Socialist Worker

Goldman Sachs: Bank accused of fraud has tentacles round Labour

by Simon Basketter
Issue No. 2198

THE US’S most notorious investment bank, Goldman Sachs, is being charged with fraud.

Gordon Brown described the company as “morally bankrupt”. Yet the bankers are all over his government:

  • Gavyn Davies, a former Goldman economist, became an adviser to Brown and later chairman of the BBC. Sue Nye, Davies’ wife, was Brown’s private secretary and is a special adviser.
  • Simon Dingemans, a Goldman Sachs banker, advised the government throughout the financial crisis.
  • The bank is at the heart of Labour’s privatisation plans. It made £4.8 million advising the Treasury during the Northern Rock crisis.
  • Chancellor Alistair Darling held three private meetings with Richard Gnodde, Goldman’s co‑head, in the last three months of 2009. He met with other bankers only twice.
  • The bank was the sole adviser to Bradford & Bingley before it was nationalised.

Rolling Stone magazine dubbed the investment bank, “a vampire squid wrapped around the face of humanity”. It has been caught not only making a fortune out of the economic crash, but setting up financial products in order to fail.

The subprime mortgage scandal flowed from the housing bubble. Brokers, having sold to just about everyone who could afford a mortgage, needed to find a way to sell to those who could not afford one.

The resulting subprime mortgages were put together and chopped up into parcels of debt, some riskier than others.

These were then packaged together with more secure loans to create complex financial products with names such as “collateralised debt obligations”.

Banks, hedge funds and private equity firms all rushed to gamble on them.

Goldman Sachs’ version saw John Paulson, a billionaire hedge fund manager, make a fortune.

Ordinary people, who spent trillions rescuing the bankers, are the victims of this fraud.

Goldman Sachs “stars” use a revolving door between banking and government. Its former chief executive, Hank Paulson, went on to become US treasury secretary, bailing out the banks.

The firm’s profits for the first three months of this year are nearly double those of last year.

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Article information

Tue 20 Apr 2010, 18:02 BST
Issue No. 2198
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