- SEQ CHAPTER \h \r 1The Battle of the Titans: JPMorgan
vs. Goldman Sachs
- Or Why the Market Was Down for 7 Days in a Row
-
- Ellen Brown, January 28, 2010
- www.webofdebt.com/articles
-
- We are witnessing an epic battle between two banking
giants, JPMorgan Chase (Paul Volcker) and Goldman Sachs (Geithner/Summers/Rubin).
Left strewn on the battleground could be your pension fund and 401K.
-
- The late Libertarian economist http://www.lewrockwell.com/rothbard/rothbard66.html
Murray Rothbard wrote that U.S. politics since 1900, when William Jennings
Bryan narrowly lost the presidency, has been a struggle between two competing
banking giants, the Morgans and the Rockefellers. The parties would sometimes
change hands, but the puppeteers pulling the strings were always one of
these two big-money players. No popular third party candidate had a real
chance at winning, because the bankers had the exclusive power to create
the national money supply and therefore held the winning cards.
-
- In 2000, the Rockefellers and the Morgans joined forces,
when JPMorgan and Chase Manhattan merged to become JPMorgan Chase Co. Today,
the battling banking titans are JPMorgan Chase and Goldman Sachs, an investment
bank that gained notoriety for its "http://en.wikipedia.org/wiki/Goldman_Sachs"
speculative practices in the 1920s. In 1928, it launched the Goldman Sachs
Trading Corp., a closed-end fund similar to a Ponzi scheme. The fund failed
in the stock market crash of 1929, marring the firm's reputation for years
afterwards. Treasury Secretary Timothy Geithner and former Treasury Secretaries
Henry Paulson, Robert Rubin, and Larry Summers all came from Goldman, prompting
one commentator to call the U.S. Treasury "Goldman Sachs South."
-
- Goldman's superpower status comes from something more
than just access to the money spigots of the banking system. It actually
has the ability to "http://www.webofdebt.com/articles/populist_retribution.php"
manipulate markets. Formerly just an investment bank, in 2008 Goldman magically
transformed into a bank holding company. That gave it access to the Federal
Reserve's lending window; but at the same time it remained an investment
bank, aggressively speculating in the markets. The upshot was that it can
now borrow massive amounts of money at virtually 0% interest, and it can
use this money not only to speculate for its own account but to bend markets
to its will.
-
- But Goldman Sachs has been caught in this blatant market
manipulation so often that the JPMorgan faction of the banking empire has
finally had enough. The voters too have evidently had enough, as demonstrated
in the recent upset in Massachusetts that threw the late Senator Ted Kennedy's
Democratic seat to a Republican. That pivotal loss gave Paul Volcker, chairman
of President Obama's newly formed Economic Recovery Advisory Board, an
opportunity to step up to the plate with some proposals for serious banking
reform. Unlike the team of Geithner et al., who came to the government
through the revolving door of Goldman Sachs, former Federal Reserve Chairman
Volcker came up through Chase Manhattan Bank, where he was vice president
before joining the Treasury. On January 27, market commentator "http://news.goldseek.com/InternationalForecaster/1264605785.php"
Bob Chapman wrote in his weekly investment newsletter The International
Forecaster:
-
- "A split has occurred between the paper forces of
Goldman Sachs and JP Morgan Chase. Mr. Volcker represents Morgan interests.
Both sides are Illuminists, but the Morgan side is tired of Goldman's greed
and arrogance. . . . Not that JP Morgan Chase was blameless, they did their
looting and damage to the system as well, but not in the high handed arrogant
way the others did. The recall of Volcker is an attempt to reverse the
damage as much as possible. That means the influence of Geithner, Summers,
Rubin, et al will be put on the back shelf at least for now, as will be
the Goldman influence. It will be slowly and subtly phased out. . . . Washington
needs a new face on Wall Street, not that of a criminal syndicate."
-
- Goldman's crimes, says Chapman, were that it "got
caught stealing. First in naked shorts, then front-running the market,
both of which they are still doing, as the SEC looks the other way, and
then selling MBS-CDOs to their best clients and simultaneously shorting
them."
-
- Volcker's proposal would rein in these abuses, either
by ending the risky "proprietary trading" (trading for their
own accounts) engaged in by the too-big-to-fail banks, or by forcing them
to downsize by selling off those portions of their businesses engaging
in it. Until recently, President Obama has declined to support Volcker's
plan, but on January 21 he finally http://www.alternet.org/economy/145321/obama_adopts_volcker's_solution:_if_banks_
- want_govt._guarantees,_they_have_to_close_their_casino_operationsendorsed
it.
-
- The immediate reaction of the market was to drop
and drop, day after day. At least, that appeared to be the reaction of
"the market." Financial analyst http://maxkeiser.com/Max Keiser
suggests a more sinister possibility. Goldman, which has the power to manipulate
markets with its high-speed program trades, may be engaging in a Mexican
standoff. The veiled threat is, "Back off on the banking reforms,
or stand by and watch us continue to crash your markets." The same
manipulations were evident in the bank bailout forced on Congress by Treasury
Secretary Hank Paulson in September 2008.
-
- In Keiser's January 23 http://ia350642.us.archive.org/2/items/MaxKeiserRadio-TheTruth
- AboutMarkets-23January2010/tam230110.mp3broadcast with
co-host Stacy Herbert, he explains how Goldman's manipulations are done.
Keiser is a fast talker, so this transcription is not verbatim, but it
is close. He says:
-
- "High frequency trading accounts for 70% of trading
on the New York Stock Exchange. Ordinarily, a buyer and a seller show up
on the floor, and a specialist determines the price of a trade that would
satisfy buyer and seller, and that's the market price. If there are too
many sellers and not enough buyers, the specialist lowers the price. High
frequency trading as conducted by Goldman means that before the specialist
buys and sells and makes that market, Goldman will electronically flood
the specialist with thousands and thousands of trades to totally disrupt
that process and essentially commandeer that process, for the benefit of
siphoning off nickels and dimes for themselves. Not only are they siphoning
cash from the New York Stock Exchange but they are also manipulating prices.
What I see as a possibility is that next week, if the bankers on Wall Street
decide they don't want to be reformed in any way, they simply set the high
frequency trading algorithm to sell, creating a huge negative bias for
the direction of stocks. And they'll basically crash the market, and it
will be a standoff. The market was down three days in a row, which it hasn't
been since last summer. It's a game of chicken, till Obama says, 'Okay,
maybe we need to rethink this.'"
-
- But the President hasn't knuckled under yet. In his State
of the Union address on January 27, he did not dwell long on the issue
of bank reform, but he held to his position. He said:
-
- "We can't allow financial institutions, including
those that take your deposits, to take risks that threaten the whole economy.
The House has already passed financial reform with many of these changes.
And the lobbyists are already trying to kill it. Well, we cannot let them
win this fight. And if the bill that ends up on my desk does not meet the
test of real reform, I will send it back."
-
- What this "real reform" would look like was
left to conjecture, but Bob Chapman fills in some blanks and suggests what
might be needed for an effective overhaul:
-
- "The attempt will be to bring the financial system
back to brass tacks. . . . That would include little or no MBS and CDOs,
the regulation of derivatives and hedge funds and the end of massive market
manipulation, both by Treasury, Fed and Wall Street players. Congress has
to end the 'President's Working Group on Financial Markets,' or at least
limit its use to real emergencies. . . . The Glass-Steagall Act should
be reintroduced into the system and lobbying and campaign contributions
should end. . . . No more politics in lending and banks should be limited
to a lending ratio of 10 to 1. . . . It is bad enough they have the leverage
that they have. State banks such as North Dakota's are a better idea."
-
- On January 28, the predictable reaction of "the
market" was to fall for the seventh straight day. The battle of the
Titans was on.
-
- __________________________
-
- Ellen Brown developed her research skills as an attorney
practicing civil litigation in Los Angeles. In Web of Debt, her latest
book, she turns those skills to an analysis of the Federal Reserve and
"the money trust." She shows how this private cartel has usurped
the power to create money from the people themselves, and how we the people
can get it back. Her eleven books include Forbidden Medicine, Nature's
Pharmacy (co-authored with Dr. Lynne Walker), and The Key to Ultimate Health
(co-authored with Dr. Richard Hansen). Her websites are
- http://www.webofdebt.com/www.webofdebt.com, http://www.ellenbrown.com/www.ellenbrown.com,
and
- http://www.public-banking.com
-
- http://webofdebt.wordpress.com/2010/01/29/jpmorgan-vs-
goldman-sachs-why-the-market-was-down-7-days-in-a-row/
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