Why is Goldman allowed to game the system?

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switters's picture
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Why is Goldman allowed to game the system?

Submitted by Edward Harrison of Credit Writedowns.

Marshall Auerback sent me a link to a recent Simon Johnson missive about Goldman Sachs. I had already seen and liked this article, but his e-mail prompted me to write this post. My question is: Why is Goldman a bank holding company?

Goldman becomes a bank

The reason Goldman became a bank to begin with is because it was on the verge of collapse after the Lehman Brothers failure. Andrew Ross Sorkin has a good write up on this in Vanity Fair:

Due to disastrous bets on Lehman paper, the giant Reserve Primary Fund had broken the buck a day earlier, causing an investor run on the money-market funds. Between that, Geithner thought, and billions of dollars of investors’ money locked up inside the now bankrupt Lehman Brothers, that meant only one thing: the two remaining broker-dealers—Morgan Stanley and Goldman Sachs—could actually be next.

Just in case it’s not obvious, Goldman Sachs was a major beneficiary of the government’s bailout of the financial services industry, not only through the bailout of AIG but also through its ability to fall under the regulatory umbrella as a bank holding company (technically Goldman became a financial holding company but the distinction is relatively minor. see definition here). – something which made it eligible for debt guarantees and other government backstops.

Full article here.

John99's picture
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Re: Why is Goldman allowed to game the system?

Maybe because we don't do anything about all these crimes? Just guessing.

goes211's picture
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Re: Why is Goldman allowed to game the system?

It's good to have friends in high places.

ao's picture
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Re: Why is Goldman allowed to game the system?

Why indeed?  And the bigger question is why has the socialization of loss and the privatization of profit been allowed, both by our government and by us, for not only Goldman but all the others? 

ltlredwagon's picture
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Re: Why is Goldman allowed to game the system?

John99, I couldn't agree more.  Mr. Burke was absolutely right.   But chutzpah being a personal flaw, I would offer this ineloquent rewording:  The only thing necessary for the triumph of evil is for evil men to disguise or cloud their intentions and actions sufficiently that men, the vast majority of whom are good, will not fully grasp what is occurring, nor suspect that it is evil, and thus will do nothing until it is too late.

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