Wednesday, April 22, 2009

How to funnel your hard earned money into our I-bank : the Goldman primer

Its fucking amazing.

Amidst the current economic mess, while jobs are being lost in millions, people are being forced to leave their homes left right and center, life savings, 401ks, retirement savings of the common man are being reduced to rubbles, I banks (read Goldman Sachs) continue to churn out amazing profits from what is now nothing but a naked form of state-subsidized (read Obama administration) profit generating racket for the remaining few I-banks (Goldman primarily after Merryl, Bear Sterns and Lehmann managed to go belly up with greed, as a sidenote the prestigious scumbag and asshole of the decade award goes to (Sloan) Harvard alum and ex Merryl CEO John Thain for managing to award himself and his fellow execs 100s of millions of $$ in performance bonus exactly 8 days before they had to go to the US government asking for a bailout).

Ok lets start:

The chief players: Goldman Sachs, SEC, White house
Cameos: Merryl, Bear Sterns, Lehmann
Comic relief: AIG
Act 1: The great depression of 09 aka how wall street managed to ass rape you

The story so far (quoted in green):

A former Goldman chief, Rubin, presses the Commodities Futures Trading Commission(CFTC, a federal government regulation and enforcing agency for the market) to deregulate a type of derivative contract whose chief benefit to an investment bank like Goldman is that it allows it to lend more — the CDS being most useful as a tool to move investment risk off a bank’s balance sheet. Then another Goldman chief, Paulson, pushes for further relaxation of lending limits. Then Goldman jumps head-first into the housing bubble, buying tens of billions in CDS protection to hedge their crazy investments. This massive explosion in lending by banks like Goldman, fueled in part by the use of derivatives like CDS and fueled still more by the 2004 change in rules, puts an enormous strain on the economy, leading to giant holes blown in its hull by the end of 2007 and on through 2008. It follows that when Goldman’s chief partners in those CDS deals, AIG, collapses as part of this wave of crashes, Paulson — now Treasury Secretary — rushes to the rescue, pumping billions in taxpayer money into AIG that is quickly funneled to Goldman. Then a Goldman alum is put in charge of AIG while another bunch of Goldman alums funnels still more bailout money to AIG, and yet another Goldman alum is put in charge of regulating the derivative market that is the focus of most of the bailout efforts.

In the midst of all of this, something amazing happens. Goldman Sachs, along with Bank of America, Morgan Stanley, and a host of other “troubled” banks, reports a profit for its first quarter in 2009! How and why that happened is another fascinating story, for another time. For now the only thing to remember is that all the same people who got us into this mess — Rubin, Summers, Goldman in general — are now being put in charge of the cleanup by a president who spent most of 18 months on the campaign trail pledging to end the influence of money in politics.

Add this together with the obscene giveaway that is the Toxic Asset program Geither has just devised (Goldman Sachs “expressed interest in participating in the plan as an investor,” according to the WSJ), and you have an amazing situation. Between the Bush and Obama administrations, you have a bailout program that has now figured three ways to funnel money to Goldman, Sachs: via AIG, via TARP, and now via this trillion-dollar “Public-Private Investment Program,” which basically lends huge amounts of money to investors and provides guarantees against heavy losses. It’s free money, state-subsidized profiteering at its most naked.

Hail Goldman, fucking assholes, all of you execs and b-school alums at Goldman should be lined up in a row and asked to eat shit burgers followed by a "thanks a lot, can I have one more and please can you piss on me while you are flipping those shit burgers".

In today's fun news: I played poker at the airport on saturday after my flight got delayed on a supremely dodgy Boingo connection, and managed to rip $8k off a huge donkish player in less than 2 hours.


Anonymous said...

if this is true then wow

Maxwriter said...

hmm....although Thain graduated from HBS. He was a MIT undergraduate.

Anonymous said...

I played poker at the airport on saturday after my flight got delayed on a supremely dodgy Boingo connection, and managed to rip $8k off a huge donkish player in less than 2 hours :-o
OMG!! AT this rate, the B-school loans n all shud not be of any concern to u.. Well, do u even need to go to a b-school. :-)

patrick the painter said...

Forget about Tea Parties. It's time for a Run-On-the-Bank-Party!

Josh Hohman said...

Let me know how the poker career works out - sounds a lot more fun than what most MBA's end up doing...

I just wanted to drop you a line and tell you that I enjoy your blog, and wish you the best of luck with your MBA experience. I was in your shoes a few years ago, and can tell you that the Stanford GSB was two of the best years of my life (the application process, not so much, but that’s another story…)

Anyway, I know how stressful the application process can be, and since a lot of your readers are in the process of applying to business school, I thought I might be able to help you provide a valuable resource to your loyal readers.

I’d like to send you a copy of my complete applications for 5 top MBA programs (for free, seriously). Then, if you think your readers might like it as well, I’ll provide a link you can post on your blog so your readers can grab their copy as well.

If you're interested, drop me an email at, and I'll have a preview copy of my application materials emailed to you ASAP, so you can check it out and make sure it's something you'd feel comfortable giving away to your readers.

Josh Hohman

Shreenath Regunathan said...

Great blog OMG - I can resonate with a lot of your comments/posts; I am sure you've read the GS vanity fair article, if not, here ya go:

I do quite love the poker play on your blog and wish you the best!
If you seriously need to chat about strat consulting / gen management, let me know.
I'm also applying though only a couple of the schools overlap

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