A law unto themselves

August 16th, 2012

Published on WSWS, by Barry Grey, August 15, 2012.

On August 9, the US Justice Department announced it was ending a criminal investigation into allegations that Goldman Sachs committed securities fraud in its underwriting and marketing of mortgage-backed securities in the months leading up to the Wall Street crash of September 2008. The department said it would not file charges against the bank or any of its employees. 

As a special favor to Goldman, the Obama administration’s Justice Department took the unusual step of making a public announcement that it had cleared the bank of wrongdoing.

The allegations stemmed from a detailed, 640-page report on the financial crisis issued in April of 2011 by the
Senate Permanent Subcommittee on Investigations. The report, based on a two-year investigation and 56 million pages of evidence, documented rampant fraud and criminality by major banks and the complicity of credit rating firms and federal bank regulators. In releasing the report, the chairman of the committee, Senator Carl Levin, said the panel’s two-year probe had uncovered “a snake pit rife with greed, conflicts of interest and wrongdoing.”

The largest section of the report by far, comprising 240 pages, was devoted to a scrupulously documented account—citing internal emails, memoranda, prospectuses and interviews—of how Goldman Sachs, beginning in December 2006, offloaded billions in toxic sub-prime mortgage holdings to investors by packaging them into complex mortgage-backed securities and collateralized debt obligations (CDOs). Goldman sold the investments while concealing the source of the mortgages, the fact that they were losing value, and Goldman’s belief that they would decline further.

As the report substantiated, Goldman further defrauded its clients by betting for its own profit that the securities it was recommending would collapse, without telling its customers that it was doing so … //

… The current crisis has revealed how completely the bankers rule behind the trappings of democracy. Instead of being led away in chains and having their ill-gotten wealth seized for treating the world economy as their personal gambling casino — a crooked one at that—the financial oligarchs were rewarded with trillions stolen from the public purse. Now the state, bankrupted by the bailout of Wall Street, is clawing back a portion of the cost by destroying social programs and public services and impoverishing the working class … //

… The report concludes with a survey of federal securities laws that apply to Goldman’s activities. On page 606, for example, the following appears: “With respect to a broker-dealer, the SEC has held: ‘When a securities dealer recommends a stock to a customer, it is not only obligated to avoid affirmative misstatements, but also must disclose material adverse facts to which it is aware. That includes disclosure of “adverse interests” such as “economic self interest” that could have influenced its recommendation.’”

No one with a straight face can claim that Goldman did not violate federal laws in its money-mad drive to profit from the collapse of the housing market. The Senate report is a devastating indictment of criminal practices that pervade not only the actions of Goldman Sachs, but all of the major banks, hedge funds and financial institutions.

The role of the government in shielding the financial mafia—not a single leading US banker has been prosecuted since the crash of 2008—shatters all claims that the financial system can be reformed. The grip of the financial aristocracy over society can be broken only through the independent, revolutionary mobilization of the working class on the basis of a socialist program. At the center of that program is the expropriation of the major banks and their transformation into public utilities under the democratic control of the working people. (full text).

Links:

Taking Population Out of the Equation: Reformulating I=PAT; Published on Reading From The Left (first on Institute on Women and Technology, 1993), by Patricia Hynes, 66 pdf-pages.

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