Published on the Blog Seeking Alpha, July 1, 2009.
In a chapter from The Great Crash, 1929 titled “In Goldman Sachs We Trust,” the famed economist John Kenneth Galbraith documented the obscene profits gained by Goldman Sachs at the expense of their hapless investors.
Goldman used the investment trust vehicle to scam its investors. The first trust was the Goldman Sachs Trading Corporation; the bank issued a million shares at $100 apiece, bought all those shares with its own money and then sold 90 percent of them to the hungry public at $104.
The trading corporation then relentlessly bought shares in itself, bidding the price up further and further. Eventually it dumped part of its holdings and sponsored a new trust, the Shenandoah Corporation, issuing millions more in shares in that fund – which in turn sponsored yet another trust called the Blue Ridge Corporation. In this way, each investment trust served as a front for an endless investment pyramid: Goldman hiding behind Goldman hiding behind Goldman. Of the 7,250,000 initial shares of Blue Ridge, 6,250,000 were actually owned by Shenandoah – which, of course, was in large part owned by Goldman Trading … (full text).
Watch also the video: Conversations with History, John Kenneth Galbraith, 51.40 min, June 12, 2008.