Red Flags Over Goldman Sachs

Just to prove that I am an even-handed insulter, here is a rant about my former employer, Goldman Sachs. The scandal at 1MDB, the Malaysian sovereign wealth fund from which it appears that billions were stolen by politicians all the way up to the Prime Minister, continues to unfold.

 

The main players in the 1MDB scandal. Irony alert: apparently money siphoned off from 1MDB was used to inter alia finance Martin Scorcese’s movie “The Wolf of Wall Street”, in which Leonardo di Caprio plays a major boiler room operator/ hustler who makes a fortune by defrauding his clients. When the WSJ contacted the people involved in 1MDB, all of them strenuously denied wrongdoing, with the exception of the only currently imprisoned one, who “declined to comment”. The money is gone, but it seems nobody took it. It is so to speak a Malaysian luxury miracle, proudly aided and abetted by those doing God’s work on the other side of the Pacific pond – click to enlarge.

 

At last count, law enforcement officials in seven countries are investigating the scandal, with the unsurprising exception of the officials whose boss did the stealing.  As the slogan of the Malaysian Tourism Board puts it: “Malaysia, truly Asia.

Here’s a prediction: Goldman Sachs is going to bleed for this one.  There were more red flags fluttering over these deals than in a May Day parade.

These included the extraordinary fees that Goldman was paid for underwriting the debt of 1MDB (a total of $306 million for raising $3.5 billion, which is at least 10 times the normal level).  When the head of the bank in Asia questioned the fees, he was overruled by Gary Cohn, then Goldman’s President and now Trump’s nominee to head up the National Economic Council.  Drain the swamp, indeed.

 

A WSJ video summarizing what is known about the giant 1MDB fraud, which is said to be the largest white collar crime ever commited.  Evidently, billions of dollars have been “misappropriated”, but the perpetrators remain unidentified and unindicted. Amazingly, only one person has landed in investigative custody so far, and he’s not from Malaysia.

There was also the murky role played by an intermediary called Jho Low, who continued to be involved in the bond deals despite being turned down twice when he applied to become a private client of Goldman.

Finally, 1MDB requested that the proceeds of the bond offerings were paid to a small, private Swiss bank.  The use of a bank like this was unusual enough that a senior Goldman banker had to meet with compliance officers from the Swiss bank in order to persuade them to take the money.

 

God’s little helper on Earth, via ZH’s William Banzai 7 (WB7 produces the funniest Blankfein send-ups by far – here’s another excellent one). Blankfein proved that it’s sometimes better to remain silent when he remarked in reference to the Malaysia/1MDB deals of GS: “We have to do more of that.

 

At a company meeting, Lloyd Blankfein, the CEO of Goldman, held up these deals as examples for the rest of the regional employees: “Look at what [names of the bankers] did in Malaysia.  We have to do more of that.”  Sorry, Lloyd, but this was not doing God’s work.

Once again, it appears that Goldman has lost its historic ability to overrule short-term greed in favor of the long-term variety.

 

Lionel Shriver

One of my greatest pleasures is finding out that someone whose work I admire is a libertarian to boot.  I have recently experienced this with Lionel Shriver, the authoress of We Need to Talk About Kevin (made into a very creepy movie) and The Mandibles.

In addition to being very good writing, The Mandibles is supposed to deal with explicitly libertarian themes, such as the collapse of society following a crisis in an over-indebted America.  I anxiously await its delivery by Amazon.

Shriver recently caused social justice warrior outrage with a speech she gave in Brisbane, Australia, where she insisted that the writer’s craft required “cultural appropriation” if she is not to “designate my every character an aging 5-foot-2 smartass.”  She then topped it off by donning a sombrero at the end of the presentation.

 

Lionel Shriver, here seen holding up the odd figurine one gets as part of the Orange Prize for Fiction, which she deservedly won for “We Need to Talk About Kevin”.  Recently she caused conniptions among SJWs by describing how authors of belletristic literature go about creating interesting casts of characters for their books.  In a deliberate show of contempt for the behavioral prescriptions of crybullydom, she then callously donned a verboten sombrero in a vile act of cultural appropriation, a thoughtless micro-aggression against the entire nation of Mexico, mocking the marginalized group status of its population and violently pushing it out of its safe space. This may well trigger depression, body image issues and intense feelings of inferiority among Mexico’s citizens, who must henceforth be deemed to be in severe danger of contracting invisibility syndrome. Can we allow Mexico to be walled in by the Trump-devil before the country has fully recovered from Ms. Shriver’s brutal sombrero attack? And why is nobody looking into the Putin connection? Surely he’s somehow involved.

 

Here is a good interview with Shriver from Reason, which discusses the Brisbane speech at length.  Even better, here is the NYT guest editorial she wrote in which she outed herself as a libertarian, entitled “I Am Not a Kook.”  It included these words:

 

“I cannot be the only American repeatedly forced to vote Democratic because the Republican social agenda is retrograde, if not lunatic — at the cost of unwillingly endorsing cumbersome high-tax solutions to this country’s problems. My comrades and I don’t all sit around reading Ayn Rand novels, either. In fact, the abundance of my natural political bedfellows don’t call themselves libertarian — though “socially progressive economic conservative” is a mouthful. We aren’t bigots, and we’re not evangelical. We’re live-and-let-live about sexuality, accept man-made climate change and believe in evolution. But we’re also concerned about the national debt, oppressed by an arcane, punitive tax code, and unenthusiastic about widespread dependency on the state.”

 

After speculating how such a reasonable, fundamentally American position could have been successfully stigmatized as extremist, Shriver finishes up with:

 

Voters like me — who believe that environmental quality, health and safety, and security needn’t be purchased at the cost of our liberty, and who defend the right to make our own mistakes as a crucial aspect of being human — deserve political representation. We’re ornery, and we don’t like being told what to do, but we’re not kooks.

 

Editor’s Note:

Roger occasionally writes brief comments on a wide variety of current events. We have agreed to publish these on Acting Man under the heading Side Notes, it appeared originally at Economic Man.

 

Image captions by PT

 

Roger Barris is an American who has lived in Europe for over 20 years, now based in the UK. Although basically retired now, he previously had senior positions at Goldman Sachs, Deutsche Bank, Merrill Lynch and his own firm, initially in structured finance and latterly in principal and fiduciary investing, focussing on real estate. He has a BA in Economics from Bowdoin College (summa cum laude) and an MBA in Finance from the University of Michigan (highest honors).

 

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2 Responses to “Side Notes, January 14 – Red Flags Over Goldman Sachs”

  • RagnarD:

    Also, does anyone at Acting-Man have a view on why we’ve zero about this since it came out in August?:

    “U.S. Army fudged its accounts by trillions of dollars, auditor finds”
    http://www.reuters.com/article/us-usa-audit-army-idUSKCN10U1IG

    Yes, someone comments that it is “only a net $62B out”. But why should we have any faith in the veracity of that comment?

    One of the least surprising “reveals” would be that the NSA/CIA/Black Ops/Military have figured out how to
    spend Trillions off balance sheet / outside the eyes of the official record keepers.

  • RagnarD:

    Great piece Roger. I’m already more than half way through The Mandibles. I heard about it via the same Reason interview you linked to. Its like the Grapes of Wrath meets the ZeroHedge Future, with humor. Not that I’ve read Grapes of Wrath, but the bits I’ve seen of the movie didn’t look too funny.
    I’ll have to check out the Kevin book.

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