05.16.11
The Lynch Lloyd Blankfein Rule
Good news, lads! Good news! Uh … never mind.
A few months ago I came up with the Let’s Lynch Lloyd Blankfein rule.
It’s simple:
Even if there’s an appetite for a lynching in the public, if nobody knows the names of the to-be-lynched, the lynchees, then the latter are probably safe.
When I used to announce the band was going to play the song, “Let’s Lynch Lloyd Blankfein,” the audience — all adults, many of whom have had very bad luck since the economic collapse of 2008 — never knows who the guy is.
So I have to explain it.
In so doing, it illustrates how the mainstream media in collusion with US financial interests which captured the financial regulatory structures of the US government, betrayed everyone.
For a graphic example, the current issue of Rolling Stone has Matt Taibbi’s piece on the Levin report, the big book on the economic collapse and Wall Street skullduggery. His story is here.
It explains the Levin report in Taibbi-style, focusing on Goldman Sachs.
Taibbi relates how the Levin report documents Goldman’s systemic global fraud, a process in which the company realized it was over-leveraged into billions of dollars of toxic mortgages and crap assets.
However, it then decided to unload the toxic financial waste — which Lloyd Blankfein called “cats and dogs” — to suckers, further betting against the newly diced-up and repackaged assets. And it told no one it was doing this.
In this manner Goldman came out a big winner when the economy cratered in 2008.
Taibbi digests material from the Levin report that show Goldman lied continually to its clients about the worth of the products it was selling to them.
The Rolling Stone piece explains one instance:
Goldman’s biggest client, Morgan Stanley, begged it to liquidate the investment and get out while they could still salvage some value. But Goldman refused, stalling for months as its clients roasted to death in a raging conflagration of losses. At one point, John Pearce, the Morgan Stanley rep dealing with Goldman, lost his temper at the bank’s refusal to sell, breaking his phone in frustration …
Goldman insists it was only required to liquidate the assets “in an orderly fashion.” But the bank had an incentive to drag its feet: Goldman’s huge bet against the deal meant that the worse Hudson performed, the more money Goldman made. After all, the entire point of the transaction was to screw its own clients so Goldman could “clean its books” …
The crime was far from victimless: Morgan Stanley alone lost nearly $960 million on the Hudson deal, which admittedly doesn’t do much to tug the heartstrings. Except that quickly after Goldman dumped this near-billion-dollar loss on Morgan Stanley, Morgan Stanley turned around and dumped it on taxpayers, who within a year were spending $10 billion bailing out the sucker bank through the TARP program.
It is worth pointing out here that Goldman’s behavior in the Hudson scam makes a mockery of standards in the underwriting business. Courts have held that “the relationship between the underwriter and its customer implicitly involves a favorable recommendation of the issued security.” The SEC, meanwhile, requires that broker-dealers like Goldman disclose “material adverse facts,” which among other things includes “adverse interests.”
And the firm continued to lie to Congress in investigations the body launched after 2008.
Taibbi goes through details culled from the Levin report and he makes the case that there is now more than enough evidence to bring criminal cases against the firm. However, Goldman has made the bet that it has so captured the US government that no serious cases will be brought against it.
And, so far, that looks like the smart money.
Was Taibbi’s piece big news. Is anyone even talking about the Levin report on Goldman being in jeopardy?
Nope. The big news is Osama bin Laden’s porn stash.
For an example of journalistic malfeasance in action, here’s Taibbi on CNN — backburnered to Ali Velshi’s territory for assorted pantywaists.
Velshi and CNN set it up as the usual journalistic polarity, with Taibbi on one side — the one for lynching Lloyd Blankfein and Goldman Sachs, and Megan McCardle on the other.
Somewhere in between the two, the mores of modern journalism dictate, must be the truth.
Ummm, no.
Taibbi despises McCardle as a witless high-button shill for Wall Street at the Atlantic. He visibly sneers at her near the end, quipping sarcastically: “Morality is so trite.”
McCardle doesn’t care for Taibbi, naturally, but that’s more a consequence of his damaging her reputation through regular refutations published at Rolling Stone.
Well, what’s the moral here? It’s the Lynch Lloyd Blankfein rule in action.
What did you hear more about this weekend, Osama bin Laden’s porn stash, Mike Huckabee not running for president, or the case for criminal prosecutions against Goldman Sachs?
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