Stock Market Collapse: More Goldman Market Rigging?

Last week, Goldman Sachs was on the congressional hot seat, grilled for fraud in its sale of complicated financial products called “synthetic CDOs.” This week the heat was off, as all eyes turned to the attack of the shorts on Greek sovereign debt and the dire threat of a sovereign Greek default. By Thursday, Goldman’s fraud had slipped from the headlines and Congress had been cowed into throwing in the towel on its campaign to break up the too-big-to-fail banks. On Friday, Goldman was in settlement talks with the SEC.

Goldman and Wall Street reign. Congress appears helpless to discipline the big banks, just as the European Central Bank appears helpless to prevent the collapse of the European Union. … Or are they?

Suspicious Market Maneuverings

The shorts circled like sharks in the Greek bond market, following a highly suspicious downgrade of Greek debt by Moody’s on Monday. Ratings by private ratings agencies, long suspected of being in the pocket of Wall Street, often seem to be timed to cause stocks or bonds to jump or tumble, causing extreme reactions in the market. The Greek downgrade was suspicious and unexpected because the European Central Bank and International Monetary Fund had just pledged 120 billion Euros to avoid a debt default in Greece.

Markets were roiled further on Thursday, when the U.S. stock market suddenly lost 999 points, and just as suddenly recovered two-thirds of that loss. It appeared to be such a clear case of tampering that Maria Bartiromo blurted out on CNBC, “That is ridiculous. This really sounds like market manipulation to me.”

Manipulation by whom? Markets can be rigged with computers using high-frequency trading programs (HFT), which now compose 70% of market trading; and Goldman Sachs is the undisputed leader in this new gaming technique. Matt Taibbi maintains that Goldman Sachs has been “engineering every market manipulation since the Great Depression.” When Goldman does not get its way, it is in a position to throw a tantrum and crash the market. It can do this with automated market making technologies like the one invented by Max Keiser, which he claims is now being used to turbocharge market manipulation.

Goldman was an investment firm until September 2008, when it became a “bank holding company” overnight in order to capitalize on the bank bailout, including borrowing virtually interest-free from the Federal Reserve and other banks. In January, when President Obama backed Paul Volcker in his plan to reinstate a form of the Glass-Steagall Act that would separate investment banking from commercial banking, the market collapsed on cue, and the Volcker Rule faded from the headlines.

When Goldman got dragged before Congress and the SEC in April, the Greek crisis arose as a “counterpoint,” diverting attention to that growing conflagration. Greece appears to be the sacrificial play in the EU just as Lehman Brothers was in the U.S., “the hostage the kidnappers shoot to prove they mean business.”

The Nuclear Option

It is still possible, however, for the European Central Bank to snatch Greece from the fire and rout the shorts. It can do this with what has been called the nuclear option — “monetizing” the debt of Greece and other debt-laden EU countries by effectively “printing money” (quantitative easing) and buying the debt itself at very low interest rates. This is called the “nuclear option” because it would blow up the hedge funds and electronic sharks operated by Goldman and other Wall Street heavies, which specialize in bringing down corporations and whole countries for strategic and exploitative ends.

Will the ECB proceed with this plan? Perhaps, say some experts. It could just be waiting for the German election on Sunday, which the ECB does not want to appear to be influencing.

Ellen Brown is an attorney, founder of the Public Banking Institute, and author of twelve books, including the best-selling Web of Debt. In The Public Bank Solution, her latest book, she explores successful public banking models historically and globally. Read other articles by Ellen, or visit Ellen's website.

11 comments on this article so far ...

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  1. MichaelKenny said on May 8th, 2010 at 10:23am #

    What’s interesting is that the world is beginning to see that the whole Greek “crisis” was a political manipulation originating in Wall St (which means, in practice, the Israel Lobby) and designed to destroy, at least, the euro, if not the EU itself. The stunt was to force an EU bailout of Greece, then move on to, say, Spain, and as the bailout sums became astronomical, try to foment a taxpayer revolt in Germany, force a referendum on the euro in that country and cause Germany (not Greece!) to leave the euro, thus bringing it down. What has gone wrong, I think, is that Wall St has been hoist with its own petard: globalisation! World economies are so intertwined that, just as Greece going down would bring down the whole EU, the EU going down would bring down the US, which finances its empire by foreign borrowing and is actually more heavily indebted than Greece! (Maybe the US should abandon the dollar!)

  2. Ellen Hodgson Brown said on May 8th, 2010 at 10:34am #

    Yes I think the goal was to force a crisis in the EU, solidifying the centralization of power; but it’s backfiring. The ECB may not take the “nuclear option” right away, expanding the money supply, but it’s the only way in the end to keep the Euro afloat.

  3. Gary S. Corseri said on May 8th, 2010 at 10:44am #

    Thanks for the elucidation, Ellen.

    When even bombshell, former “It” girl, Maria Bartiromo exclaims the manipulative fishiness of our market economy–and, indeed, by implication, our New World Order system–we can all rest assured that the foul smell has reached high heaven!

    But, what to do about it? Even some of the proposals you suggest in your brief, fine article sound somewhat manipulative. How do we manage to get transparency into a rickety, centuries-old system that has burgeoned with new technologies and lightning-fast trading instruments that feast on bundled obscurities? Oh, Lord! Am I talking about our economic system and the markets–or our political system, Congress, et. al.?

    The Greeks are taking to the streets with anger, grief, confusion over the loss of autonomy. Here, in Never-Never-Land we seem to be deadened to our losses, overwhelmed. Can democracy exist without a fair measure of transparency and the intellectual tools to cope with complexity? Methinks we need some transformative thinking real soon–or that oil spill in the Gulf won’t be the only slime spreading over this world.

  4. Ellen Hodgson Brown said on May 8th, 2010 at 11:41am #

    Yes the Greeks are more inflammatory and impulsive than we are. (I traveled in Greece in my youth — don’t ask!) It’s good that someone somewhere gets riled up about these things and gets out and makes a statement. They know the bailout won’t work because the Greeks can’t be harnessed to do austerity measures and pay the money back. The engineered crisis is turning into a real crisis, and the only way out is to get more money into a collapsed system. The ECB will have to monetize, which is a good thing; that’s what all central banks should do, provide the funds for the infrastructure, etc., their countries need. Money is just a receipt for goods and services; if you’ve got people willing to provide goods and services, there’s no harm in printing the receipts. It’s not “funny money;” it’s legitimately backed by productivity.

  5. Don Hawkins said on May 8th, 2010 at 11:55am #

    Bring down the hedge funds and electronic sharks operated by Goldman and other Wall Street heavies. Am not a praying man but this Sunday maybe just one to give the people who could bring these people down courage, what the heck God’s work.

  6. Don Hawkins said on May 9th, 2010 at 2:46am #

    George put it well and here in the States I see the Senator from Utah out not conservative enough, oh dear. Ignorance is strength it appears so. I guess it’s just better that way no thinking required all done for us one of the new rules papers do you have your papers. The old corner store in San Francisco and the owner in his nineties, “you know in 1940 I sold maybe 5 pack’s of rolling papers a month. Now in 2010 I sell 5,000 a month and I know there can’t be that many cowboy’s in the city by the bay”. I hope that was conservative enough as we try and figure out the fine point’s. Go to your left your right your left cup of coffee nice game of checkers and the winner is…………?

    http://www.monbiot.com/archives/2010/05/03/the-parasites-in-labours-brain/

  7. Don Hawkins said on May 9th, 2010 at 5:38am #

    aus·ter·i·ty

    reduced availability of luxuries and consumer goods, esp when brought about by government policy

    Any thought’s on this and Oh Al Gore what are your thought’s on cap and trade or gated communities same for Goldman Sach’s and a few more keep it simple 25 word’s or less will do.

  8. Don Hawkins said on May 9th, 2010 at 5:47am #

    A new book am going to write how to be happy with a good cup of coffee some great conversation. Cream or sugar oh or how about this new stuff called equal. You just might want to lose that suit and designer dress a tad bit hot when doing honest hard important work. Think of it as a new way of thinking before we head for the Star’s.

  9. observing said on May 9th, 2010 at 8:27am #

    aus·ter·i·ty
    equal·i·ty

    Unless austerity is applied in equal severity to the ruling/moneyed classes and their golem corporations, all the re-arranging of these financial deckchairs will give the same result as all manufactured bubbles since South Sea.

    We know the abusers will not curb themselves, so to mix metaphors, who will guillotine the cat? Bells have been hung, many mortgaged mice chewed in the to no avail.

  10. Don Hawkins said on May 9th, 2010 at 8:34am #

    From what I understand the President of the United States is going to give another commencement speech today and talk a little on the importance of good citizenship. Let’s see some good examples of good citizenship could be the United States Congress, Goldman Sach’s the new’s media, the oil and gas industry, Hollywood they love us very very did I forget anybody. Maybe he will say something like this.

    I know many of the best minds we have today tell us you kid’s don’t have a future unless we act and act now. Well there are other minds that also tell us it’s a hoax. The truth of course is somewhere in the middle yes we may put cap and trade off a year or so trust in your leaders have hope and go shopping. Remember what you see with your own eye’s sometimes isn’t true think of it as a big giant video game. Your future is bright and many of the leaders you now see will be talking to you from a secure location in the near future with more things you should do. Eat more tuna and don’t smoke the Union is strong.

  11. Don Hawkins said on May 9th, 2010 at 8:49am #

    Contracted local workers place oil containment booms in the Gulf today and it look’s like all is uncontrolled I mean controlled. Some think NASA should be called but the answer is somewhere in the middle. Granted it maybe off to the East a little no big deal. Did you all follow that?