Goldman’s Role in the 1MDB Controversy
Goldman Sachs must be foremost among foreigners praying that the 1MDB scandal doesn’t topple the Najib government.
The full scale inquiry by agencies ranging from Bank Negara to the Anti-Corruption Commission would surely unearth so much that was rotten in the state of Malaysia and might well give the guarantor of its huge debts (the people of Malaysia) the opportunity to renege on the grounds of claims made at the time of the debt issuance.
Even if this were not to be the case, there is every reason why Goldman should be made to throw up the huge profit it made on raising money for what it must have been able to smell was a dubious deal. But Goldman avarice ensures that any sense of smell is extinguished as soon as its eyes see the potential for huge rewards by being party to a deal which yields the sort of commission only available on dodgy transactions.
As has been pointed out elsewhere, Goldman collected a commission of 7.69% in raising US$6.5 billion for 1MDB, a supposedly quasi- sovereign borrower. Why would such a company be willing to pay so much over the odds, in the process netting Goldman fees which are believed to have totalled US$500 million?
Now the Malaysian government is on the hook for probably about US$4 billion of guarantees. A new administration might well decide to contest this liability given the circumstances of its issuance and Goldman’s role.
Goldman asked no questions because it must have known that something irregular was up. But in the amoral world of top level investment banking, who cares about truth or conduct when millions can be collected, no questions asked? Of course to ordinary companies and people whose loan requests are subject to intense bank scrutiny, Wall Street’s finest feel no need so long as they can collect mega fees and pass the parcel whether to global bond buyers or the Malaysian public.
The latter are now expected to stand behind this worst of all examples of the nexus between UMNO, banks and corruption – exceeding even the Bank Bumiputra-Carrian affair of the 1980s, in which Bank Bumi lost US$1 billion in what was then the world’s biggest scandal, and vastly larger than the string of similar scandals – Perwaja Steel, MAS etc etc. A full investigation of 1MDB could well show a large case for Goldman to answer as to why the guarantee may be null and void.
But what is perhaps most remarkable is that despite a string of dubious deals—including a role in the Greek crisis by earlier helping Greece raise money on the basis of manipulated debt data – Goldman is still regarded as a respectable institution. That is a commentary on the current state of western financial so-called capitalism.