Goldman Sachs the Public

The Gulf Oil rig accident is not only an ecological disaster but it catastrophic proportions will regrettably pollute the public attention paid to the Goldman Sachs investigation just as the oil slicks will contaminate the environment. Conspiracy theorists might even be expected to infer some connection between the accident and Goldman Sachs. The supposition of course being that Goldman Sachs arranged for the oil platform disaster explicitly to draw media and public attention away from headlines and stories about their culpability in the financial crisis.

But let’s get back to a more grounded reality. Goldman Sachs claims that they did nothing wrong, at least nothing more wrong than what was being done by their peers and their lesser comrades in the financial community. They may admittedly have been foolish to engage in trading in complex synthetic collateralized debt obligations (CDO) without truly understanding the real risks involved for their clients and themselves; but hey, everyone was doing it.

Now there may be some truth in this assertion, but is Goldman Sachs actually willing to also public admit that they are no more and actually less knowledgeable, informed and capable than other leaders in the financial market place? Is their stellar reputation really just smoke and mirrors? Perhaps their ability to make money is due to the cultivated and privileged influences that they have established with Governmental policy makers, elected officials and our illustrious and copious bureaucratic agencies. The familiar ‘revolving door’ between industry and Government seems well oiled and in robust motion.

So some questions for Goldman Sachs:

• How is it possible that Goldman Sachs was able to hedge your positions on CDOs without understanding both the nature of the risk, and more importantly the associated relative values of the CDOs to the leveraged default obligations based upon their failure?

• Did Goldman Sachs merely set up a hedge fund instrument that they knew would pay off handsomely because they knew that the mortgage-based instruments were unsound or valueless?

• Didn’t Goldman Sachs lose some money on the CDO because they had no choice except to hold some CDOs in their own positions; otherwise it would be patently obvious that they had determined that these instruments had become or always were worthless?

• What amount of capital was at risk with the hedged default obligations relative to the CDOs; and how was the return value on that determined? And, if that potential rate of return was as attractive as it appears it was, shouldn’t Goldman Sachs have been aggressively marketing those instruments to the same clients to whom they were marketing the mortgage-backed CDO?

• How much money did Goldman Sachs’ executives lose on personally owned CDO investments, versus how much did executives make on their hedged counterparts?

These are the kinds of questions that Congress, the media and the public should be insisting get answered? Before we worry about whether they are guilty of some planned malfeasance, the American people and their representatives should be demanding that a comprehensive explanation of what was involved in creating these investments and permitting them to become so ‘toxic’ without any apparent alerts being attended to by the industry (particularly Goldman Sachs itself), the Government and its oversight agencies, and the media experts who provide the public with their in-depths analysis and understanding of the marketplace.

I am sure we can all sit back and await the Congressional and the SEC’s efforts to get to the bottom of this cesspool; but I fear that what will float to the top are results that we get from the same politicians and special interests that we always get.