Goldman Sachs Lied to Congress and Needs to be Indicted

Matt Taibbi lays out the case.

Lloyd Blankfein went to Washington and testified under oath that Goldman Sachs didn't make a massive short bet and didn't bet against its clients. The Levin report proves that Goldman spent the whole summer of 2007 riding a "big short" and took a multibillion-dollar bet against its clients, a bet that incidentally made them enormous profits. Are we all missing something? Is there some different and higher standard of triple- and quadruple-lying that applies to bank CEOs but not to baseball players?

This issue is bigger than what Goldman executives did or did not say under oath. The Levin report catalogs dozens of instances of business practices that are objectively shocking, no matter how any high-priced lawyer chooses to interpret them: gambling billions on the misfortune of your own clients, gouging customers on prices millions of dollars at a time, keeping customers trapped in bad investments even as they begged the bank to sell, plus myriad deceptions of the "failure to disclose" variety, in which customers were pitched investment deals without ever being told they were designed to help Goldman "clean" its bad inventory. For years, the soundness of America's financial system has been based on the proposition that it's a crime to lie in a prospectus or a sales brochure. But the Levin report reveals a bank gone way beyond such pathetic little boundaries; the collective picture resembles a financial version of The Jungle, a portrait of corporate sociopathy that makes you never want to go near a sausage again.

Upton Sinclair's narrative shocked the nation into a painful realization about the pervasive filth and corruption behind America's veneer of smart, robust efficiency. But Carl Levin's very similar tale probably will not. The fact that this evidence comes from a U.S. senator's office, and not the FBI or the SEC, is itself an element in the worsening tale of lawlessness and despotism that sparked a global economic meltdown. "Why should Carl Levin be the one who needs to do this?" asks Spitzer. "Where's the SEC? Where are any of the regulatory bodies?"

This isn't just a matter of a few seedy guys stealing a few bucks. This is America: Corporate stealing is practically the national pastime, and Goldman Sachs is far from the only company to get away with doing it. But the prominence of this bank and the high-profile nature of its confrontation with a powerful Senate committee makes this a political story as well. If the Justice Department fails to give the American people a chance to judge this case — if Goldman skates without so much as a trial — it will confirm once and for all the embarrassing truth: that the law in America is subjective, and crime is defined not by what you did, but by who you are.

Wachovia Bank laundered billions of dollars from Mexico's murderous drug gangs

On 10 April 2006, a DC-9 jet landed in the port city of Ciudad del Carmen, on the Gulf of Mexico, as the sun was setting. Mexican soldiers, waiting to intercept it, found 128 cases packed with 5.7 tons of cocaine, valued at $100m. But something else – more important and far-reaching – was discovered in the paper trail behind the purchase of the plane by the Sinaloa narco-trafficking cartel.

During a 22-month investigation by agents from the US Drug Enforcement Administration, the Internal Revenue Service and others, it emerged that the cocaine smugglers had bought the plane with money they had laundered through one of the biggest banks in the United States: Wachovia, now part of the giant Wells Fargo.

The authorities uncovered billions of dollars in wire transfers, traveller's cheques and cash shipments through Mexican exchanges into Wachovia accounts. Wachovia was put under immediate investigation for failing to maintain an effective anti-money laundering programme. Of special significance was that the period concerned began in 2004, which coincided with the first escalation of violence along the US-Mexico border that ignited the current drugs war.

Criminal proceedings were brought against Wachovia, though not against any individual, but the case never came to court. In March 2010, Wachovia settled the biggest action brought under the US bank secrecy act, through the US district court in Miami. Now that the year's "deferred prosecution" has expired, the bank is in effect in the clear. It paid federal authorities $110m in forfeiture, for allowing transactions later proved to be connected to drug smuggling, and incurred a $50m fine for failing to monitor cash used to ship 22 tons of cocaine.

More shocking, and more important, the bank was sanctioned for failing to apply the proper anti-laundering strictures to the transfer of $378.4bn – a sum equivalent to one-third of Mexico's gross national product – into dollar accounts from so-called casas de cambio (CDCs) in Mexico, currency exchange houses with which the bank did business.

"Wachovia's blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations," said Jeffrey Sloman, the federal prosecutor. Yet the total fine was less than 2% of the bank's $12.3bn profit for 2009. On 24 March 2010, Wells Fargo stock traded at $30.86 – up 1% on the week of the court settlement.

The conclusion to the case was only the tip of an iceberg, demonstrating the role of the "legal" banking sector in swilling hundreds of billions of dollars – the blood money from the murderous drug trade in Mexico and other places in the world – around their global operations, now bailed out by the taxpayer.