Goldman Sachs, was the Wolf of Walls Street an exclusive case?

In 1996 brokerage house Stratton Oakmont fall down. In 1999 its founder is proclaimed as a guilty of fraud and money laundering. The sentence, bring out in 2003, are four years of prison, from which he only completed two, and an obligation to return 110 millions of dollars from which, till now, he only returned 14. This is the story that everybody knows perfectly thanks to the movie “The Wolf of Wall Street” from 2013, directed by Martin Scorsese, but only few people know that jobberies like those from the movie, happen in the financial world daily and theirs authors not always end up in so bad situation, sometimes, a wangle is just a springboard in their careers.

 

By Bartosz Prokott / Photo: Razvan Stanciu

We cannot say that it was long time ago, because considering the present world condition it seems like it was yesterday, but ten years ago the major crisis of contemporary history of this planet exploded. The crisis that started as an economic, immediately became a problem in every social field. But, is it correct to say that it started there? No, it didn’t. It was an Economic Bubble in constantly growth during years, that finally exploded because it couldn´t handle more. There are a lot of reasons that inflated the balloon, but the most important are Subprime Mortgage crisis and Greek Depression. Curiously, it can be a coincidence, it can be jobbery, there is a name that appears in both cases, so it does in every single misfortune that helped to develop 2007´s crisis…

But we must go step bby step. Subprime Mortgage, ergo high-risk loans were mortgage for people with low income. With this, we can understand that those debts were dangerous debts, as they might be not returned. Any Spaniard has a minimal idea of what the housing bubble was, but we must understand that the house crisis goes further; the national territory was only a little part of the problem. We must go to the other continent. In U.S.A. rubbish mortgage, granted without the need to fulfil high requirements by the applicants, were products that the big banks, being naturally very clever, prevented that they would not work. Even so they decided to go ahead with the idea and chose to either pack the mortgages into one and sell them to another as a single financial product, which was known as worthless just by them, or stay with them, secure them several times, and get the benefits of compensation. So, the money was lost by both buyers and insurers (the multinational AIG went bankrupt precisely because of this reason), but not the bank, which would win on either side. The bank that made the most profits with this very legal and unethical behaviour was Goldman Sachs.

 

Sign indicating Wall Street, the epicenter of the crisis

 

Regarding the Greek depression, we must know that it was not the consequence, as many have thought, of the great recession. We must think of it as a house without fundamentals that is devastated when the tornado arrives. It was a problem that was growing for years. It is true that the bankruptcy of Greece broke out after the great recession, but it was caused by the waste of public money, its location in the euro zone, differences between the countries of the union, the banking crisis, but above all by the inaccuracy in presenting the data to its lenders.To understand this, we must go back to the year 2000 when the country asks for the euro to be its official currency. One of the conditions that the candidates to the euro zone had to fulfil was to maintain their public debt below 60% GDP. But for the Hellenic country the rules were adjusted a little, in such a way that, exceeding its debt from 2001 with 100% above GPD, the country enjoyed the common currency. All this because thanks to certain financial institutions, Greece showed that the debt was in continuous decline. Curiously, "the institution" that helped most was Goldman Sachs.

Goldman Sachs, the bank of banks, which strives to act in the legal, but not in the ethical framework. Although it was founded in 1869, it becomes important in 1956 when, under the direction of Sidney Weinberg, who is the first adviser of the Ford group and enters into the riskiest banking. Bank that appears in any worldwide embezzlement and it´s known for its connections with high levels of public administration in all continents. Since 2006 it is chaired by Lloyd Blankfein.

Lloyd Blankfein, from Jewish origin, grew up in Brooklyn, New York. Graduated from Harvard University, he joined Goldman Sachs in 1994 to finally become its CEO in 2006.It should be noted that Blankfein takes over the reins of Goldman Sachs before what we can call the crack of 2007 and it is precisely him, the one in charge to defend what remains of the reputation that the bank preserved, as well as to introduce the bank in a restructuring very important. He testifies before the multiple committees of the US Congress and directs the change from Goldman Sachs from investment bank to commercial bank to receive government money, leaving everything with a good face. Leaving with such a good face that, from 2006 until today, is the highest-paid executive on Wall Street (in 2006 he earned 54 million dollars, in 2016 a little less, only 22, but he’s still the first), without appreciating the detail that his bank had to be rescued.

 

Wall street, New York City

Henry Paulson, who was head of Goldman Sachs before Blankfein, studied at the same Harvard University. Goldman Sachs employee since 1974, in 2006 he leaves the company, already as CEO, to join, as several of his predecessors, in the public sector. Paulson, whose fees were not as high as Blankfein's, was much more interested in power than money. As treasury secretary in the Bush administration he had to come up with a bailout plan for banks and insurers that went bankrupt for subprime mortgages, oh irony.

Mario Draghi, a well-known Italian economist, especially by his current position of president of ECB. However just a few know that between 2002 and 2006 he was vice president of the European section of Goldman Sachs. Coinciding in this way, with the help that the bank was lending to Greece to hide its debt. The economist was asked about it a few years later, but apart from a journalist at the press conference no one was interested in his past and the issue had no major impact.

These were just three cases from a bunch. Goldman Sachs Bank has a long list of politicians who either worked for him before taking up a public charge or after.

It is a situation that occurs on every continent. The funny thing about all this is that many of these people, being involved in multiple scandals that had very serious effects for the world economy, did not suffer any consequences, nothing, on the contrary, it is a significant rise in their careers. We are impressed with personalities like Jordan Belfort, when the wolves that rule the world go unseen.

Créditos