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PORTSIDE  March 2012, Week 3

PORTSIDE March 2012, Week 3

Subject:

Wake Up Congress; Before the Next Collapse

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Date:

Mon, 19 Mar 2012 21:34:30 -0400

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Wake Up Congress; Before the Next Collapse 
Goldman Sachs' Trader Finds a New Occupy Tactic 

by PAM MARTENS, Counterpunch, March 19, 2012 

http://www.counterpunch.org/2012/03/19/goldman-sachs-trader-finds-a-new-occupy-tactic/

In the last decade, Wall Street has evolved from
predator to organized crime with a speed dial to
Washington.  Instead of Washington reforming Wall
Street, it has seduced and corrupted Washington.  It
didn't have to come to this.

Since at least 1989, incredibly talented, hardworking
men and women have been leaving high paying positions
at major Wall Street institutions and alerting the
public in meticulously crafted, first-hand narratives
released by venerable publishing houses that Wall
Street wants to rip off its clients' faces.

On Wednesday, March 14, Greg Smith - following in the
proud lineage of Micheal Lewis, Frank Partnoy and Nomi
Prins - simply bypassed the tedious route of galleys
and nit-picking editors  and went straight to the OpEd
page of the New York Times with his resignation letter
decrying Goldman Sachs for abusing its clients.  "It
makes me ill how callously people talk about ripping
their clients off. Over the last 12 months I have seen
five different managing directors refer to their own
clients as 'muppets,' sometimes over internal e-mail,"
Smith said. He called the current environment at
Goldman "as toxic and destructive as I have ever seen
it."

Each day since then, corporate media pundits have
frenetically struggled to characterize the motives of
this 33-year old earning $500,000 a year.  The defining
moment in this debate came in this video where Evan
Newmark, Wall Street Journal columnist and a former
Managing Director of Goldman Sachs, asks MarketWatch
writer Jon Friedman the following question in reference
to the 3 million page hits Smith's OpEd had received on
line: "Do you think Greg Smith will have an easy time
monetizing his popularity?"  I had to play the tape
three times to be sure I wasn't hallucinating.

A young man throws both caution and his career to the
wind in a virtual scream for the leadership of this
country to wake up to what's still transpiring on Wall
Street and a journalist for the newspaper covering Wall
Street can only relate the selfless act to dollar
signs.  The Wall Street culture of greed is
metastasizing into the larger society at a gut churning
pace.  The assumption by Newmark is that there is no
one earning $500,000 who might love his country, its
future, the next generation's future more than his love
of money.

Smith's choice of venue for his resignation letter to
Goldman was dramatic but his words were just more
concrete evidence of what other Wall Street veterans
have been telling the public for the past 23 years - as
Congress turned a deaf ear and proceeded to remove
barriers to facilitate more face ripping of customers.

In 1989, Michael Lewis wrote about his tenure at
investment bank Salomon Brothers in the bestseller
Liar's Poker.  According to Lewis, "It was assumed that
I might well put a customer or two out of business.
That was part of being a geek. There was a quaint
expression when a customer went under.  He was said to
have been 'blown up.' "

Frank Partnoy issued another wake up call to the public
and Congress in 1997. In his bestseller, F.I.A.S.C.O. -
Blood in the Water on Wall Street, Partnoy gave a
damning assessment of Wall Street powerhouse, Morgan
Stanley, where Partnoy worked as a derivatives
structurer: "...my ingenious bosses became feral
multimillionaires: half geek, half wolf.  When they
weren't performing complex computer calculations, they
were screaming about how they were going to 'rip
someone's face off' or 'blow someone up.' Outside of
work, they honed their killer instincts at private
skeet-shooting clubs, on safaris and dove hunts in
Africa and South America, and at the most important and
appropriately named competitive event at Morgan
Stanley: the Fixed Income Annual Sporting Clays Outing,
F.I.A.S.C.O. for short. This annual skeet-shooting
tournament set the mood for the firm's barbarous
approach to its clients' increasing derivatives losses.
After April 1994, when these losses began to increase,
John Mack's [President of Morgan Stanley] instructions
were clear: 'There's blood in the water. Let's go kill
someone.' " (Wall Street is serially enamored with
killer talk, as I previously reported here.)

But Partnoy, now a law professor at the University of
San Diego, did not stop with eye-opening books. He took
his case repeatedly and directly to those who had the
power to stop the financial madness before it took down
the country.

On January 24, 2002, Partnoy testified before the U.S.
Senate's Committee on Governmental Affairs as follows:
"After 360 customers lost $11.4 billion on derivatives
during the decade ending in March 1997, the Commodity
Futures Trading Commission began considering whether to
regulate OTC derivatives. But its proposals were
rejected, and in December 2000 Congress made the
deregulated status of derivatives clear when it passed
the Commodity Futures Modernization Act. As a result,
the OTC derivatives markets have become a ticking time
bomb, which Congress thus far has chosen not to
defuse..." That bomb went off on September 15, 2008. 
Congress had six years to act and did nothing.

Again on March 7, 2006, Partnoy testified before the
U.S. Senate's Committee on Banking, Housing and Urban
Affairs that the credit rating agencies' "increasing
oligopoly profits are a dangerous sign, a symptom of an
infection spreading through the financial markets...The
rating agencies are conflicted, not only because
issuers pay for ratings - they also provide consulting
services and threaten unsolicited ratings. The
multi-trillion dollar credit derivatives industry...is
opaque, volatile, and downright frightening."  It
remains opaque, volatile and downright frightening
today.

By March 3, 2010, Partnoy had decided perhaps pictures
were worth a thousand words and gave a large screen
slide presentation to the media and attendees at a
conference on markets.  With his past warnings left
unattended until financial disaster prevailed, Partnoy
still went about urging sane financial reforms that
would properly deal with Wall Street's off balance
sheet debt bombs:  "If financial reform doesn't include
reforms that would make Citigroups and other major
financial institutions' balance sheets look like
reality instead of fiction, then financial reform isn't
going to work."

Financial reform isn't working; in fact, the key
aspects of reform are still being negotiated with the
unprosecuted inmates 20 months after the Dodd-Frank
Wall Street Reform and Consumer Protection Act was
passed by Congress.  That so-called reform legislation
did not restore the most critical component: the
Glass-Steagall Act, which bars commercial banks holding
insured deposits from being under the same corporate 
ownership as  their casino cousins - brokerage firms
and investment banks.

Partnoy has a new book coming out in June titled Wait:
The Art and Science of Delay, dealing with the timing
of decision making.

Just seven days before Greg Smith poured his heart out
to 3 million on-line readers, AlterNet published an
interview with author and cultural critic Morris Berman
conducted by Nomi Prins. Prins is a prolific Wall
Street writer who worked for Goldman Sachs as a
Managing Director from March of 2000 to her resignation
in early 2002, capping a 15-year career on Wall Street.
 (Prins, together with Krisztina Ugrin, has tirelessly
tracked the Fed's trillions in bailout funds to Wall
Street and posts them here.)

Berman has written a trilogy of books on the future of
America and tells Prins in this interview that America
is in irreversible decline; it is a nation of ignorant
people and hustlers and "At this point we can no more
reverse our downward trajectory than we can turn around
an aircraft carrier in a bathtub."  Berman elaborates:

"The dominant thinking on the left, I suppose, is some
variety of a 'false consciousness' argument, that the
elite have pulled the wool over the eyes of the vast
majority of the population, and once the latter
realizes that they've been had, they'll rebel, they'll
move the country in a populist or democratic socialist
direction. The problem I have with this is the evident
fact that most Americans want the American Dream, not a
different way of life--a Mercedes-Benz, as Janis Joplin
once put it. Endless material wealth based on
individual striving is the American ideal, and the
desire to change that paradigm is practically
nonexistent. Even the poor buy into this, which is why
John Steinbeck once remarked that they regard
themselves as 'temporarily embarrassed millionaires.' "

Now, I respect people who thoroughly research their
subject and write three in-depth books with endless
facts and documentation.  But something was not quite
right with the Berman assessment and it nagged me for
an entire week until Greg Smith wrote his $2.15 billion
resignation letter.  (That's the amount of market
capitalization Goldman Sachs lost that day.)

I went to my bookcase and pulled out the books by
Lewis, Partnoy and Prins. If hope is the last thing to
die, I wanted something to cling to.  I decided the
very existence of these books disproved Berman's
theory.

These authors had made large salaries and succeeded on
Wall Street.  They gave it all up to educate the public
and, hopefully, spur reforms. They have relentlessly
stayed on this course despite endless disappointments
delivered by a hapless Congress.

And what about the thousands of Occupy Wall Street
protestors around the country who slept on concrete or
dirt in fabric tents in 30 degree weather until ejected
by force.  How about those Occupiers who were beaten,
pepper-sprayed, arrested and came right back for more. 
Their American Dream, like mine, is simply a level
playing field, not a Mercedes-Benz.  If Lewis, Partnoy
and Prins were the first sounds in the rebellion,
Occupy Wall Street is a shout; Greg Smith is a scream.

If one needs further evidence that hope is not yet
lost, it is in the opening pages of Other People's
Money: The Corporate Mugging of America, the 2004 book
Prins wrote after leaving Goldman Sachs.  Prins gives a
poignant and candid answer for her exodus:

When I left Wall Street, at the height of a wave of
scandals uncovering scores of massively destructive
deceptions, my choice was based on a very personal
sense of right and wrong...So, when people who didn't
know me very well asked me why I left the banking
industry after a fifteen-year climb up the corporate
ladder, I answered, 'Goldman Sachs.'

"For it was not until I reached the inner sanctum of
this autocratic and hypocritical organization - one too
conceited to have its name or logo visible from the
sidewalk of its 85 Broad Street headquarters [now
relocated to 200 West Street] that I realized I had to
get out...The fact that my decision coincided with
corporate malfeasance of epic proportions made me
realize that it was far more important to use my
knowledge to be part of the solution than to continue
being part of the problem."

I decided to reach out to Partnoy and Prins with the
following question: "What is the one thing that could
happen in America today that would make you optimistic
that the country will find its moorings in time to save
itself." They responded as follows:

Frank Partnoy: "One crucial thing is for Americans to
rediscover the importance of the rule of law. Oliver
Wendell Holmes famously said that the law is a
prediction of what a judge will do. For decades, that
common law notion helped reinforce a culture of respect
and ethics as people in private and public life came to
understand that if they did something wrong, a judge
would ultimately assess their conduct and punish them
for it. Unfortunately, today we live in a country of
rules, not law, and judges are largely absent from
policy making. These rules differentially affect people
based on their race, social and economic status, and --
most importantly -- whether they work on Wall Street.
The wealthy avoid rules; the poor cannot. Until we
approach white collar crime as we do street crime,
Americans will be justified in their lack of respect
for the legal order. And respect for law is the
backbone of any society."

Nomi Prins: "Any potential for a more positive outcome
would have to rise from a broad population push that
renders the 99% more influential. True reform won't
manifest from the highest echelons of political
chambers or corporate boardrooms. Inequality won't be
lessened because the wealthiest individuals decide to
spontaneously share. It is up to individuals to pay
more attention to their collective, rather than
personal surroundings, despite all media messages to
the contrary. Indeed, we need to spend more time
examining what's going on, and not zoning out on some
sound bite about a Kardashian. We need to band
together, as in the Occupy movements, or even in local
communities, to demand an alternative system and become
a more unified society. Unfortunately, so much of our
current framework is stacked against this, starting
with the sheer cost of living which demands so much of
our energy. It all comes down to embracing the human
drive to connect, rather than merely survive."

Prins has written a novel, Black Tuesday, which reminds
us of the parallels between today's systemic Wall
Street corruption and that of 1929.  The heroine,
Leila, is given a missive by her Aunt. "Sometimes you
don't find your cause, Leila...Your cause finds you. 
There is a fight buried in all of us."

Will that fight be unearthed in enough people to make a
difference?  Time is not our friend.

Pam Martens worked on Wall Street for 21 years. She
spent the last decade of her career advocating against
Wall Street's private justice system, which keeps its
crimes shielded from public courtrooms. She maintains,
along with Russ Martens, an ongoing archive dedicated
to this financial era at www.WallStreetOnParade.com.
She has no security position, long or short, in any
company mentioned in this article. She is a contributor
to Hopeless: Barack Obama and the Politics of Illusion,
forthcoming from AK Press. She can be reached at
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