”In a series of damaging emails released yesterday, Tourre also compared the products to a “Frankenstein” monster that had “turned against his own inventor”. Other emails that emerged yesterday showed Lloyd Blankfein, Goldman’s chief executive, boasting about the money the bank made from the housing market collapse. “Of course we didn’t dodge the mortgage mess,” Blankfein wrote in November 2007. “We lost money, then made more than we lost because of shorts (bets against housing).”
It was a short run on broadway. Enron-the Musical is closing after only sixteen critically mixed performances, in which investors in the production practiced their own version of short selling to cover their losses.The play was a form of derivative trading in itself, a licensed product from a new form of industry based on the suffering of others. Conceptually, like many of the Goldman-Sachs products difficult to place, but the play does represent a certain inflection point regarding our relation to money.In this sense, it’s a shame Goldman Sachs continues to position itself as the world’s most hated vessel of greed these days. Because, really, it makes us forget just how terrible Enron was.
The full-fledged Enron theatre production tracks the rise and fall of ex-bosses Jeffrey Skilling, now jailed and Kenneth Lay, now deceased, as well as their dealings with ex-CFO Andy Fastow, the mastermind of the company’s shady accounting practices.In the end the Enrons,was exposed as a house of cards, much like Madoff , AIG, Fannie-Mae, and perhaps Goldman-Sachs. Who knows, it might extend all the way to the Federal Reserve System. maybe we will know one day if all roads do lead to Rome. Perhaps there will there be public monuments commerorating these melt-downs in the future; even a form of poppy day to commemorate the millions of ruined lives caused by these frauds which appear endemic and deeply rooted.
Stories about finance and fraud are always timely; for every Goldman that steps up to the plate, many are vying to be in the on-deck circle. Goldman is just a variation the theme; but the public persona and performance of Goldman-Sachs CEO Lloyd Blankfein shows that the world of finance and accounting shows that a world of business and accounting that has not traditionally inspired much in the way of song and dance routines appears to be changing; given the surplus of capable understudies that this craft seems to be producing.
Blankfein’s blessing of financial products that are designed to fail, instruments with built in obsolescence has some resemblence to a scene in Enron where a trader recounts a frightening day when his trades lost millions, then proudly recalls how Skilling applauded his courage, telling him “Only people who are prepared to lose are ever gonna win.” Its you win when you lose; a surrealistic world where synthetic and purely conceptual products, unlinked to any tangible assets are traded like marbles in a school yard. No tangible assets are produced, yet we have come to the point, as a society, to treat this type of activity as a ”primary industry” and not the quasi- money laundering scheme it most closely resembles. Like the pyramid on the American dollar bill, one cannot help but wonder if all these forms of arcane, conceptual manouvers are not part of a pyramid scandal of which the Bernard Madoff case, may be the proverbial tip of the iceberg.
The ”racial profiling” of this race that is seen in the Blankfeins, Ken Lewis’s etc. show some portent towards people who are extremely clever, yet not that bright; numbers men disconnected with most reality. This focus on quantitative skills is evident too in Mr. Fabrice Tourre’s e-mails. Even as he seems aware that he has created a financial instrument that could come crashing down, he marvels at its conceptual applications.
”In one e-mail he calls the product “pure intellectual masturbation” and “something absolutely conceptual and highly theoretical.”Tourre’s emails described the products he created as “a ‘thing’, which has no purpose, which is absolutely conceptual and highly theoretical and which nobody knows how to price”.He also predicted the collapse of the market, writing that “the poor little sub-prime borrowers will not last so long!!!”. “It’s like Frankenstein turning against his own inventor,” he writes of the products he was selling.”
Meanwhile, it has emerged that five senior directors of Goldman Sachs, including Michael Sherwood, the co-head of its London office, sold shares in the bank after the SEC first warned that it may take action over the fraud claims. The watchdog issued a “Wells” notice, an official warning, in July last year. The executives sold shares worth $65.4m between October 2009 and last February. Goldman’s shares dropped almost 13% after the SEC claim was filed in court 10 days ago.
The play seemed to have much merit, although a horror more than a tragi-comedy may have been a better tangent of departure. It’s a world where making money is all that counts, and that point is neatly reinforced by an on-stage ticker displaying Enron’s stock price throughout the play. In one dazzling scene, traders sing and dance while a projector bathes them in glowing share prices in a kaleidoscope of finance. Skilling wins a power struggle to take over as Enron’s CEO and begins to implement his vision of shifting the company away from a tiresome focus on developing real assets, and towards a more lucrative emphasis on nebulous businesses such as trading energy and bandwidth.
”Goldman Sachs – I believe – is dirty and so are the other Wall Street firms that were very much involved and complicit in the creation of the bubble and the ultimate bursting of it. The “quick” sales of firms to other banks, the overnight issuance of billions of dollars done before America literally woke up on a Monday morning, the fear tactics used to pay out trillions all remain LARGE QUESTIONS in my mind. I want to know how we all got destroyed by a handfull of not so qukc talking banking executives who managed to destroy 40% of the worlds’s wealth and transfer much of it to themselves.” ( Mike Morgan )
”The stories continue to be all about Goldman Sachs. Goldman Sachs getting bad PR, Goldman Sachs pays out billions in bonuses, Goldman Sachs charge with civil fraud by the SEC, Goldman Sachs…Goldman Sachs…Goldman Sachs. However, the question of wrong doing – downright illegal activities – seem to be skirted every step of the way. All the Congressional Hearings over the past year pointed fingers, called CEO’s out and our President even called them “FAT CATS” but no one is asking the questions, “what part did they play in the original mortgage meltdown that led to the worst financial crisis this country has ever seen (yes, I believe it is worse then the Great Depression).”
Skilling’s brand of rapacious capitalism is facilitated by the financial ingenuity of his chief financial officer, Andrew Fastow, who gazes longingly at him like a love-stricken teen. In one brilliant scene, Fastow presents a chilling finance lesson, explaining to Skilling how they can create entities in which Enron will hide its mounting debts. Fastow illustrates his point by brandishing a box within a box within a box, showing how these off-the-books subsidiaries can help to disguise the company’s losses as profits.These subsidiaries, known as raptors, are later depicted by actors wearing lizard-like heads. As Enron’s debts veer out of control, Fastow is shown desperately trying to calm these terrifying creatures, which munch insatiably on dollar bills. This kind of shell game was not unique to Enron and appears to be pervasive within the financial system; otherwise why the need to create increasingly esoteric and exotic products pushed further down the pyramid.
”There was a hint during the most recent Congressional Hearings. I think I heard Mr. Glankfein say that at one point they bid so low on mortgage papter (and bonds) that no one would sell. In other words, he answered a question that I have been asking sine March of 2007. How did the market suddenly collapse? How was it possible that the once thriving market for MBS’s had suddenly and abruptly come to an end? How, I wondered could investors worldwide – mostly very sophisticated – all stop investing almost overnight? How, I wondered, was the tap turned off thus causing the mortgage meltdown and a financial crisis we will be dealing with for years to come? ( Mike Morgan )
Blankfein answered all those questions. He (GS) intentionally bid so low that lenders would not sell loans and other investment houses would not sell their bonds. With secondary market (aftermarket) for loans, lending would have to stop because the money – if not recirculated – ran dry. A new question now also comes to mind. When GS bid low to discourage sales of laons did they do so knowing the market would crash? An ideal situation for them and Paulson & company (not our former Treasury Secretary and former GS CEO) who were betting that the market would crash. Now this question is more criminal then it is civil and inquiring minds need to know. ( www.Goldmansachs666.com)
”Considering Bernie Madoff’s fall, how should we view Goldman Sachs’ recent gains? Bloomberg’s Christine Harper reports:
Goldman Sachs Group Inc. made more than $100 million in trading revenue on a record 46 separate days during the second quarter, or 71 percent of the time, breaking the previous high of 34 days in the prior three months.Trading losses occurred on two days during the months of April, May and June, down from eight in the first quarter, the New York-based bank said today in a filing with the U.S. Securities and Exchange Commission. The company made at least $50 million on 58 of the 65 trading days during the quarter, or 89 percent of the time.
No one can explain these profits. No other firm is making such gains. Although Goldman is a publicly traded company, only Goldman insiders know how Goldman makes its money.”
”What makes the play so provocative is our awareness now that Enron was hardly alone, that it was just one villain in a global financial system that was rotting at the core. We’ve since witnessed the meltdown of such giants as Lehman, Bear Stearns, AIG, Fannie Mae and Freddie Mac, which puts Enron, both the musical and the company, in a new light. Unapologetic to the end, Skilling puts it best when he hauntingly declares: “We didn’t do anything any other company doesn’t do. We did it more and we did it better.’ ”
In the play,a trio of Enron lawyers appears on stage wearing blindfolds, cheerfully passing the buck to an Arthur Andersen accountant who makes decisions about the company’s financial maneuvers through conversations with a hand puppet. Two bankers appear as Siamese twins, wearing a single, oversized overcoat and speaking in tandem. Incapable of independent thought, they are comically eager to invest in this debt-ridden time bomb, with no questions asked.
The stock analysts who covered Enron with giddy enthusiasm appear in a similarly unflattering light. A quartet of these cheerleaders literally sings the company’s praises, belting out the lines: “Jeff Skilling, he’s our man, if he can’t do it no one can. He’s the man with the master plan.”
In the end, of course, their confidence is exposed as blind faith: Enron’s stock plunges from $95 to $1 in just 24 days as it becomes clear that the company is little more than a house of cards. Skilling ends up in jail for 24 years, while Kenneth Lay suffers a heart attack and dies while under investigation.
The play’s recounting of this costly farce is good, subversive fun, but it also holds a very dark message about the chaos that unfettered greed and financial sleight of hand can create. By the time Skilling is dragged away in handcuffs, 29,000 employees — who had been encouraged to “invest in themselves” by buying Enron stock — have lost their jobs and their savings.
What makes the play so provocative is our awareness now that Enron was hardly alone, that it was just one villain in a global financial system that was rotting at the core, and very little has changed since. Its as if the powers that be, inflict the disease and apply the antidote as the need be. We’ve since witnessed the meltdown of such giants as Lehman, Bear Stearns, AIG, Fannie Mae and Freddie Mac, which puts Enron, both the musical and the company, in a new light. Unapologetic to the end, Skilling puts it best when he hauntingly declares: “We didn’t do anything any other company doesn’t do. We did it more and we did it better.”