Squids

Rolling Stone columnist Matt Taibbi famously described the giant investment banking firm, Goldman Sachs, as a “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”

Taibbi’s description is eloquent, but totally unfair to squids.

The vampire squid (vampyroteuthis infernalis) is a wonderful creature.[i]  Sure-- it has a slightly unappealing appearance,  with  a big thing flowing like a black cape, reminding one of a vampire. And its does have suckers, although they are hard to see unless you look up close at one, but there is no “blood funnel.”

Why did Taibbi pick the vampire squid to represent Goldman Sachs?  Maybe because this squid doesn’t shoot out ink when it feels threatened. Instead, the vampire squid shoots out a sticky mucus.

If you have to choose between the kind of slime coming out of Goldman Sachs or the sticky mucus from a vampire squid living in the ocean, pick the one in the ocean. It won’t stick to your wallet.

People often wonder--what does Goldman Sachs (or any investment bank) do?  The slime at Goldman is actually a financial lubricant, greasing the gears of the financial world.

Some critics allege that investment banks don’t manufacture anything and don’t create anything of value—other than billions in profits for the bank itself. Wrong again.  Investment banks invented amazing things, including complex financial instruments (derivatives, credit default swaps, collateralized debt obligations, etc.) capable of temporarily bamboozling the entire planet, extracting wealth from every nook and cranny, and bringing the entire modern world to the brink of a massive financial crisis.

Recently, the "vampire squid" of Wall Street was in the news yet again. One of its derivative salesmen, Greg Smith, resigned and passed on his resignation letter to the New York Times, setting off a fire storm of controversy. Smith complained that Goldman had lost its way ethically since he started with the firm. He pointed to the double dealing that Goldman typically does when fleecing its customers (referred to by the firm as “muppets”). Smith wrote of a “toxic and destructive” environment that subordinated the needs of the firm’s clients to the firm’s profits.

Goldman Sachs Clients

It took poor Greg Smith more than 10 years inside the firm to figure out that the company he worked for was a bunch of lying, cheating, stealing gangsters. He seems a bit oblivious.

Goldman Sachs has been in trouble with the law for cheating its clients almost since the day it was founded. In 1928 the firm was famous for creating a “notorious Ponzi scheme known then as the Goldman Sachs Trading Corporation.”[ii]

Since that time Goldman has been oozing slime through one SEC prosecution or another for its entire lifetime, almost always a situation in which Goldman gets caught fleecing its own clients.

Former investment banker William D. Cohan describes Goldman’s escapades in his book “Money and Power: How Goldman Sachs Came to Rule the World.”  In a recent article, Cohan described in detail how in 1970 Goldman totally screwed its clients in the Penn Central bankruptcy. Essentially, Goldman unloaded worthless Penn Central commercial paper on its own clients to save its own ass, AFTER it learned, but did not disclose to its clients, that the railroad was bankrupt.

Bringing things up to date, Goldman profited to the tune of $4,000,000,000 in the mortgage meltdown by betting against mortgage-backed securities that it created and sold to clients, while knowing full well that the stuff was toxic junk.[iii]

Only a week ago, Goldman promised the Delaware court that it would try to “strengthen internal rules to prevent…conflicts of interest” after it was caught playing both sides against the middle in another classic example of Goldman double dealing, this time between an energy company (El Paso) being bought out by Kinder Morgan, a pipeline company.[iv]

So let’s not be so mean to the vampire squids. They are harmless creatures, living in the deep ocean far from the rapacious crooks on Wall Street.

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[i] The vampire squid's body is covered with light-producing organs called photophores. This gives the squid the unique ability to "turn itself on or off" at will through a chemical process known as bioluminescence. When the photophores are off, the squid is completely invisible in the dark waters where it lives. The squid has incredible control over these light organs. It has the ability to modulate the size and intensity of the photophores to create complex patterns that can be used to disorient predators and attract prey. http://www.seasky.org/deep-sea/vampire-squid.html

[ii] William D. Cohan, “Goldman’s Long History of Duping Clients,” Washington Post, March 18, 2012, p.B3.

[iii] Id.

[iv] Washington Post, March 17, p.A10.