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Based on my Wall Street experience, I don't expect Goldman Sachs execs to do any jail time

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Posted: Saturday, May 1, 2010 12:00 am

Even though more than 25 years have passed since I was a Wall Street banker, I follow developments in the financial markets with as much interest as I did when I was immersed in them.

My Lodi friends know that I still have some associations on the Street. They all want to know what I think will ultimately happen to Goldman Sachs and its high-ranking officials as a result of the recent civil lawsuit brought by the Securities and Exchange Commission that charged the bankers with fraud. The SEC alleges that Goldman created and sold mortgage investments that were secretly intended to fail.

Middle America hopes that the worst befalls Goldman. Who can blame them? Few have been left unscathed by Goldman's sleazy role in the mortgage blowup.

Without getting into all the complicated details, the deals initially protected Goldman from losses when the mortgage market soured but then ultimately yielded staggeringly high profits for the bank.

Then, to make Goldman's public image even worse, when asked about its role in what eventually became a worldwide economic meltdown, Chairman Lloyd Blankfein told the Times of London: "We're very important. We help companies to grow by helping them to raise capital. Companies that grow create wealth. This, in turn, allows people to have jobs that create more growth and more wealth. It's a virtuous cycle."

Blankfein concluded that he is just a banker "doing God's work." At the time of his remark, Goldman had posted third-quarter 2009 earnings of $3 billion and planned to pay year-end bonuses in excess of $16 billion.

Most observers could not make the connection with a "virtuous" $16 billion and "God's work."

At last Tuesday's Senate hearings, none of the bankers were found to have done wrong. Some Democrats, despite being aghast at Goldman's eagerness to bet against investments it was selling to other clients, suggested that may be unfair to single out Goldman for prosecution. As far as they are concerned, Goldman might just been the biggest and best at what was standard operating procedure on Wall Street.

More revealingly, other Democrats said privately that the party needs to be careful in how far it goes in portraying Goldman Sachs as the chief bad guy in the financial collapse, given the firm's major presence on Wall Street as well as in the world's financial markets.

Left unsaid by the Democrats, but perhaps of most significance, is that the White House hopes that its own ties to Goldman do not become common knowledge.

The website lists an impressive total of 21 former Goldman Sachs executives who hold or have held high-ranking positions in the George W. Bush and Barack Obama administrations.

Some, like former treasury secretaries Robert Rubin and Henry Paulson, are prominent. Others, like undersecretary to the treasury Mark Patterson, are less known but nevertheless hold influential posts.

Here's another VIP name you have never heard of: Former Goldman Vice President Adam Storch is the managing executive of the SEC's enforcement division. That's right! The same SEC that brought suit against Storch's former employer, Goldman.

To those who wonder what might happen to the Goldman thieves, my unhappy answer is, nothing.

The Wall Street rich make and carry out the financial games' rules, and the Washington, D.C. powerful oversee them.

In what is now a famous May Rolling Stone article titled "The Feds vs. Goldman," investigative reporter Matt Taibbi provided the best summary of who Goldman Sachs is and what it does.

Taibbi wrote that Goldman is responsible for "every major market manipulation since the Great Depression," and described it as "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money."

According to Taibbi, former Goldman CEO Henry Paulson, when he was Bush's treasury secretary, was "the architect of the bailout" who masterminded "a suspiciously self-serving plan to funnel trillions of your dollars to a handful of his old friends on Wall Street."

As wonderful as it would be to see them behind bars, don't look for it to happen.

Joe Guzzardi worked for Merrill Lynch during the days when it was a respected institution. Contact him at

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