Does Goldman control the destiny of markets?

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At the recent Harris Poll of 60 of America’s most visible companies, the big banks of the housing scam, namely AIG , Goldman Sachs, Freddie and Fannie conspicuously occupied the last 4 spots, showing how far the big banks have slipped in public esteem. Against a separate question specifically related to a company’s trustworthiness, 40% of the 3000 odd respondents questioned, replied that they would never trust or buy any product sold by Goldman Sachs.

Goldman Sachs, the Investment Banker was a trusted advisor and an underwriter of California municipal securities. Over the last five years, it had earned about $25 million in underwriting fees from California issues. That was till it met Goldman Sachs, the hedge operator, as the company donned new clothes under its new CEO, Lloyd Blankfein . Today Investment Banking brings in around 10% of Goldman earnings, while trading , namely hedging, betting, swapping and shorting, accounts for three quarters of the Wall Street Banks bumper profits of $13.4 Billion.
During the summer of 2008 Goldman advised and helped in first promoting and then shorting California and New Jersey muni bonds..

As per ProPublica a NY based non-profit , Goldman in a 58 page confidential report to its select institutional clients, advised the shorting of California’s municipal bonds that it had underwritten.. Citing the bankruptcy of Bay Area city of Vallejo as evidence of “worsening fundamentals of municipal finances” it advised hedges and buying of CDS against municipal bonds issued by California and some other larger states.

Though Democrat Gary S Schaer, who chaired the Financial Institution and insurance committee protested to Blankfein, it seems that the top class analysts at Goldman were able to point out weaknesses in the bonds and silence the critics. However the issue is not an analyst evaluation of a munibond or a country debt, which anyway will be shaky in the world’s best run democracies, as politicians cannot take the best business decisions, like corporate leaders, only because they are not appointed but elected by the constituency.

In question is the ethics and principles of an underwriter and promoter of a bond, to short it a few months down the line. In question is the right of independent hedge fund managers like Paulson to pass a decree on the performance of a public issue, with no statutory approvals. The question is the ability of a few hundred odd brokers and dealers at the ICE or NYMEX commodity exchange to drive down the prices of any public issue or commodity and profit from the unusual volatility.

The ICE cartel, of Big Banks and Big Oil, where Goldman is a lead member has the money power and clout to drive a mindboggling $ 7 trillion CDS contracts, shorting , as per their website. What chance has a corporate, a municipality, or a nation have against the punters who have been driving once stable commodities like oil up and down the charts since the last decade.

Investment Banking is about trust about not divulging proprietary information obtained as an underwriter to short-sellers in the market. How Goldman can repeatedly do it with corporate, cities and nations and go scot free citing weakness of an issue, is beyond comprehension. Surely the regulators at the CFTC, FSA, SEC, Fed and the Treasuries have themselves to blame for the way they have allowed hedge funds to move into the driving seat of the world’s economy.