It deals with the "legend" of the crash of worldwide systems if the billions in bailout dollars were not given to the banks. Goldman Sachs guys were central to all the decisions made and these guys made sure that Goldman Sachs survived and, indeed, prospered into the mammoth body it is today. Now that the economy has successfully been financialized, the stock market is treated as though it were indicative of the whole economy; hence, we treat Wall Street as if it represents the health of the economy while unemployment remains high. How did American get to this point?
David Stockman writes from his checkered past as head of his own private equity fund company, his term at the head of the Office of Management and Budget (1981-1985) and as a member of the US House of Representatives (1977-1981) who supported Reaganomics.
Web Extra: Read an Excerpt of David Stockman's New Book: The Great Deformation, The Corruption of Capitalism in America
By David Stockman - By ABC News
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GOLDMAN AND MORGAN STANLEY: THE LAST TWO PREDATORS STANDING This was a blatant miscarriage of governance. As will be seen, at that late stage of the delirious financial bubble which had overtaken America, Goldman Sachs and Morgan Stanley had essentially become economic predators. Their bankruptcy would have resulted in no measureable harm to the Main Street economy, and possibly some gain. It would have also brought the curtains down on a generation of Wall Street speculators, and sent them packing in disgrace and amid massive personal losses—the only possible way to end the current repugnant régime of crony capitalist domination of the nation's central bank.
Goldman and Morgan Stanley helped generate and distribute hundreds of billions in toxic assets—mortgage-backed securities and CDOs based on subprime mortgages—that were now resident on the balance sheets of a wide gamut of Main Street institutions like corporate pension funds and insurance companies, along with institutional investors spread all over the planet. The TARP and Federal Reserve funds that were pumped into Goldman and Morgan Stanley, however, did nothing to ameliorate the huge losses being incurred by these gullible customers.
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In the days after September 15, the shock absorbers of the last two investment banks left standing, Goldman and Morgan Stanley, also failed the test. Their most illiquid asset classes—such as securitized mortgages, CDOs, commercial real estate securities, and corporate junk bonds— declined in market value by between 20 percent and 50 percent during the meltdown. Even when blended with holdings of low-risk government bonds and blue chip corporate securities, the blow to capital was devastating, and they would not have survived the ordeal on their own. (emphasis added)
Read the rest of Chapter 2 here