How Goldman Sachs Became The Most Hated Bank On Earth

By Economy Watch

Goldman Sachs is the bank everyone loves to hate. In the first of our two-part investigation into the bank, we ask why they emerged as the biggest winners in the financial crisis. We also look at how they lobbied the US Government to reduce banking regulations, how they acquired massive fortunes by selling sub-prime mortgages, and how they deceived their clients by betting against the products they sold.

Goldman Sachs: "A Great Vampire Squid Relentlessly Jamming Its Blood Funnel Into Anything That Smells Like Money".


Goldman Sachs was not always the investment bank everyone affects to despise. Its bankers were once dubbed "billionaire boy scouts" because of their talent for making fortunes while maintaining a guilt-free, cherubic image.

But Goldman's bankers are now far more likely to be compared to squids than boy scouts and have become the favourite target of anti-bank protestors. A week before Christmas, 300 protesters in the Occupy Movement dressed up in squid costumes and carried a giant puppet squid on a march to Goldman Sachs' offices in New York.

The action was inspired by a Rolling Stone article which compared Goldman Sachs to: "a great vampire squid, wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money". The protesters shouted: "We fry calamari", and "everyone pays their tax. Everyone, but Goldman Sachs."

Public hatred of Goldman, fuelled by modern mass media, has intensified, but it would be naive to believe the banks' character has fundamentally changed. Although there was nothing on the same scale as its nefarious role in the 2007 Financial Crisis, Goldman has been involved in controversy ever since it was founded by the German-born Jew Marcus Goldman in 1869.

In 1929 for example, Goldman sponsored a pyramid scheme disguised as a mutual fund, which collapsed causing 42,000 investors to lose US$300 million. Then, in 1970, came the Penn Central catastrophe in which a default on short-term paper marketed by Goldman produced damage claims exceeding the bank's net worth. In the late 1980s, Goldman's head of risk arbitrage, Robert Freeman, was sent to jail for insider trading. And during the same period, Goldman was implicated in an illegal scheme to prop up insolvent businesses operated by the corrupt Czech-born newspaper tycoon Robert Maxwell.

"The reality is that the firm has been in and out of trouble throughout its whole existence and has constantly been pushing the edge of the envelope," said William D.