Wednesday, August 4, 2021
Aug. 4, 2021

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Berko: Goldman Sachs too strong to sell


Dear Mr. Berko: I belong to a successful investment club with a large portfolio. We own 150 shares of Goldman Sachs stock. We don’t buy stock in companies that are socially irresponsible — for example, companies that deal with alcohol, tobacco or defense and some entertainment stocks. Two members (both are accountants) want the club to sell Goldman Sachs, which the club bought at $66 in 2008, because it’s involved in many “suspicious financial activities.” They insist that the recent problems in Greece were caused by a crooked Goldman Sachs. They say Goldman caused the sinking of the Greek economy so it could make money off the falling prices of Greek stocks and bonds. My wife and I want to know whether this is true and whether we should sell the 50 shares we also bought at $66.

— LS, Detroit

Dear LS: I think a quotation from international banker Mayer Amschel Rothschild (1744-1812) is apropos: “Let me issue and control a nation’s money supply and I care not who makes the laws.”

Goldman Sachs (GS-$198.88) is no more crooked than Bank of America, a U.S. senator, BP, General Motors, your state Legislature, annuity salespeople, local car dealers or payday lenders. Crooked is as crooked does! Yet, Greece is in sordid financial straits, issued billions of euro bonds between 2002 and 2012 and can default on its sovereign debt because of this brilliantly nefarious brokerage. That said, the greed of Greek’s legislative body and union leaders is equally responsible. Many of them have become wealthy at the public trough.

Goldman Sachs is ruled by Lloyd Blankfein, who, from his golden throne, claims that his firm is “doing God’s work.” Some admirers call him “Pope Lloyd.” In 2002, Goldman Sachs persuaded Greek bankers to participate in a series of cross-currency swaps, in which Greek government debt — issued in dollars, pounds and yen — was swapped for euro debt, and at a later point in time, the debt was exchanged back into the original currency. The purpose of the swaps was to hide billions of dollars of Greek debt to make Greece more attractive to foreign bond investors. In this instance, Goldman cleverly concocted a series of fictional exchange rates (big banks do this frequently), allowing Greece to claim assets that were billions more than the country actually owned. And with this trumped-up balance sheet, Goldman secretly arranged hundreds of millions of dollars of new credit for the equally complicit Greek government. In 2003, Greece’s debt was equal to its gross domestic product. A decade later, Greece’s debt exploded to twice its GDP, but at some point, Greece must pay the piper for its Goldman Sachs transaction, ask for or demand debt forgiveness, or default. And that piper is pounding on Greece’s door. According to an often reliable source at UBS, Goldman Sachs sucked nearly $200 million in fees and trading profits from those transactions. Though no matter how odious its deeds have been, I would not recommend selling Goldman Sachs.

GS is an enormously powerful global investment banking and securities firm that has its tentacles in nearly everything that can be monetized. Its muscular trading department (almost 50 percent of revenues) controls the world’s supply and demand for most industrial commodities, including aluminum, oil, copper, coal, wheat, natural gas, nickel and tin. Its powerful investment banking business enjoys worldwide power and influence among most of the world’s elected governments and dictators. Its investment management business has few rivals, and today GS has over $1 trillion in assets. Goldman is a veritable money machine and among the few firms that can truly make a silk purse from a sow’s ear. Its success is determined by its people, who define its culture. Goldman hires the best and strongest, and Goldman partners make more money than partners with similar positions at other investment banking firms. GS has more ex-government administrators, ex-Cabinet members, politicians and ex-politicians, ex-administration and administration advisers, state and county commissioners and ex-commissioners, and judges and ex-judges on retainer than it has employees on its payroll.

Malcolm Berko addresses questions about stocks. Reach him at P.O. Box 8303, Largo, FL 33775 or