Deconstructing the Capitalism of the Western World (1)

I recently stumbled into an article about how bankers and financiers often reap more money compared to other occupations even though they are not necessarily smarter than their compatriots from other fields (Stephen J.Rose, "Why Financiers Make So Much Money," Forbes, 02/09/2010). I had to admit that I am in agreement with Rose's main reasoning, simply because these guys actually control the economy.
Indeed, even though financiers may appear to be simply gambling on others' wealth, their power and influence cannot be underestimated.

Sadly, financiers actually receive their power from us, regular people who give them power to work on our money and make them multiply faster and grow bigger. In other word, financiers are inseparable from the world's economy because of people's desire to make more and more money. Financiers can get the access to all the money they have because we simply had trusted them to handle and manage our money. It all started when we left the old fashioned way of keeping our money under the pillow because we realize that they do not grow while we keep them, and that's why we could not refuse when the financiers offer us meager interests for storing our wealth in their care. But it did not stop there, some people who possessed large amount of wealth are still discontent by the fact that their money is only generating a low interest rate, and why we became eager to invest in more complex financial products when financiers offer us multiple options to grow our money faster, whether they be through simple lending, stock market to the complex CDO.

Amid the recent US housing bubble crises which also dragged the world economy lower, financial powerhouses like Goldman Sachs, Merrill Lynch and JP Morgan are actually playing a large role in the fall, even though they vehemently denied it. At the height of the housing bubble, Merrill Lynch was being investigated for pushing homeowners to draw money from their Home Equity loan to bet on the stock market (Ann Davis, "Betting the House on the Stock Market," WSJ, 12/9/2004). After the housing market crash, Goldman Sachs was also found to be selling the housing market CDOs while secretly betting against it. (Greg Gordon, "How Goldman secretly bet on US housing crash," McClatchy Newspapers, 11/1/2009) Wall Street executives and traders claimed that they were simply following a good financial practice by hedging their trading positions by betting against it, but many doubts that their move was a mere luck. JP Morgan Chase was also accused of playing a large role in the fall of Lehman Brothers by withholding $19 billion transfer to Lehman which some argued would have averted the demise of Lehman Bros which started the domino effect in the collapse of the world stock markets. (F. William Engdahl, "Paulson Panics as UK, Germany Find Own Solution," Financial Sense, 10/20/2008)

The revelation of these conspiracy added to the public anger toward big banks and financial institutions, it caused waves of uproar in the US which prompted some politicians to propose resolutions aimed to investigate the financial powerhouses' role and how to limit their unbridled power and influence. However, the efforts were soon died down as US government, lawmakers and common citizens were overwhelmed by many other more pressing issues such as the ongoing recession, persistently high unemployment rate, continuing foreclosures, endless health care reform debates, partisanship political rivalries, increase of world terrorism activities and Haiti's disaster. To be honest, looking at the way our politicians handle the matters, skeptics are more convinced that the financiers may have already penetrated and controlled both the House and the Senate and perhaps the President too. After all, money and influence are what the Wall Street is best known for.

However, the extent of the true role of private financial giants in this recession did not stop there. From investigation surrounding the recent Greece debt problems which shook the Euro Zone quite hard, Goldman Sachs was also said to be involved in a scenario to cover-up the severity of Greece's debt problem by offering to provide derivative deals to take off the debts from the book by offering cross currency swap with fictional exchange rate (Beat Balzli, "How Goldman Sachs Helped Greece to Mask its True Debt," Spiegel, 02/08/2010). Gary Cohn, Goldman president was reportedly traveling to Greece in early November to offer complex financial derivative products to defer Greece debts, less than three month before the news of Greece debt problems exploded. (Louise Story, et al., "Wall St. Helped Greece to Mask Debt Fueling Europe’s Crisis," New York Times, 02/14/2010).

So what's else? Is there something else that we still did not know of?