The Devil’s Company: Goldman Sachs

There’s an old joke on Wall Street: If you have a conflict, Goldman Sachs has an interest.

As it happens, a Federal Reserve regulator named Carmen Segarra was specifically assigned to look into Goldman’s conflict-of-interest policy. So she started to examine Goldman’s deals, like the Kinder Morgan/El Paso deal.

Or the time Goldman Sachs said the New York Fed had signed off on a transaction with Spanish bank Santander. Whether that was an outright lie or just a mistake is unknown, but the NY Fed never signed off on any deal with Santander.

So, not surprisingly, the Fed regulator, Segarra, concluded that Goldman Sachs has no conflict-of-interest policy.

Then her Fed bosses took Goldman’s side and reportedly fired her when she wouldn’t change her findings.

Surprised? You shouldn’t be. Goldman Sachs and the New York Federal Reserve Bank have a pretty cozy relationship.

I’ve written before about the revolving door between Washington and Wall Street. But it’s no different at the Federal Reserve. In fact, it might be worse…

The current president of the New York Fed is a man named William Dudley. He was a Goldman Sachs partner and the firm’s chief economist for 10 years before former Treasury Secretary Tim Geithner hired him at the Fed. Dudley makes $410,000 a year as Geithner’s successor as NY Fed president.

Then there’s E. Gerald Corrigan. Corrigan was head of the New York Fed from 1985 to 1993, and he was head of the Basel Committee on Banking Supervision from 1991 to 1993. He joined Goldman Sachs in 1994 and made partner in 1996.

Corrigan and Geithner were pals and had lunch together, according to the New York Times. And it was that relationship that prompted insurance giant AIG to come to Goldman for cash in September 2008 when the financial system was crumbling.

The New York Times reports that AIG had originally been seeking a loan from JP Morgan because, as the AIG CEO said, “the potential conflicts of interest [with Goldman Sachs]… were too great.”

A Goldman spokesman told the Times, “We don’t believe anyone at Goldman Sachs asked Mr. Geithner to include the firm in the [AIG] assignment.” Personally, I don’t believe that for a minute.

AIG ultimately got $170 billion in federal assistance. Some of that cash paid AIG bonuses, and $30 billion in cash went right out the door — $12 billion alone went right to Goldman Sachs.

And I will never forget Tim Geithner, as Treasury Secretary, repeatedly defending the decision to let AIG pay off its trading partners (Goldman Sachs was the biggest) and then letting Goldman and others pay massive bonuses with that cash.

During one of Geithner’s 22 appearances before congressional sub-committees in the wake of the crisis, Florida Republican John L. Mica said, “We’re getting a lame story… I don’t know why we shouldn’t request your resignation.”

Of course, he and Congress never did. And Geithner’s now making the big bucks with private equity firm Warburg Pincus.

This is just one story of corruption between Wall Street, the U.S. government, and the Federal Reserve. There are plenty of others.

Who do we go to when the regulators are just as corrupt as the bankers they regulate? And who will take a stand when our congressional leaders are just hoping to skim a few crumbs off the Goldman Sachs lunch tables?

Americans are suffering for this blatant corruption.
Briton Ryle

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