One Sold Fool's Gold; the Other Is Real and Reliable
BY Craig R. Smith, Chairman, Swiss America
April 22, 2010
Goldman Sachs committed civil fraud. That's what the U.S. Securities and Exchange Commission charged on April 16. The SEC accuses this giant investment bank of marketing a dodgy mortgage derivative bundle with help from a hedger who made a billion dollars betting these investments would lose value.
Clients who trusted Goldman Sachs such as the Royal Bank of Scotland together lost at least $1 billion. Some were bailed out by taxpayers, as indirectly was Goldman Sachs itself to the tune of more than $12 billion.
What Goldman Sachs did was "like selling a car with faulty brakes and then buying an insurance policy on the buyer of those cars," said the Chairman of the Financial Crisis Inquiry Commission.
The SEC action surprised many. Several high officials in President Barack Obama's Administration, including key financial advisors and regulators, came from Goldman Sachs. During the 2008 election cycle Goldman Sachs gave more than $4.4 million to Democratic candidates, including nearly $1 million to Mr. Obama's campaign, leading some to joke that the U.S. Government has become a wholly-owned subsidiary of Goldman Sachs.
"Almost everything that the White House has done has been haunted by the personnel and the money of Goldman," said Lawrence Jacobs, a University of Minnesota political scientist, to McClatcheyNews.
The action came days before debate on a major Democratic bill to further regulate financial institutions. Such control is necessary, said Mr. Obama a year ago, to create a "wider recovery, a more stable system, and a more broadly shared prosperity," i.e. redistribution of income. Get ready for a populist campaign against banks and Wall Street as Democrats try to regain independent voters.
This proposed legislation contains permanent, unlimited bailout authority that Republicans say could make future bailouts of government-favored companies routine - one more step toward government picking winners and losers in our economy while sucking the capital out of capitalism.
Gold, meanwhile, remains what it has been since biblical times: a reliable store of value that government cannot devalue by printing more or manipulating paper investments.
One financial expert who knows this, ironically, is the hedger who helped create Goldman Sachs' dodgy mortgage bundles. He reportedly is heavily invested in gold mining stocks that he might have to liquidate to pay legal expenses, news that may have caused an unexpected downward blip even in the price of gold.
Throughout history gold's value has stood tall when the schemes of greedy
profiteers and politicians crumble, as they are now.
In this time of economic earthquakes, when even the largest financial giants
and the U.S. Dollar have become unreliable, which diversified investment can
you trust to provide security for your family - Goldman Sachs or sacks of
gold? You need to act now, while your dollars and stocks still have some value.
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