The Goldman Sachs’ investment banker known as the Fabulous Fab was saying today in the Senate hearing that a particularly damning document was “not entirely accurate.” But under Senator Levin’s withering questions he could not say what specifically was inaccurate. Finally Levin said:
“I think you have not answered the question the best you can. So let’s go on.”
The whole hearing had the elaborate ritual of kabuki theater. The senators were excoriating. They accused Goldman Sachs of playing both sides of the subprime mortgage catastrophe. Senator MacCaskill was on fire. The bankers were like bookies, she said, or they were like the house in Vegas, taking the vig. But Goldman Sachs was not just taking the vig, they were making bets based on inside information. But for hour after hour, tranche after tranche of Goldman bankers did not answer the senators’ questions as best they could.
In the end the Wall Street Matrix remains firmly in place. No one is being blamed for the central Ponzi-like “instrument of mass destruction” (Warren Buffet’s phrase), the credit default swaps. Credit default swaps were fundamentally fraudulent. They were a way of offering financial institutions “insurance” on bonds without regulation, without proper underwriting, without proper reserves. It was this illusion of security that allowed the Ponzi scheme of subprime mortgage lending to continue to expand. In the beginning all the big institutions held equity positions – known as going “long” – in the subprime market. But thanks to credit default swaps, when their top analysts began to realize that the whole market was going to go bust, they were able to play a big short and make money when American pension funds were losing billions.
As I write this Blankfein is explaining how Goldman got billions in taxpayer AIG bailout money because “the government” didn’t want AIG to fail. But the Matrix renders utterly invisible the simple fact that the “government” that Blanfein is referring to is not the government at all but rather the bankers operating from behind the scene. The Matrix renders invisible for example the true ownership and control of the New York Federal Reserve Bank – what Blankfein calls “the government” -- which is actually entirely composed of the very private banks which benefited so munificently from the vast bailout. Consider: the chairman of the New York Fed during the meltdown was on the board of Goldman Sachs. Jamie Dimon, the CEO of J.P. Morgan Chase, beneficiary of the biggest of the big meltdown deals – like Bear Stearns and WaMu – himself was at the time a Class A director of the New York Fed. Timothy Geithner was selected to be president of the New York Fed by directors and CEOs of these very banks and insurance houses like AIG. The bankers from Goldman Sachs and J.P. Morgan were Timothy Geithner’s BOSSES. Yet they were the biggest beneficiaries of the taxpayer largesse the Timothy Geithner’s “stewardship” at the Fed unloosed.
Although the Republican senators at the hearing today were full of vitriol and anger at the Goldman bankers, it appears that they are still doing the bankers’ bidding when it comes to blocking financial and regulatory reform. This may the Democrats' moment to press the moment to its crisis, and turn this into the modern-day equivalent of the Teapot Dome crisis more than a century ago. There’s a whole world of anger here, anger that could fuel a Democratic response that could dwarf the teabaggers. Therefore the poll question: