The executives in financial products at AIG were easy suckers for counterparties like Goldman Sachs (GS). The counterparty traders to AIG were probably saying of AIG executives, ‘Come on, fishy, take the bait. Swallow the lure all the way to your gut. Then, we’ll set the barbed hook and yank you out by your innards when the mortgage insanity is done.’

Judged by the classical definition of chutzpah, GS has a lot of it. The idea of chutzpah is evidenced in the anecdote of a fellow who kills both of his parents (to get the estate early), then brazenly demands leniency from the court on account of being an orphan. So it is with Goldman Sachs. As noted by Weidner, they characterized their exposure to AIG as “immaterial,” but that immateriality was predicated on the fact that in their counterparty role they had suckered AIG into making bets payable only from the deep pockets of Uncle Sam – and Sam would have to pay up (provide bailouts) to stay in the business of government.

What audacity! Not surprisingly, some of the most soiled are among those who want to disembowel nations of their wealth so they can use that money to “repair and perfect the world.” Such repair is predicated on the ‘philanthropic’ principle of plutocratic tikkun olam – a dreadful skewing of an otherwise laudable concept. As icing on the cake, the PR agents of the pirates hurl the allegation that anyone opposed to society-wide trampling for their preferential cause is guilty of hate. That’s chutzpah piled on chutzpah! If anyone is guilty of hate it is the fast-buck elites who nefariously and shamelessly undermine the future of the hardworking middle class.

Happily, there are many quality people in finance and the national media who are NOT buying into the predatory game. These whistle blowing media experts put human decency, personal honor and moral rectitude above any business connections or fraternal alliances. Their goodness of character is the yet under-recognized story of New York and its environs. Without these heroes – many of them being the cream of the crop of Judaism – we wouldn’t have the important window into national affairs that we have today. When the day comes that new leadership replaces old, these are among the people our nation should look to for wisdom.

AIG is receiving the public wrath that is due, but what about GS, J.P. Morgan, and all the knowing counterparties? Why are they not receiving ample scrutiny? The bankruptcy of Semgroup, as exposed in the Forbes.com article, “Did Goldman Goose Oil,” calls for much deeper examination. Not only did GS have access to Semgroup’s propriety trading book, it had Arjun Murti and visibility regarding the Marc Rich group of oil speculators in Europe.

Who can forget how Arjun Murti and other Goldman Sachs analysts provided “research reports,” in the spring and early summer of 2008 suggesting the prospect of a “super spike” of crude to over $150 a barrel. Then, when the oil price run-up fell short of the target and more bidding energy was needed to create the superspike, the New York Times nicely stepped up and produced an article lavishly entitled, “An Oracle of Oil Predicts $200-a-Barrel Crude” (May 21, 2008). In all likelihood, Murti and his colleagues were just pawns in the game, hidden handlers playing upon their ‘pride of expertise’ in goading them to make astounding calls unsupported by traditional fundamentals.

Weidner correctly points to Goldman Sach’s benefit from Paulson’s selective bailouts as well as several other cases of curiously timed good fortune. But there is more, including the matter of George Soros’s theory of reflexivity that was highly touted in circles that GS executives frequented. As Soros explained in his April 26, 1994 speech to the World Economy Laboratory Conference held in Washington D.C. (under the auspices of the MIT Department of Economics), his theory considers breakdowns between reality and perception to be the investment opportunities most worthy of exploitation. Indeed, Soros declares that his theory provides justification for “a new morality,” explaining this business morality with the subtle inference that when market pricing is driven by irrationality to extremes, wealth holders with knowledge of anti-equilibrium theory can counter the excessive fluctuations that trend following speculation generates. By implication, those who popped the bubbles should be richly rewarded for their intervention, as well as for any work in stimulating the bubble for gaming during inflation and pricking upon full inflation.

In speaking to mathematical wizards at the 1994 MIT conference, Soros argued that participants’ bias can change the fundamentals which are supposed to determine market prices. Drawing upon this idea later in his speech, he asks the emerging wizards to scrutinize the values that guide people in their actions. Any perceptive reading of the whole document cannot help but conclude that the aim was to stimulate the creation of statistically robust models of perception error among investment groups – error assessment that could be used by hedge funds and the trading desks at investment banks to exploit departures from equilibrium in market pricing. These strategies were likely built into the proprietary trading platforms that Goldman Sachs insisted on protecting from government regulators.

Viewed from this angle, the AIG debacle, the SemGroup hold-up, and countless other “market events” are possible expressions of subterranean plans laid to plunder the world, embarrass legislatures, and set-up the world for conquest by the power of money. Granted, there will be wars along the way as they provide disequilibrium opportunities to be gamed. But the larger plan is to create economic changes at such a pace that people cannot cope. Eventually, the troubled masses cry out for an impregnable environment of financial stability – but who can provide such an environment except for those with the financial clout to control market disequilibria. Thus, when political conquest comes it will be at the request of the masses. A people conquered by their own professed inability to run their government rightly is a people that can be made to believe that democratic plutocracy is a better outcome than the freedoms they held before.

The struggle now begins anew. Publius put it this way in the Federalist Papers: “The republican principle demands, that the deliberate sense of the community should govern the conduct of those to whom they entrust the management of their affairs.... It is a just observation, that the people commonly intend the PUBLIC GOOD. This often applies to their very errors. ...They know from experience, that they sometimes err; and the wonder is, that they so seldom err as they do; beset as they continually are by the wiles of parasites and sycophants, by the snare of the ambitious, the avaricious, the desperate; by the artifices of men, who possess their confidence more than they deserve it, and of those who seek to possess, rather than to deserve it” (Federalist No. 71). The challenge now is to find competent representation from those who seek to DESERVE it rather than possess it.