Goldman: Doing God's Work

I’ve just read over my last blog (July 19 last year) on Goldman Sachs, and it’s déjà vu all over again. Paul Krugman wrote shortly before then that Goldman had been selling toxic mortgage-backed securities to its customers, while at the same time making billions by “selling mortgage-backed securities short, just before their value crashed.”

The new twist in recent days is that Goldman Sachs was not only doing this, but that it neglected to tell its customers anything about its short selling. Just to keep you updated, “selling short” means that a stock trader bets that a given stock is about to go down—and when it does, he makes as much money as if he bet successfully on it going up. I first learned about this through a stock trader years ago, the new husband of an old friend, who the day I visited their New York apartment, happily informed me that he and his son had just made about $2 million dollars that day. His specialty, “selling short.” Though betting that a stock would go down seemed insane to me, Dick explained it was perfectly legitimate, and smart.

Apparently, the boys at Goldman think the same way. Only, again, they somehow forget to tell their customers about it, i.e., that the securities they’re pushing on them are, in their opinion, doomed and, as a result, they’re secretly selling those same securities short. Worse, in emails that have been made public by the Securities and Exchange Commission (which has brought legal action against Goldman for this type of fraud), Goldman managers have boasted of their cleverness in bilking widows and orphans out of their money. Fabrice Tourre, a Goldman trader, joked: “I’ve managed to sell a few Abacus (the name of the toxic portfolio) bonds to widows and orphans that I ran into at the airport, apparently these Belgians adore (them).” (quoted by AP, 4/24/10). Tourre also quoted Dan Sparks, manager of Goldman’s subprime business, as saying that the business “is totally dead, and the poor little subprime borrowers will not last so long!” Ho ho.

Evidently, a hedge-fund manager named Paulson (his personal income in this hedge business during the crisis amounted to over $10 million a day! according to Gregory Zuckerman in “The Greatest Trade Ever”) helped Goldman select investments for Abacus knowing that it was going to go into the toilet (Paulson put the deal together as a hedge, i.e. betting that the securities would go down), and then pushed the deal to its customers. Those customers, kept in the dark, were mainly European banks who had no idea that the American housing market was so shaky. Goldman managers, like CFO David Viniar, referred to the Goldman strategy as “the big short.” Of course, Goldman is publicly denying that it had organized a strategy of going short, but the firm’s records show otherwise. Together with its role in bringing down AIG, its use of nearly interest-free government funds to make huge profits, and its use of exotic swaps to help Greece disguise its financial problems (while it bet against Greece by shorting Greece’s debt), makes plain that the premiere investment bank in the world is indeed what Matt Taibbi called it last year: a “great vampire squid wrapped around the face of humanity.” As to the financial sector of which Goldman is the most shining example, its share of domestic corporate profits “never higher than 16 percent until 1986, hit 41 percent in the last decade” (Frank Rich, NY Times, 4/25/10). And you were wondering whatever happened to American manufacturing, to American firms which actually produce something other than fraud?

But the question I want to raise, again, is “who are these people?” What kind of flesh-devouring, soul-killing robots can bear to engage in this kind of criminality? From their point of view, it’s called “enlightened self interest.” From their CEO Lloyd Blankfein’s perspective, they are doing “God’s work.” I suppose if you believe that God is a sadistic, cruel, diabolical destroyer of hopes and dreams, lives and cities and whole countries, a deity who enjoys watching widows and orphans get screwed while wealthy dweebs (just watch them as they testify before the Senate Finance Committee) luxuriate in their pools and palaces, then perhaps it is God’s work. But if you question what kind of nation could allow this to go on, what kind of economic system could foster this kind of cruelty, fraud, inequality and sheer human suffering—then you may be thinking that something more than new regulations or new legislation is going to be needed. What that eventually turns out to be is still not clear. But I know one thing: if I were one of the executives in any of these so-called banks or brokerage houses, I wouldn’t walk too casually or conspicuously down the street these days.

Lawrence DiStasi

Myriad Genetics Patents Your Genes

I heard it first on the PBS News Hour, and then on CBS’ 60 Minutes on April 4. There is a company named Myriad Genetics, based in Salt Lake City, Utah, that has patented the genes that cause breast and ovarian cancer. They are known as BRCA1 and BRCA2. Myriad Genetics also has tests for mutations on these two cancer predisposition genes, tests that many women like May Girard want to have done so they can know if they are at risk for these cancers. It could save their lives. The problem for Ms. Girard is that Myriad’s BRACAnalysis test is costly—around $3000—and when she tried to find another company to test her for these genes, she was told that only Myriad has the patent so only Myriad can administer the tests. No other company is even allowed to work with these genes. They belong to Myriad. Even though they’re in Ms. Girard’s body, and possibly your body as well? Even so.

The very notion seems bizarre, even impossible. How can a company own your genes? But the grim truth is that biotech companies have been busy buying up genes to the extent that, according to 60 Minutes, some twenty percent of all human genes have been patented so far. That’s 20% of your body that’s now owned by some corporate entity or other. And the rest will no doubt be patented soon.

This was the situation that outraged Ms. Girard and the ACLU (and other groups), which sued Myriad Genetics in court. The good news is that on March 30 a U.S. District Court ruled against Myriad’s exclusive ownership of these genes, and in favor of the ACLU. Judge Robert Sweet said in his ruling, “Because the claimed isolated DNA is not markedly different from native DNA as it exists in nature, it constitutes unpatentable subject matter” (AP, March 30, 2010). That is, companies cannot patent nature—which would seem to be a no-brainer. But to the geniuses of corporate America, it’s anything but. As a lawyer for Myriad, Brian Poissant, said: “This is not nature’s handiwork…this is the hard work of man” (Reuters, March 30). So Myriad’s reaction to the decision was, first, to say that the decision wouldn’t have much effect on its business (only a few of its patents were voided; it holds sixteen more on these genes); and, second, to say that it would ask the Court of Appeals to overturn the decision. Analysts noted that such appeals could keep the case in litigation limbo for years. Which is the reason that securities analysts opined that other companies, though apparently now allowed to produce competing tests for BRCA, will not do so, fearing that the ruling could be overturned by a higher court. Given the conservative makeup of the Supreme Court, this appeared to be a good bet.

So there you have it. The code to your body is fast becoming the patented property of corporate America—in much the same way that much of your food, when it is genetically modified, becomes the property of giant corporate monstrosities like Monsanto or Cargill. As to the wisdom of allowing the moral degenerates who run American business to own exclusive rights to the very template of your body, consider the advice that was given before Myriad ran into the above-named lawsuit. “My top idea for 2009 is Myriad Genetics” said one Mike Cintolo. In the Cabot Market Letter, Cintolo looked at what he called “the leader in the new field of cancer predisposition testing….Myriad Genetics has five tests on the market (covering colon, breast, ovarian, and skin cancer) that tell a patient if his genes make it more likely that he’ll get various types of cancer.” Which is to say, Myriad owns this stuff, and, medical ethics to the contrary, it ain’t giving it away. In addition, Myriad’s CEO and President, Peter Meldrum, was chosen best biotech CEO in 2008 by Adam Feuerstein. Why? For “pulling off one of the smartest drug licensing deals of all time.” What Meldrum did was sell Myriad’s already faltering Alzheimer’s treatment, Flurizan, to a Danish drugmaker, Lundbeck, in a deal that included “an up front $100 million payment. Unfortunately for Lundbeck, just a month later Flurizan went belly-up in a Phase III trial, but Myriad got to keep the non-refundable payment (the $100 million), which covered the cost of conducting a Phase III trial of the doomed drug. Meldrum effectively passed Myriad’s problem drug to Lundbeck and got $100 million in the process.” (http://www.fiercebiotech.com/story/myriads-meldrum-picked-best-biotech-ceo/2008-12-18?utm_medium=rss&utm_source=rss&cmp-id=OTC-RSS-FB0).

In short, the sociopathic head of Myriad gets high praise and adulation for what? for his ability to hoodwink another company into giving him $100 million for a drug he knew was doomed. Top businessman, CEO of the year! So what do you think? Feel comfortable entrusting your genes, your very life to the likes of Myriad Genetics and its CEO Meldrum? I mean, he’s probably a pillar of his community and his church as well. What could be bad?

Lawrence DiStasi