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Jul. 13 2009 - 10:55 am | 465 views | 5 recommendations | 24 comments

Draw your own conclusions about the distance between Goldman Sachs and the US government

The prosecution wanted to the judge to deny bail, a la Bernie Madoff and Allen Stanford, because the stolen code “could be use to manipulate the market in unfair ways.” The judge, to his credit chose to disagree. This was an alleged crime against GOLDMAN, not, presumably a crime against society. Therefore it was a “garden variety” economic crime, meaning that the normal niceties of “free on bail” were available.

via Is the U.S. Government An Arm of Goldman Sachs? – Graham and Dodd Investor — Seeking Alpha.

Apologies for getting to this late — I’m on deadline on something else and haven’t had much time to post — but this just has to be posted, given the continued debate over Goldman Sachs. Surely plenty of people followed the story last week of Sergey Aleynikov, a Russian computer whiz who, well, defected from the employ of Goldman Sachs, apparently taking with him the bank’s proprietary trading code. There is a lot of backstory here that is key: if you’ve followed Zero Hedge’s speculations dating back months about Goldman somehow manipulating program trading at the NYSE, this is connected to that, as the theory here is that Aleynikov stole the computer program that Goldman may have been using to manipulate the NYSE.

Such speculations until recently may have sounded like conspiracy theories, but then last week Assistant U.S. Attorney Joseph Facciponti stood up in court and let loose a whopper. “The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways,” he said.

Again, this is a federal prosecutor quoting Goldman Sachs, admitting in open court that it has been using a computer program that can be used to unfairly manipulate markets. Take that information and couple it with the insane data about Goldman’s share of program trading volume since the beginning of the year and… well, you can draw your own conclusions.

While I’m here: a lot of people have been writing me asking me to respond to Megan McArdle’s bizarre freakout on the Atlantic website, where she lambasted my Goldman piece in curiously discombobulated fashion and then apparently spent the next couple of days jamming her feet in her mouth in the comments section (Megan at 6:52 P.M. on July 10: “No, his facts are wrong, his conclusions are wrong, and only his discomfort with Goldman Sachs’ role in our public life is correct.” Megan three hours later: “Or perhaps a better way to say it is that the facts are right, but the mini narratives are ludicrously wrong.”).  I’m reluctant to get into this, among other things because I’ve already done two different too-long responses to critics of this piece, and I’m also supposed to be writing something else right now, so… But I will get to her later in the week, when I have time, and I’m going to need time, just going by one quick read-through of her piece.

One more side note: I’m working on something right now and as part of that I’m looking to interview anyone who is an employee of the state of New Jersey and holds a New Jersey state pension. Anyone out there knows anyone like that, please let me know.


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  1. collapse expand

    Turns out Megan is Michael McFaul’s daughter. Go figure.

  2. collapse expand

    “Again, this is a federal prosecutor quoting Goldman Sachs, admitting in open court that it has been using a computer program that can be used to unfairly manipulate markets.”

    So, in effect, Goldman is complaining about someone stealing the gun they’ve been using to rob banks?!?!? This sounds too much like, “Officer! Officer! That guy just stole my dope!!!” Pathetic.

    And then, instead of having bells go off in his head, the prosecutor just repeats Goldman’s line of reasoning?!?!? I can’t take this shit much longer!

  3. collapse expand

    I am hoping to read more about what you think about the up and coming “cap and trade/carbon-credit” bubble, as you mentioned in The Great American Bubble Machine…we want names!
    “The new carbon-credit market is a virtual repeat of the commodities-market casino that’s been kind to Goldman, except it has one delicious new wrinkle: If the plan goes forward as expected, the rise in prices will be government-mandated. Goldman won’t even have to rig the game. It will be rigged in advance.”

  4. collapse expand

    Dude, Matt

    You really got to expose Megan McArdle for what she is. See –> Peasant Mentality.

    If she wants to shrill for Goldman. Fine. But the gratuitous Sarah frickin Palin comparison. That’s simply inexcusable.

    And you can’t even read what she says it’s so incomprehensible.

  5. collapse expand

    Megan’s biggest problem is that her ignorance of history and faith in self-regulating markets blinds her to even the possibility that there’s a villain out there.

    She’s not unique in this regard, nor is she the most dangerous person who shares this type of worldview. In fact, I’d argue that her view fits within the bell curve of what passes for conventional wisdom about the cause of the current depression, which is best exemplified by the “it’s mostly the Fed’s fault” meme posited by Barry Ritholtz in Bailout Nation. The good news is that Barry came out today on his blog and forcefully distanced himself from Megan’s comments about “no villains.”

    So, if you are going to after Megan’s bit of silliness, you may want to combine the effort with going after others that are intent are reassuring us and themselves that there was no villain, that there was no crime.

    Indeed there was, and it is still going on.

  6. collapse expand

    Friends are always amazed when I point out the close ties between Goldman and the Treasury and how people jump from Goldman to government jobs and then take care of their old firm. I like being able to site your recent piece to prove the point. The question everyone always asks is why the major news outlets do not jump on these connections? The carbon-credit market connection with Goldman should be interesting. Keep up the great reporting and hopefully someday the public in general will catch on to Goldman’s tactics.

  7. collapse expand

    Distance between Goldman and the government? I thought Goldman is a division of the US Treasury? Isn’t that why the government made them whole on their exposure to the decrease in the value of AIG’s collateral, even though Goldman hadn’t suffered any losses?

  8. collapse expand

    Matt – I have two family members who are a part of the NJ state workers pension system. One is retired and one is an active employee. Email me at soyouthinkyoucaninvest at gmail dot com. Thanks.

  9. collapse expand

    Matt, you’ve got extraordinary courage to write the Truth about the multi-trillion dollar shenanigans of Goldman Sachs. I applaud you and Rolling Stone magazine for taking on this financial monstrosity. I’ve always wondered why Henry Paulson, former CEO of Goldman and last year’s Treasury secretary, got down on his knees and begged and pleaded with Congress (Pelosi especially) to give him the $700B TARP funds and authority to intimidate the financial sector to his will. My gut told me at the time, and you confirmed it in your brilliant writing, that Paulson was concerned only about ensuring GS did not fall through the cracks and go the way of Merrill Lynch, Lehman Brothers and Bear Stearns. This cocksure sonofabitch used his and his GS buddies’ influence to prop up GS’s stocks and saved his own fortune in the process. But don’t count on Congress to do the right thing and reign in these assholes. Like you more or less said, they pretty much own this country and its rulers. I used to be very positive about this country and its ideals. What the past twelve months has proven to me is how a very very miniscule cabal of powerful individuals in New York City and Washington can undermine an the largest economy in the world.

  10. collapse expand

    One more thing Matt…you seem to be one who thirsts for the Truth. I’ll be praying for you my friend, as I will with Christopher Hitchens another writer I admire, to ditch your “leading to nowhere atheism” and one day find comfort in the only Truth out there that matters anyway – and that is with Jesus Christ.

  11. collapse expand

    That is a fascinating little quote – thanks for posting it. The clear implication is that Goldman Sachs uses it like a responsible oligarch – to manipulate the market in what it considers to be fair ways. Thanks for the great work, Matt; I look forward to your longer response to McArdle’s bloviating.

  12. collapse expand

    Sorry my earlier comments are still awaiting moderation – however I would be happy to explain my info. if you wish to contact me at serenadipitti@gmail.com.

    My facts are thoroughly researched and easy to document. I can provide sources that would help guide your own research efforts. I’m doing this because I think there is much at stake.

    You can moderate this message – it’s not really intended fort posting.
    Thanks, and best,

  13. collapse expand

    Hank Paulson has a LARGE financial interest in cap and trade/carbon-credit.

    Nice to have connections, I suppose:


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