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Goldman Sachs was charged by the SEC this morning with civil fraud in making billions (by taking out insurance policies from the likes of AIG in derivative forms called Credit Default Swaps) on the failure of the very same securities they made billions on just a few years earlier when they bundled them as AAA securities and sold them to you and me. This very charge by the SEC summarizes the entire financial crisis and sheds the light on the Memetic play between an unhealthy ENTERPRISE value system (vMEME) that has escaped the detection of regulators many decades ago and a vacuous ORDER vMEME (SEC) who’s appointees use their time there as a springboard to lucrative careers on Wall Street (is there a more blatant case of the fox guarding the hen house?).
For those who are not familiar with the Wall Street culture, investment bankers and their regulators call themselves the “Masters of the Universe”; a highly sophisticated and complex form of the finance ENTERPRISE vMEME that considers the ORDER/REGULATOR vMEME a nuisance that applies to lower forms of intelligence but not to them. This belief was further bolstered by over 3 decades of financial deregulation beginning with the Reagan administration and continuing on today where the SEC has become so ineffective that it must be abolished in order for a SYSTEMIC regulator to rise. For months the SEC couldn’t find anything wrong with Madoff after he handed himself in to them.
So, how much are we to believe that The Obama Administration and the current Congress are serious about regulating Wall Street? Goldman and the rest of the investment banking community have contributed tens of millions to Obama’s campaign and their congressional lobbyists have never been as powerful as they are today. This form of unhealthy ENTERPRISE vMEME is known to move at the speed of light when caught by the ORDER/REGULATOR vMEME. It has already started working on the next investment scheme that will evade the SEC’s detection and create another asset bubble resulting in another financial crisis and again the SEC will not know what’s happening.   I’m sure we’ll soon hear about an undisclosed settlement that will preserve Goldman’s stature as the “Destroyer God” in this Masters of The Universe play where the lives of millions are still being destroyed and global wealth gets more concentrated in the hands of the few on Wall Street.
Some news shows asked questions such as, “How much will GS be fined?” and “Will there be other investment houses also charged with legal action?”
More skeptical outlets wondered if the SEC would really follow through.
In my view what’s most noteworthy is the change in the market that has already occurred. The mere knowledge that the SEC has publicly begun legal action against Goldman Sachs has already established the following changes in the life conditions in the investing environment. All three of these effects are already working together to cause a sea change in the attitude of the investment market as the SEC action is digested:
First, in the upper left quadrant (individual/interior), other investment houses are now feeling pressure that they may be next and are thus incentivized to play more by the rules to avoid trouble.
Second, in the lower right quadrant (collective/external) the Market (meaning individual and institutional investors) are now aware that there is an ORDER component that may directly affect their bottom line, and will be choosing their investment options taking this into account, i.e., they don’t want to invest with an institution where they may lose money due to that institution’s unlawful behavior.
Third, in the lower left quadrant (collective/internal), the investment houses now feel their ORDER is being judged and rewarded (or punished) by the Market which they now understand will be looking for fair players and avoiding cheaters where to place their investments.
What is not expected to be immediate, but which I predict in the coming weeks and months, is an attempt by investment houses to position themselves in the market as fair–ORDERly–players, through advertisement and (hopefully) true action to better follow a healthy ORDER vMeme. This action is in the upper right quadrant (individual/external) and thus rounds out the present, brief 4Q analysis.
Whether the SEC follows through rigorously or not, their public statement and accusation has reestablished a sense that there is a standard (ORDER) that we all want each other to follow so that we are not taken advantage of by the other, and has articulated, perhaps for the first time since the S&L debacle, that our financial investment system has drifted from that standard.