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15 Signs Wall Street Pathology Is Spreading

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Goldman's secret moral pathology 15 symptoms of a Wall Street disease destroying democracy and capitalism By Paul B. Farrell, MarketWatch ARROYO GRANDE, Calif. (MarketWatch) -- In "The Battle for the Soul of Capitalism" Jack Bogle no longer sees Adam Smith's "invisible hand" driving "capitalism in a healthy, positive direction." Today, his "Happy Conspiracy" of Wall Street plus co-conspirators in Washington and Corporate America are spreading a contagious "pathological mutation of capitalism" driven by the new "invisible hands" of this new "mutant capitalism," serving their selfish agenda in a war to totally control America's democracy and capitalism. Fund statistics hoodwink consumers MarketWatch's Chuck Jaffe reveals the statistics that are used against consumers by the mutual funds industry. The "Goldman Conspiracy" is the perfect B-school case study of Wall Street's secret contagious pathology, with insiders like Lloyd Blankfein, Henry Paulson and others pocketing billions more of the firm's profits than shareholders, evidence the new "mutant capitalism" has replaced Adam Smith's 1776 version which historically endowed the soul of American democracy as well as our capitalistic system. Sadly for America Goldman's disease is rapidly becoming a pandemic spreading beyond Wall Street's too-greedy-to-fail banks, infecting our economy, markets and government as it metastasizes globally. What are the symptoms of this growing "soul sickness," this "pathological mutation of capitalism" Bogle fears? Recently we reviewed the consequences of this "soul sickness." Today we'll paraphrase news reports about 15 symptoms spreading "soul sickness" beyond the boundaries of this Goldman case study: These are the 15 signs of a moral pathology undermining not just banking but American democracy and capitalism. 1. Gross denial of any moral damage caused by their rampant greed Seeking Alpha: "Goldman is America's most hated corporation." We cheer as Rolling Stone's Matt Taibbi calls Goldman "a giant vampire squid wrapped around the face of humanity." Banks triggered a global crisis. Main Street suffers. Greedy bank CEOs raid the Treasury then stuff $30 billion in their bonus pockets, up 60% from last year. They are our 21st century General Motors, convinced "What's good for Goldman is good for America." We saw how that arrogance ended. Wall Street has similar suicidal symptoms. 2. Narcissistic egomaniacs with secret 'God complexes' London Times' John Arlidge interviewed Goldman CEO Blankfein: "He paid himself $68 million in 2007, now worth more than $500 million, yet insists he's a blue-collar guy. He says banking has a 'social purpose,' just a banker 'doing God's work.'" When I was at Morgan Stanley in the 1970s the firm ran an ad: "If God Wanted To Do a Financing, He Would Call Morgan Stanley." Today, all of Wall Street is dual diagnosed: They're morally blind money addicts who believe they're "God's chosen." AA would say: They haven't "bottomed," won't recover from their disease till a disaster hits, with another market meltdown and the "Great Depression 2." Then maybe they'll "quit playing God." 3. Paranoid obsessives about secrecy, guilt and non-disclosure Bloomberg: "New York Fed's Secret Deal: Taxpayers paid $13 billion more than necessary when government officials, acting in secret, made deals with banks on AIG, buying $62 billion of credit-default swaps from AIG." The government would eventually cover about $180 billion in AIG swaps backing toxic CDOs when Paulson and Ben Bernanke double-teamed to bailout Goldman, saving them from bankruptcy. 4. Power-hungry need to control government using Trojan Horses Wall Street Journal: "For a year Goldman said it wouldn't have suffered damage if AIG collapsed. But a new report kills that claim. TARP inspector general found that then New York Fed Chair Tim Geithner gave away the farm. If AIG had collapsed, Goldman would have had to cover the losses itself. They couldn't collect on the protection of AIG swaps." Yes, Goldman was bankrupt. But friends in high places always save them. 5. Borderline personalities who regularly ignore conflicts of interest New York Times: "Before becoming Treasury secretary in 2006, Hank Paulson agreed to hold himself to a higher ethical standard than his predecessors. He specifically said he'd avoid his old buddies at Goldman where he was CEO. Later Congress saw many conflicts of interest, not just meetings but favorable treatment for his buddies at Goldman." 6. Pathological liars incapable of honesty even with own investors McClatchy News: "Goldman secretly bet on the U.S. housing crash after peddling more than $40 billion of securities backed by 200,000 risky home mortgages. But they never told their investors they were also secretly betting that a drop in housing prices could wipe out the value of those securities." Paulson knew, stayed silent. "Only later did their investors discover Goldman's triple-A investments were junk. Did Goldman's failure to disclose its bets on an imminent housing crash violate securities laws?" Boston University Prof. Laurence Kotlikoff says: "This is fraud, should be prosecuted." But it won't be in the new "mutant capitalism." Members of AA say you know when an alcoholic is lying: Their lips are moving. Same with Wall Street: Think liar's poker. It's in their DNA. They're compulsive liars trapped in a culture of secrecy. They lie, the lies cascade, memory slips, more lies are necessary, they cannot stop lying. Goldman sure can't ... look, their lips are moving again. 7. Sole fiduciary duty to insiders, not investors, never the public New York Examiner: "Goldman was at the heart of the subprime market, selling subprime junk as no-risk AAA bonds, then gambling, hedging, shorting their investors. Goldman traded like Enron. That set up the meltdown. The Fed and Goldman's ex-CEO at Treasury saved Goldman. Taxpayers got stuck with the bill. Bailout overseer Elizabeth Warren called this reckless gambling. Trend forecaster Gerald Celente calls it mafia-style looting. 8. Moral issues are PR glitches, violations of 'don't get caught' rule USA Today says "Goldman Sachs should be celebrating. Yet, the mood at the investment bank seems to be one of crisis about the public backlash over employees' bonuses." So Goldman's on a PR blitz in a bid to undo the damage. They canceled their Christmas party. Also launched a $500 million program for small businesses. Get it? They can't see their moral failings, only a PR problem, so they hire PR agents and crisis managers first. 9. Charitable donations are tax and PR opportunities, not moral issues New York Times: Examined Goldman charitable foundation's tax filing: Thick as a phone book with more than 200 pages of trades. "Never seen anything like it," said Verne Sedlacek, president of Commonfund, a $25 billion fund for universities and nonprofits. The money to Goldman's foundation is dwarfed by insiders' bonuses. The foundation got $400 million, gave away $22 million. Bonuses were 20 times more. Even the New York Post said "Goldman's Born Again Image is Laughable." They're sleaze-ball cheapskates. 10. When exposed in a massive fraud, feign humility, fake an apology CBS MoneyWatch: "Blankfein now says he's 'sorry for the role Goldman played in the housing crisis: We participated in things that were clearly wrong.'" Wrong? Sounds more like he's admitting to something "clearly criminal." Reread: Isn't he admitting guilt to a fraud; cheating millions of homeowners, shareholders, taxpayers? Then laughs at us with phony "restitution," a fund of $100 million annually for five years to small-business owners. Financial Times says "$100 million is the profits from one good trading day. In 3Q '09 they had 36 days better than that." Unfortunately, these crooks will get away with it. 11. When bankruptcy threatens, bribe friends in 'Happy Conspiracy' Barron's: While Geithner was "showcasing what a great investment Washington made in Goldman, the 23% return on the $5 billion of the taxpayers money, Warren Buffett's deal made him a fabulous 120% return. Goldman's stock ran up to $180 from $115, a gain of $2.8 billion. Add 8% discount on warrants, another $3.2 billion to him." 12. Engage co-conspirators to cover up, distract, do your dirty work Reuters: "Former Merrill Lynch CEO John Thain was fired after a scandal over the billions in Merrill bonuses. He says big insider bonuses don't cause excessive risk-taking nor the financial crisis." He blames "poor risk management, excessive leverage and too much liquidity for too long. But even if they tie bonuses to long-term performance, that won't prevent the next collapse." Why? They'll find new ways to break the moral code. 13. As money-hungry vultures they will prey on vulnerable Americans McClatchy News: "An obscure Goldman subsidiary spent years buying hundreds of thousands of subprime mortgages, many from the more unsavory lenders. They repackaged them as high-yield bonds. The bottom fell out. Now, after years of refusing to disclose they owned the mortgages, the secret is out and Goldman has become one of America's biggest, greediest foreclosers." Yes, the vampire squid wants pounds of flesh. 14. Treat everyone not in the 'Happy Conspiracy' with tough love HuffPost's Leo Leopold warns: "Each day reveals how we've traded away our sense of decency and the common good in exchange for pure greed. Unemployment means hunger. The Agriculture Department reports 49 million Americans don't have enough food, up 13 million over the last year, highest number ever." Wall Street treats anyone not in the "Happy Conspiracy" as morally defective capitalists in need of "tough love." 15. Addicts consumed by money: 'Jesus would throw them out ...' New York Times' Maureen Dowd: "Goldman's trickle-down catechism isn't working. We have two economies. In the past decade Wall Street's shared little with society. Their culture is totally money-obsessed. There's always room for a bigger house, bigger boat. If not, you're falling behind. It's an addiction. And Washington's done little to quell it. Geithner coddles wanton bankers. Obama's absent. 'Saturday Night Live' was tougher. And as far as doing God's work: The bankers who took taxpayer money, pocketing obscene bonuses: They're the same greedy types Jesus threw out of the temple." Warning: Washington, Main Street, none of us has "clean hands." We're all in bed with the "Happy Conspiracy," touched by greed, turning a blind eye to Wall Street's rapidly metastasizing moral and spiritual pathology: So ask yourself, do you believe America's widespread "lack of a moral compass" will eventually trigger another, bigger market and economic meltdown, pushing America into the next "Great Depression II?" There is a video: Fund statistics hoodwink consumers http://www.marketwatch.com/story/15-signs-wall-street-pathology-is-spreading-2009-11-24