[A-List] The Battle of the Titans: JP Morgan Versus Goldman Sachs

[james daly]

The Battle of the Titans: JP Morgan Versus Goldman Sachs
Or Why the Market Was Down for 7 Days in a Row

By Ellen Brown

URL of this article: www.globalresearch.ca/index.php?context=va&aid=17280

Global Research, January 29, 2010
Web of Debt - 2010-01-28


We are witnessing an epic battle between two banking giants, JPMorgan Chase 
(Paul Volcker) and Goldman Sachs (Geithner/Summers/Rubin). Left strewn on 
the battleground could be your pension fund and 401K.



The late Libertarian economist Murray Rothbard wrote that U.S. politics 
since 1900, when William Jennings Bryan narrowly lost the presidency, has 
been a struggle between two competing banking giants, the Morgans and the 
Rockefellers. The parties would sometimes change hands, but the puppeteers 
pulling the strings were always one of these two big-money players. No 
popular third party candidate had a real chance at winning, because the 
bankers had the exclusive power to create the national money supply and 
therefore held the winning cards.



In 2000, the Rockefellers and the Morgans joined forces, when JPMorgan and 
Chase Manhattan merged to become JPMorgan Chase Co. Today the battling 
banking titans are JPMorgan Chase and Goldman Sachs, an investment bank that 
gained notoriety for its speculative practices in the 1920s. In 1928, it 
launched the Goldman Sachs Trading Corp., a closed-end fund similar to a 
Ponzi scheme. The fund failed in the stock market crash of 1929, marring the 
firm's reputation for years afterwards. Former Treasury Secretaries Henry 
Paulson, Robert Rubin, and Larry Summers all came from Goldman, and current 
Treasury Secretary Timothy Geithner rose through the ranks of government as 
a Summers/Rubin protégé. One commentator called the U.S. Treasury Goldman 
Sachs South.



Goldmans superpower status comes from something more than just access to 
the money spigots of the banking system. It actually has the ability to 
manipulate markets. Formerly just an investment bank, in 2008 Goldman 
magically transformed into a bank holding company. That gave it access to 
the Federal Reserves lending window; but at the same time it remained an 
investment bank, aggressively speculating in the markets.  The upshot was 
that it can now borrow massive amounts of money at virtually 0% interest, 
and it can use this money not only to speculate for its own account but to 
bend markets to its will.



But Goldman Sachs has been caught in this blatant market manipulation so 
often that the JPMorgan faction of the banking empire has finally had 
enough. The voters too have evidently had enough, as demonstrated in the 
recent upset in Massachusetts that threw the late Senator Ted Kennedys 
Democratic seat to a Republican. That pivotal loss gave Paul Volcker, 
chairman of President Obamas newly formed Economic Recovery Advisory Board, 
an opportunity to step up to the plate with some proposals for serious 
banking reform. Unlike the string of Treasury Secretaries who came to the 
government through the revolving door of Goldman Sachs, former Federal 
Reserve Chairman Volcker came up through Chase Manhattan Bank, where he was 
vice president before joining the Treasury. On January 27, market 
commentator Bob Chapman wrote in his weekly investment newsletter The 
International Forecaster:



A split has occurred between the paper forces of Goldman Sachs and JP 
Morgan Chase. Mr. Volcker represents Morgan interests. Both sides are 
Illuminists, but the Morgan side is tired of Goldmans greed and arrogance. 
. . . Not that JP Morgan Chase was blameless, they did their looting and 
damage to the system as well, but not in the high handed arrogant way the 
others did. The recall of Volcker is an attempt to reverse the damage as 
much as possible. That means the influence of Geithner, Summers, Rubin, et 
al will be put on the back shelf at least for now, as will be the Goldman 
influence. It will be slowly and subtly phased out. . . . Washington needs a 
new face on Wall Street, not that of a criminal syndicate.



Goldmans crimes, says Chapman, were that it got caught stealing. First in 
naked shorts, then front-running the market, both of which they are still 
doing, as the SEC looks the other way, and then selling MBS-CDOs to their 
best clients and simultaneously shorting them.



Volckers proposal would rein in these abuses, either by ending the risky 
proprietary trading (trading for their own accounts) engaged in by the 
too-big-to-fail banks, or by forcing them to downsize by selling off those 
portions of their businesses engaging in it. Until recently, President Obama 
has declined to support Volckers plan, but on January 21 he finally 
endorsed it.



The immediate reaction of the market was to drop  and drop, day after day. 
At least, that appeared to be the reaction of the market. Financial 
analyst Max Keiser suggests a more sinister possibility. Goldman, which has 
the power to manipulate markets with its high-speed program trades, may be 
engaging in a Mexican standoff. The veiled threat is, Back off on the 
banking reforms, or stand by and watch us continue to crash your markets. 
The same manipulations were evident in the bank bailout forced on Congress 
by Treasury Secretary Hank Paulson in September 2008.



In Keisers January 23 broadcast with co-host Stacy Herbert, he explains how 
Goldmans manipulations are done. Keiser is a fast talker, so this 
transcription is not verbatim, but it is close. He says:



High frequency trading accounts for 70% of trading on the New York Stock 
Exchange. Ordinarily, a buyer and a seller show up on the floor, and a 
specialist determines the price of a trade that would satisfy buyer and 
seller, and thats the market price. If there are too many sellers and not 
enough buyers, the specialist lowers the price. High frequency trading as 
conducted by Goldman means that before the specialist buys and sells and 
makes that market, Goldman will electronically flood the specialist with 
thousands and thousands of trades to totally disrupt that process and 
essentially commandeer that process, for the benefit of siphoning off 
nickels and dimes for themselves. Not only are they siphoning cash from the 
New York Stock Exchange but they are also manipulating prices. What I see as 
a possibility is that next week, if the bankers on Wall Street decide they 
dont want to be reformed in any way, they simply set the high frequency 
trading algorithm to sell, creating a huge negative bias for the direction 
of stocks. And theyll basically crash the market, and it will be a 
standoff.  The market was down three days in a row, which it hasnt been 
since last summer. Its a game of chicken, till Obama says, Okay, maybe we 
need to rethink this.



But the President hasnt knuckled under yet. In his State of the Union 
address on January 27, he did not dwell long on the issue of bank reform, 
but he held to his position. He said:



We can't allow financial institutions, including those that take your 
deposits, to take risks that threaten the whole economy. The House has 
already passed financial reform with many of these changes. And the 
lobbyists are already trying to kill it. Well, we cannot let them win this 
fight. And if the bill that ends up on my desk does not meet the test of 
real reform, I will send it back.



What this real reform would look like was left to conjecture, but Bob 
Chapman fills in some blanks and suggests what might be needed for an 
effective overhaul:



The attempt will be to bring the financial system back to brass tacks. . . 
. That would include little or no MBS and CDOs, the regulation of 
derivatives and hedge funds and the end of massive market manipulation, both 
by Treasury, Fed and Wall Street players. Congress has to end the 
Presidents Working Group on Financial Markets, or at least limit its use 
to real emergencies. . . . The Glass-Steagall Act should be reintroduced 
into the system and lobbying and campaign contributions should end. . . . No 
more politics in lending and banks should be limited to a lending ratio of 
10 to 1. . . . It is bad enough they have the leverage that they have. State 
banks such as North Dakotas are a better idea.



On January 28, the predictable reaction of the market was to fall for the 
seventh straight day. The battle of the Titans was on.


*************


Ellen Brown developed her research skills as an attorney practicing civil 
litigation in Los Angeles. In Web of Debt, her latest book, she turns those 
skills to an analysis of the Federal Reserve and the money trust. She 
shows how this private cartel has usurped the power to create money from the 
people themselves, and how we the people can get it back. Her eleven books 
include Forbidden Medicine, Natures Pharmacy (co-authored with Dr. Lynne 
Walker), and The Key to Ultimate Health (co-authored with Dr. Richard 
Hansen). Her websites are www.webofdebt.com, www.ellenbrown.com, and 
www.public-banking.com.