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by Kathleen Rogers
Goldman Sachs, one of the world’s largest banking and investment firms, announced record profits of 3.4 billion dollars last week. How could a bank go from needing a $10 billion government cash infusion just months ago, to raking in trading revenues of $6.8 billion, almost three times the $2.4 billion they made in the same quarter last year?
And why does Goldman always come out ahead after every market debacle? Yes, it has smart traders and a brilliant franchise. But a growing number of observers believe that Goldman ensures its success more insidiously. Investigative reporter Matt Taibbi, in a recent cover story at Rolling Stone, described an ongoing, market-manipulating conspiracy over many years. In a scathing piece, Taibbi breaks down exactly how Goldman, with a little help from some former Goldman chiefs — who happen to now control the U.S. Treasury and Federal Reserve Bank – manages to cash in on every recent market meltdown.
To be fair, in strict profit-and-loss terms, Goldman Sachs consistently outperforms its banking peers. They strategically remain tight, nimble and opportunistic, enabling them to jump into an oversold market and scoop up underpriced securities while others are ineptly selling out huge positions in oversold markets that buyers have all but abandoned. In just one example, as Ben White notes in the Financial Times, Goldman CFO David Viniar sought to dramatically reduce his firm’s overall exposure to the mortgage securities market in December 2006, far before anyone began to predict the collapse of the overall mortgage market. This savvy move enabled them to avoid the unprecedented losses of many large banks, which ultimately led to the current financial mess.
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