Government Sachs

gold

Do you know anyone who works at the American investment bank, Goldman Sachs? I do. I have two batch-mates who I suppose are by now high up the food chain over there. I happened to meet one of them at an airport lounge in 2010. We were taking the same flight out of Heathrow, for Mumbai.

In engineering school, we all knew Kasturi Rangan to be a bookish introvert who spoke hesitatingly with a slight stammer and kept his gaze down toward the ground when he shuffled to class in flip flops. He hailed from Tiruchuli in Tamil Nadu, the birthplace of the 20th century saint, Ramana Maharshi and was obviously a devotee as his hostel room walls were plastered with images of the great man. Just as Ramana Maharshi did, Kasturi too sported those freshly applied tracks of vibhuti (holy ash) on his forehead at all times.

We all expected very little of him as regards placement in a snazzy blue chip employer. He’d never get through those group discussion rounds at the campus interviews. The bets were on him gravitating to a Masters in our institute after he graduated. And Masters to us all was for losers. Shrimpy guy like him would have to stare at a blackboard the rest of his life, we firmly believed.

On that day at Heathrow however, it didn’t take long for me to realize that this was not the same Kasturi anymore. There was almost something haughty and imperious about him now. His voice had changed. The stammer had been replaced by the booming, brashly confident tone of someone who is used to getting his way and nothing that anyone does will impress him. For instance, when the waitress at the bistro we were sitting in, came over with Kasturi’s Caesar salad and pint of draft Guinness and asked with a smile, “Will that be all, Sir?”, he didn’t even glance at the plate. He muttered in a dry, sullen tone,” I can live with that…”.

Kasturi showed very little interest in how I’d been doing all these years or what I presently did or if I now had a family, etc. You know, the kind of questions that friends ask of each other when they meet after many years. I asked him all those same questions about himself but he sounded condescendingly oblique in his replies, leaving me without a clue. This guy knew how to piss me off, he did.

Kasturi Rangan even appeared to have his own personal British Airways attendant who scurried around, running errands for him. She checked in for him, cleared his bags, got him coffee and cake and sought permission to leave him temporarily for something she needed to do. He was travelling in some sort of super first class evidently and must have been a very frequent flyer.  When they announced boarding I lost track of him and in fact, I never set eyes on him all through the flight, right up until I was outside the concourse at Sahar, looking around for the taxi line.

A Mercedes with tinted glasses had been waiting there right up next to the arrivals. A BA attendant was loading two bulky suitcases into the boot. Suddenly I tottered as I was shouldered roughly aside by some guy who seemed in a great big hurry. It was Kasturi. He didn’t stop to apologize but continued walking swiftly toward the Merc. As he settled back in the seat, he turned and our eyes met for an instant. I stared him down till he turned his head back and gazed straight ahead.

“You’re still the same ass—le, m—er f—er,” I called out loudly as the Merc swung into the traffic and disappeared from sight. The BA attendant gaped at me, dumbstruck by the venom in my tone. It felt soooo good.

My next brush with Goldman Sachs, up close and personal, has been the book, ‘Money & Power – How Goldman Sachs came to rule the world’ by William D.Cohan. In spite of being a financially dumbed down guy, I still found the book astonishingly easy to understand since the author has kept financial jargon to the  minimum and made it simple for us laymen.

In the 1860s, a Jewish clothing merchant in New York, Marcus Goldman, started offering cash at a fee, to other merchants who had a liquidity problem, for bills of sale that were yet to be paid by their clients. His cut was the fee he charged. He would stuff the accumulated bills under his top hat as he walked around doing business on the street. Goldman’s clients could tell how busy he was by the tilt of his hat. In time he took in his other family members and the world’s most profitable money manager was born.

In the 1920s, Goldman started by selling Ponzi-like schemes that it knew would fail, to unsuspecting investors. Much like anti-virus software makers, Goldman Sachs would wait for clients to reach close to belly-up status during the great depression and then go in and charge them exorbitant fees to turn them around. It institutionalized greed in a way that had never been done before. Perhaps it even formed the basis for the impetus in the growth of anti-Semitism in the early 20th century.

By the end of the first few chapters, I understood from where Kasturi Rangan got his attitude. The book gives one an insight into an imperiously arrogant corporation which picks up top ivy league graduates and makes them go through no less than 30 interviews before they are selected. The new inductees are taught how to be ‘long-term greedy’, a term which means that it is always more profitable to think long term.

Goldman Sachs has been an extremely nimble money manager, able to foresee and stay a step ahead of its competition. In 2007, it realized a whole year ahead of its Wall Street peers that the America’s love affair with real estate was over. Cohan describes how the company turned the 2008 sub-prime mortgage crisis to its benefit and came out eventually with billions in profits, while equally large behemoths like Bear Stearns and the Lehmann Brothers went down. It is believed that Goldman, along with a handful of other major banks, controls 80% of the world’s operating revenues.

The author creates a sense of a massive squid-like creature with its tentacles spread all over the world, right into the heart of policy-making in virtually every developed country as well as quite a few in the third world. It’s a bit scary actually, in how a vast corporation schemes and manages to wield enormous power over whole governments and the aplomb with which it’s alumni go out into the world, to hold positions of policy and decision making not only in the US but all over the world.

With the US government, it has a ‘revolving door’ kind of relationship, in which its employees and consultants have moved in and out of high level US Government positions, creating the potential for massive conflicts of interest. Former Treasury Secretary Paulson was a former CEO of Goldman Sachs. Goldman Sachs lobbyist Mark Patterson was hired as chief of staff to Treasury Secretary Timothy Geithner, despite President Barack Obama’s campaign promise that he would limit the influence of lobbyists in his administration. Joshua Bolten and Rahm Emanuel- Former White House Chiefs of Staff, William Dudley- Former Chairman of the federal Reserve, Henry Fowler- US Secretary of the Treasury, Arthur Levitt- Chairman of the Securities and Exchange commission and many more, have all been executives at Goldman Sachs.

Even in other countries, there have been many top financial posts that have been occupied by ex-Goldman Sachs executives. To name just a few, there is Mark Carney – Ex-Governor of the Bank of Canada, recently appointed as Governor, Bank of England, Petros Christodoulou – Current Deputy Chief Executive Officer of the National Bank of Greece (2012-), Carlos Moedas – Secretary of State to the Prime Minister of Portugal, Erik Åsbrink – Minister for Finance of Sweden (1996-1999), Romano Prodi – Prime Minister of Italy (1996–1998, 2006–2008) and President of the European Commission (1999–2004) and Vladimír Dlouhý – Minister of Industry and Trade of the Czech Republic (1992-1997).

No wonder that, in financial circles, Goldman Sachs goes by the nickname ‘Government Sachs’.

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