Were some of our most successful banks the victims, or the architects, of a scam?

The question of Goldman Sachs being a victim of this crisis can perhaps best be explained by the story posted in Market Trends in which it quotes the Wall Street Journal in their investigation showing Goldman not only a willing participant but as the "architect" of the scam that broke the world's economies. The claim is that Goldman Sachs played a bigger role than has been publicly disclosed in fueling the mortgage bets that nearly felled American International Group (AIG).

In Goldman's biggest deal, it acted as a middleman between AIG and banks, taking on the risk of as much as $14 billion of mortgage-related investments. Then Goldman insured that risk with one trading partner AIG, according to the Journal's analysis and people familiar with the trades. http://market-ticker.denninger.net/archives/1726-The-Architecture-Of-The-Scam-Goldman-.et.al..html

According to the Wall Street Journal, Goldman Sachs was fueling AIG's bad mortgage bets http://www.huffingtonpost.com/2009/12/12/goldman-sachs-fueled-aigs_n_389766.html and knew that AIG was a house of cards. Why was Goldman doing this? According to Dylan Ratigan, it was because it (Goldman) "sought to blow up AIG, in order to benefit itself." You see, the biggest participant in AIG's reckless gambling operation (i.e. the operation of insuring the reckless bets of banks, even though they [AIG] didn't have anywhere near the capital necessary to back up all these insurance policies, the fees for which were so very profitable) was Goldman, which bought double the amount of protection (insurance) from AIG as compared to any other bank, and, as a result, received double the amount of "benefits" from the American taxpayer, by way of backdoor government bailouts, when AIG fell apart (with Goldman's help), totally unable to honor all these ‘reckless gambling' insurance claims.

Billions of dollars then issued from the back door of the Fed, $13 billion of which went to Goldman, which was paid 100 cents for every dollar they had lost in their reckless gambling on CDOs, derivatives etc. And why was Goldman so privileged to get such a sweet deal? It was because Tim Geithner, a ‘Goldmanite' (i.e. former high-level Goldman exec) had been installed as U.S. Treasury Secretary. It's also why 30,000 Goldman employees will split up $33 billion in taxpayer booty (bonuses of $160,000 each, on average) http://online.wsj.com/article/SB124896891815094085.html, thanks to the suckered American taxpayer. Meanwhile the top Goldman execs will take their share of the booty/bonuses in stock dividends, which could well ultimately be worth far more than any cash bonus they might have received -- thanks again to generous help, in a time of need, from the suckered US taxpayers.

Total estimated cost for bailing out all the reckless-gambling banks in the US -- $24 trillion. http://www.washingtontimes.com/news/2009/jul/21/watchdog-says-tarp-tab-could-hit-24-trillion/.

In a very real sense, this is stolen money stolen from the American taxpayer, by way of a government that is in a sense owned by Wall Street and the big banks. Proof of this relationship is provided by the fact that the big banks are now using some of this stolen (bailout) money to lobby (bribe) Congress to stop any legislation that would, if passed, make it difficult for them to get bailed out with public money next time their reckless gambling goes bad.

Is there really a chance, under the new legislation, that what happened to AIG could happen again?! Aren't there enough members of Congress free from the big campaign money contributions coming from Wall Street and the big banks, to make sure that any future bailout money will be tied to rules and regulations about how that money will be used by these big banks? (Hopefully a good portion of it would next time be used to provide loans to small businesses and would-be home owners.) That remains to be seen.

Obama and his administration can scold the bankers all they want, but until Congress passes meaningful financial regulation, the bankers will continue to perpetrate the mass fraud and theft that got our country into this situation in the first place. Problem is, when you have as much money to buy politicians as the big banks have, how realistic is it to expect bought-and-paid-for members of Congress to enact strict financial regulations that will rein in the banksters?

Author's Website: http://groups.google.com/groups/profile?enc_user=JCpLDBUAAAC

Author's Bio: Several years after receiving my M.A. in social science (interdisciplinary studies) I was an instructor at S.F. State University for a year, but then went back to designing automated machinery, and then tech writing, in Silicon Valley. I've always been more interested in political economics and what's going on behind the scenes in politics, than in mechanical engineering, and because of that I've rarely worked more than 6 months a year, devoting much of the rest of the year to reading and writing about that which interests me most.

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