Did Fabulous Fabrice Really Cause the Financial Crisis

Did Fabulous Fabrice Really Cause the Financial Crisis

Here is a reminder from Greg Palast, who is one of those rarest of creatures, the investigative journalist, about what caused the last financial crisis, and the source of the criminogenic environment that is likely to be a major contributing factor to the next.

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery.

"...In August 2007, hot-shot hedge fund manager John Paulson walked into Goldman Sachs with a brilliant plan to cash in on the US housing crisis.

He paid Goldman to announce that Paulson would invest a big hunk of his fund's wealth, $200 million, in securities tied to the US mortgage market’s recovery. A few lucky investors would be allowed to give Goldman their billions to bet with Paulson that Americans would not default on their home mortgages.

It was a con. Secretly, Paulson would bet against the mortgage market, hoping it would collapse – making sure it would collapse. All he needed was Goldman to line up the suckers to put up billions to be his "partners".

It was Goldman’s and Paulson's financial version of Mel Brooks' The Producers, in which a couple of corrupt theatre producers schemed to suck investors into a deliberate flop...

What did the Feds do to Paulson? He received... a special tax break.

Am I defending the Fabulous Fabrice, the French-fried scapegoat? After all, he was just along for the ride. But he was deeply thrilled to carry water for the Bad Boys. And the charges against him are merely "civil", meaning he won't get jail time even if found guilty.

And what about Goldman, whose top brass knew of the entire game? The Securities and Exchange Commission did fine Goldman for its duplicity – a sum equal to 5 percent of the cash Goldman got from the US Treasury in bail-out funds.

After Goldman’s con became public, its CEO, Lloyd Blankfein was hailed as a visionary for offloading mortgage-backed securities before the shit hit the finance fan. Blankfein hailed himself for, he said, "doing God's work". God did well. Blankfein’s bonus in 2007 brought his pay package to $69 million for the year, a Wall Street record.

Rather than prison or penury, Blankfein was appointed advisor to Harvard University’s business and law schools.

So here’s the lesson all Harvard students are taught: If you can't do the time, don't do the crime... unless your booty exceeds a billion."

Read the entire piece by Greg Palast here.