Commenting on the Levin report, Matt Taibbi writes: "Sparks [of Goldman Sachs] followed up that meeting with a seven-point memo laying out how to unload the bank's mortgages. Entry No. 2 is particularly noteworthy. "Distribute as much as possible on bonds created from new loan securitizations," Sparks wrote, "and clean previous positions." In other words, the bank needed to find suckers to buy as much of its risky inventory as possible. Goldman was like a car dealership that realized it had a whole lot full of cars with faulty brakes. Instead of announcing a recall, it surged ahead with a two-fold plan to make a fortune: first, by dumping the dangerous products on other people, and second, by taking out life insurance against the fools who bought the deadly cars."
Still think that the focus on the real criminal behavior of GS is taking away from the structural reasons for that criminal behavior (but see Jeffrey Sachs on corporate crime, probably a lot of money to be made as their lawyers!) Why the desperate need for yield lift such that GS could get away with creating fraudulent products? For Rajan, Fed lowers rates, capital invests abroad, foreign central banks stop appreciation of their currency by buying US dollar denominated assets (wealthy investors are looking for yield lift too), Wall Street cynically creates them or some simulacrum of them, a kind of doubly fictitious capital. Maybe Jim Devine would say that this obsession with US final demand is proof of the underconsumption undertow on a global scale? LR
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