Goldman Sachs and the Three Bears

by Ouida on April 19, 2010

Let’s face it the famed childhood story is really about a home invasion.  It is a tale of theft and property destruction. Read the original fairy tale and you find something quite scary underneath.  The step sisters in the original Grimm’s tale of Cinderella actually cut off their toes to fit into the slipper.  Dig a little deeper and we find the truth about Goldilocks.  From Wikipedia:

“Each bear has his own porridge pot, chair, and bed. One day they take a walk in the woods while their porridge cools. An old hairy woman (who is described at various points in the story as impudent, bad, foul-mouthed, ugly, dirty and a vagrant deserving of a stint in the House of Correction) discovers the bears’ dwelling. After assuring herself no one is about, she enters the house. The old woman eats the Wee Bear’s porridge, then settles into his chair and breaks it. Prowling about, she finds the bear’s beds and falls asleep in Wee Bear’s bed. The climax of the tale is reached when the bears return. Wee Bear finds the old woman in his bed and cries, “Somebody has been lying in my bed,—and here she is!” The old woman starts up, jumps from the window, and is never seen again.”

And so we have it, a vagrant is made into a cute little girl too cute to allow us to see what has really happened in the story and Goldman Sachs became too gilded a financial player to allow many to appreciate the rot underneath.  A Goldman client structures a deal with investments he knows to be bad and then takes out insurance in the event those investments go bad.  He gets Goldman to find a 3rd party to certify the investments are good and Goldman sells the deal to investors who “go long”.  Goldman pockets a fee of $15 million, the client pockets tens of millions and the investors find their porridge eaten and their chairs broken to the tune of $1 billion dollars. The question remains whether or not Goldman will jump out the window or simply find a single employee who will.

Will Warren Buffett insist on a Goldman apology or will he simply vow that Berkshire Hathaway will never be a bear?  Financial writers are opining that Buffett has been used.  Is the $ 5 billion dollar investment and are the investment returns he has received are too high a price to pay for his reputation?  Goldman was aware that it would go trolling in someone else’s house for gain and wanted to keep Buffett around as a positive association.  Goldman could have bought out Buffett’s position at any time but it hasn’t.  I mean wouldn’t you want to pay off someone you owed $5 billion dollars to?  Instead Goldman is paying Berkshire Hathaway $100 to 200 million dollars a year in interest.    The problem, of course, now is that no one who invests with Goldman can ever be sure that Goldman will regard them as anything other than a dumb old bear.  On the bright side, we may finally see financial reform.  On the down side, how many pension funds are bears to the investment banks, ‘cause I don’t for a second think that Goldman Sachs is the only investment bank doing this.

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April 25, 2010 at 5:45 pm
The Big Short
May 19, 2010 at 3:07 pm

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