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| Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty) |
17 March 12
reg
Smith, a Goldman Sachs vice president, resigned his post Wednesday with
a stinging public rebuke of the firm on the oped page of the New York
Times - accusing it of no longer putting its clients before its own
pecuniary goals.
But if Mr. Smith believes his experience at Goldman is
something new, he doesn't know history. In 1928, Goldman Sachs and
Company created the Goldman Sachs Trading Corporation, which promptly
went on a speculative binge, luring innocent investors along the way. In
the Great Crash of 1929, Goldman's investors lost their shirts but
Goldman kept its hefty fees.
If Mr. Smith believes such disregard of investors is
unique to Goldman, he doesn't know the rest of Wall Street. In the late
1920s, National City Bank, which eventually would become Citigroup,
repackaged bad Latin American debt as new securities which it then sold
to investors no less gullible than Goldman Sachs's. After the Great
Crash of 1929, National City's top executives helped themselves to the
bank's remaining assets as interest-free loans while their investors and
depositors were left with pieces of paper worth a tiny fraction of what
they paid for them.
The problem isn't excessive greed. If you took the
greed out of Wall Street all you'd have left is pavement. The problem is
endemic abuse of power and trust. When bubbles are forming, all but the
most sophisticated investors can be easily duped into thinking they'll
get rich by putting their money into the hands of brand-named investment
bankers. READ MORE
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