Rising in Defense of Goldman Sachs

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The Lloyd’s Prayer

Our Chairman, who art at Goldman
Blankfein be thy name
The rally’s come
God’s work be done
On earth as there’s no fear of correction
Give us our daily gains…

Poor Goldman Sachs. Everyone is on its case. Criticizing. Carping. Jealous. Envious.

So, today we rise in defense of the Wall Street giant. Yes, the Goldmen may be shysters. But they are honest shysters…

We pick up sword and shield, ready to fight for Goldman, after reading The Financial Times. The FT has devoted a whole page to Goldman bashing. It’s time someone stood up to say a kind word for the firm.

Besides, Lloyd Blankfein said he was sorry. That’s right. He announced that the firm regretted its role in the world financial crisis. And if that weren’t enough, he pledged half a billion dollars to helping small business through tough times.

In his apology, Blankfein mentioned that he thought Goldman was doing “God’s work.” That is what prompted humorists to make up the “Lloyd’s Prayer,” we have republished above. On the surface of it, it does seem absurd. If any group of people ever worshipped Mammon, it is the bunch that works at Goldman. Money is what makes that mare run; no one doubts it.

In 2008, the average compensation of the average Goldman employee averaged $364,000 – or more than 6 times the earnings of the average American who was not employed by Goldman. Naturally, the widespread publication of this fact caused a surge of envy. Now comes news that the average Goldman man expects to make about twice as much this year – or about $765,000. As you can imagine, this did nothing to soothe the jealous spirits. Instead, it inflamed them.

And now, everyone has Goldman in his sights. Newspaper editorials kvetch and moan. Union-organized yahoos demonstrate in front of Goldman’s offices. Cartoons make fun of Blankfein. Commentators say the Goldman crew is greedy. The Rolling Stone magazine described Goldman as a “vampire squid.” Saturday Night Live mocked the company. Stand up comics stock up on Goldman jokes. Even priests criticize the firm’s claim to be doing ‘God’s work.’

The regulators cannot be far behind. It is illegal to trade on “inside information.” So, when a company targets the shares of a rival, and passes its buy orders through a Wall Street firm, the traders are forbidden from trading the shares on their own account. They cannot profit from ‘front running’ shares, based information not yet available to the public.

Goldman clearly profits from front running. But it does it by aggregating information from clients rather than using the inside information from a single client. This gives them a “market color,” rather than precise trading targets. In other words, if you have a client who sets out to acquire Acme Cement Company, you can’t buy up the shares yourself in anticipation of the rise in the share prices. That information is “protected, inside information.” But suppose you have two clients, each of whom targets a cement firm? You quickly get a “market color,” don’t you? You put two and two together. If they’re both after cement makers, probably, the whole cement sector will go up. You buy cement makers, though not those that your clients are buying.

This aggregated inside information gives Goldman a big advantage. So do its close contacts with the feds. Goldman has its former operatives in key posts throughout the government. It knows what the government is doing; it has a fair idea of what the government will do next. In trading US government securities, the biggest business in the financial world, this “insider” knowledge is no doubt a handy thing to have. It doesn’t hurt either that the Fed is making money available to Goldman at practically no cost. Nor, that the Fed is buying its mortgage backed securities – perhaps even ones that would be hard to unload on the private market.

These contacts and sources of ‘insider’ information are what George Soros has called the “hidden gifts” that Goldman enjoys…and that contribute mightily to its success.

But so what? As far as we know, Goldman holds no gun to any counterparty’s head. Nor does it lie…unless you call saying things that aren’t true “lying.” Goldman merely says the same falsehoods as the rest of the financial industry…the things people want to hear…which almost everyone believes anyway. And is there anything wrong with taking money from the US government? Doesn’t every retiree do so? Doesn’t every larcenous Congressman and every conniving contractor and every shiftless welfare addict aim to do the same thing? Isn’t the whole idea of government to take from someone and give to someone else? Then, why not to those who are most able to claim it? The swift…the strong…the smart…the Goldmans!

No, dear reader, we cannot criticize Goldman. Instead, we admire it. Goldman took advantage of the financial boom by selling debt and derivatives all over the world. Now, it takes advantage of the ‘recovery,’ by trading on its client information. And who can blame it for wanting to do business with the richest and dumbest client of all, the US government?

In God’s plan, at least as we see it, the lowly are raised up. The rich…the proud…and the foolish are brought down. God deals with the meek on his own. Goldman helps him bring the boom down on the others.

Until next time,

Bill Bonner
for The Daily Reckoning Australia

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
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Comments

  1. The priests needn’t worry – GS weren’t referring to the same deity.

    Reply
  2. But yes, GS is a company which has adapted to its environment (partly by shaping it and getting some serious “help”) extremely well – all moral issues aside. You might say that the producer’s son has an unfair advantage in the movie company, but can you blame him for being the producer’s son? Good for them for winning in the game of flexi-rules Monopoly. They are champions in the field, though of course many equally capable people never participate – impeded by principles, I suppose.

    God’s work is a funny term though. You might say that most people inadvertently and unwittingly participate in the big story, but it’s not like GS is going around clothing the naked, feeding the poor, visiting the sick and widowed, and calling people to repent, or something. Quite the opposite, which is very telling – even Google has at least tried to make itself an overall help to society at large – mostly for free. GS is all self-help. I think their god wears an expensive, dark suit with fancy shoes – not a loincloth.

    Reply
  3. Ah but the jewboy WAS referring to the same deity Dan … In his mind anyway – The Golden Calf and all that stuff – It goes back a way I think? :) (Apologies to all the children of Abraham who aren’t actually in love with mammon.) I just get a bit of fun from laughing at the stereotypes occassionally …

    Reply
  4. Hmmm … I’ll try to answer you sensibly Dan – Even though at the moment my self preservsation inclination is to just laugh at all this insanity (and basically criminal activity) for what it is – The banks probably operate within the realm of legality. Legality (at this time) is immoral – The general Western populace is spoiled – And afraid. So they choose to support immorality – Even though it does not benefit them as much as it used to. But they still think it might benefit them more than a moral world … Such is life – Humans are grubs – And then they die! :)

    Reply
  5. Well a society can prosper without needing a “finance industry” like the one the US has (although in all honesty the role of finance cannot be overlooked in the West’s success). The great thing about truth (which exists, no matter what people think), is that it _always_ wins in the end. Build a false economy out of pretend money and pies in the sky, and what do you get? False economy out of pretend money and pies in the sky – all gone in the first puff of wind. Forget your own roots and you will find yourself grafted to someone else’s. Neglect to teach your kids about all the usual quacks, crooks, snake oil and charlatans, and expect to watch them squander your hard earned wealth.

    As for stereotypes, people just give their belief systems a bad name – it says nothing about the belief system itself – an entirely different question.

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  6. Ned, just that point about the world thinking immorality pays off … actually not really. Big business knows immorality causes people to spend more money – it creates markets, weakens the resolve of purse-holders and makes populations easier to control. It just takes ten minutes to sit and think it through and every person in the world can work out that doing the right thing pays off if everybody does it – but the publican, the banker and the tommy-gun maker would go out of business – and they consider themselves too big to fall.

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  7. Agreed my friend – In a sane world one doesn’t have to be a “rocket scientist” to have a chat to a bloke and say Yeh, I reckon your business proposal should make money – And assign a risk level to it – All pretty boring ho hum sort of stuff to a professional who knows which way is up I’d think? The financial types are class A pudden puller braggarts who overstate their skills and the value thereof bigtime.

    Reply
  8. Hey Biker … Where are you? DR’s gotten a bit boring lately mate. Even Prozak seems to have lost a bit of his bite cum spite? You got a civic duty here bro … Kick us all up the bums … The kiddies cry out for someone to hate? You are missed! :)

    Reply
  9. Yeah Ned I think it was Wierd Al who wrote a song about Prozak and his dealings with Biker….

    “I know Darth Vaders really got you annoyed
    But remember if you kill him, you’ll be unemployed”

    Lachlan Scanlan
    November 21, 2009
    Reply
  10. “Goldman also received $10 billion of capital from the U.S. government in October 2008, under the Troubled Asset Relief Program.”

    In my opinion, taking this cash pretty well made it open season on their asses. Sure they paid it back an all but they were obviously in a bad enough position to have to tap it. Bad decision – prepare for unforseen consequences.

    Reply
  11. Don, they never paid back all the TARP. In fact, they never even mentioned TARP re-payments while they were dishing out their employees the biggest bonuses in the history of the company – not to mention that $200mil of the $500mil they are “giving” away is actually actually a loaner (not interest free either).

    They are a bunch of white-collar crims. Their actions were indefensible and cowardly, and this article shows that you are not much better Bill.

    Reply
  12. Hey, good one with the Lord’s Prayer.
    Reminds me of my bankers version of
    the Sound of Music:

    Dough, a deal I made myself,
    Re: an email sent to some,
    Me, its all about myself,
    Far I think I’m gonna come,
    So, my stocks are in the red,
    La, I’m rolling in it now,
    Tee, I’m golfing with the Fed,
    And that brings us back to dough (Oh Oh Oh)

    Reply
  13. Beautiful article Bill as always….. except, “we cannot critisize Goldman. Instead we admire it.”
    Do we have to identify with our new overlord now? Doesn’t your God ask you to worship Him rather than any agents of good or evil He empowers.

    Lachlan Scanlan
    November 23, 2009
    Reply
  14. I might have tested some friendships lately with my view that leverage racketeering and fraud outweighs the effect of the longterm bogus cpi basket and reserve interest rate policies in terms of asset and debt fueled service economy bubbles but I am gaining some new friends bit by bit.

    http://www.zerohedge.com/article/shadow-banking-topology

    I don’t deny the monetary policy issue and don’t lack a certain regard for the Austrians but basic math gives me truth in cause and effect both in the Japanese 80’s bubble and the Clinton era forward bubble.

    There is a certain readers comment on the zerohedge article (Orangejuice”) quoting an SMH source that has also my interest :
    quote
    Supervisors are examining whether banks such as JPMorgan Chase & Co., Morgan Stanley and Goldman Sachs Group Inc. have enough capital for the risks they take, how much they know about the strength of their counterparties and whether risk managers have authority to influence bank practices and policies.
    unquote

    Again I contend that the carry is/will unwind as a result of deleverage even if US rates remain suppressed. I also say that investigation will uncover racketeer sponsored counterparties with no clothes that will trip uber deleverage.

    Reply

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