The Vampire Squidâ€™s Problems
“Smithâ€™s sentiments are appreciated, but actually he is wrong about a fundamental point, at least in todayâ€™s business environment. Goldman doesnâ€™t have to give a damn about its clients because the vampire squid has found a much more lucrative way of insuring their bottom line: government largesse.
Letâ€™s be clear: the bailout of AIG was not a bailout of AIG. It was a bailout of Goldman Sachs, to whom AIG were a counter-party. AIGâ€™s failure would have meant Goldmanâ€™s balance sheet â€” already stuffed with derivatives dynamite â€” blew up. Goldman â€” along with a whole slew of other firms who created and invested in these dynamite products â€” would have been bankrupt.
And so the real problem is not Goldmanâ€™s rapaciousness. Itâ€™s the fact that systemic rapacity is being subsidised and protected by the government. Malpractice and malinvestment â€” such as the current global derivatives mesh which spreads risk around balance sheets like a pandemic â€” will in nature always eventually be punished by failure. Thatâ€™s precisely what we saw in 2008, and thatâ€™s precisely what governments around the world crystallised and condoned through their bailout programs. Goldman have no incentive to change their business practices under the present conditions, and they wonâ€™t.”
The Full Piece…HERE