In a scene reminiscent of the St. Valentine's Day Massacre, Goldman Sachs has emerged victorious in the recent Wall St. Gang Wars. Like all good Organized Criminals, the GS gang has high-level officials on their payroll that assist them in getting away with their nefarious deals. In this case look no further than Secretary of Treasury, Henry Paulson, the former Chairman and CEO of Goldman Sachs.
As the credit markets fell apart over the summer, causing the prices of hundreds of billions of dollars of mortgage-backed bonds to plunge, Goldman Sachs had already positioned itself so that it would profit massively from a decline in those securities. Thursday, Goldman reported earnings for its fiscal third quarter that were far above expectations.Was this really because the GS gang was the "smartest" in 2007, or did it have insider information from the Treasury Dept. and the Federal Reserve that allowed it to time the market? Clearly the "prescience of the short sale" was a result of cheating the system. Would the GS gang place such a large "bet" without some assurances. To do otherwise would be reckless gambling. What if they lost this huge "bet"? What would have been the cost to the gang? Shouldn't Congress and the SEC be investigating this type of suspicious activity?
Amassing a large bearish position in mortgages would have required planning and direction from a senior level. On the conference call, Viniar said the bet was executed across the whole mortgage business, implying that it wasn't the work of one swashbuckling trader or trading desk. Of course, the prescience of the short sale would seem to confirm the view that Goldman is the nimblest, and perhaps smartest, brokerage on Wall Street.
Even more disheartened on Friday were officials at Lehman Brothers, who saw their stock virtually wiped out after the firm filed for bankruptcy protection last Sunday. Had the government moved sooner, executives said, Lehman would not be selling itself in pieces to Barclays and private equity firms.So are we supposed to believe that Paulson isn't benefiting directly from this? Does the NY Times think we're that stupid? At least Newsweek has the guts to point out the obvious calling Paulson "King Henry". King Rat might be more appropriate.
“We don’t understand it, and we are angry,” one senior executive said Friday. “We were essentially pushed into bankruptcy and now they tighten the short-selling rules? Now they start buying mortgage assets? People here feel lousy.”
Goldman Sachs will be able to sell some troubled assets. That fact reignited discussion about the many administration officials who are Goldman alumni. Along with the Treasury secretary, who created the plan, another former executive of the firm is Joshua Bolten, the White House chief of staff. The plans lifted Goldman’s shares 20 percent on Friday, to $129.80. Mr. Paulson, once Goldman’s biggest individual shareholder, had to sell his stake when he moved to the Treasury Department.