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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 unexpected because the European Central Bank and International
Monetary Fund had just pledged 120 billion Euros to avoid a debt
default in Greece. Strategically-timed ratings downgrades of this sort
are so suspicious
that Indian market regulator SEBI recently created a stir by asking the
rating agencies operating in India for periodic reporting concerning
their fees and rating norms.

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.

Whether Goldman actually crashed the market in this case will be left to conjecture, but Keiser explained in an email how it could theoretically be done:

Remove all the buy orders that you control (since HFT traffic is 70% of the order flow, if you simply pull your HFT buy orders, you remove a huge chunk of the market - in a heartbeat -
leaving a sudden price vacuum). If you wanted to scare congress to vote
the way you wanted them to vote - a congress that is directly invested
in stocks trading on the exchange and ETF's tied to the prices on the
exchange - just pull your buys. When they do what you want them to do -
replace your buys. If you want to make the market go up - pull your
sell orders. It works both ways. (It's all detailed in my Virtual
Specialist Technology patent - how to make markets in an 'infinite
inventory environment.')

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 electronically-driven
sharks prowling in Greek waters, which specialize in bringing down
corporations and countries for strategic and exploitative ends.

Will the ECB proceed with this plan? Perhaps,
say some experts, since the Greek bailout has evidently not quelled the
bond crisis. Germany, harboring fears of a Weimar-style hyperinflation,
would be expected to contest the nuclear alternative; but there is
evidence that what actually triggered the Weimar inflation
has been distorted in the history books. The Federal Reserve has lent
massively to its member banks at near-zero interest rates without
triggering hyperinflation in the United States.