Translated from the French by Tim Gupwell.

The first hypothesis which comes to mind with regard to the American Justice Department’s decision on Friday not to prosecute the bank Goldman Sachs for its alleged role in the Subprime crisis, is of course of corruption at the very heart of the Department. The facts are well-established and eminently reprehensible: exploiting the trust of their best clients to sell them junk products; organizing bets and participating actively in these bets on complex securities which had been manipulated to ensure they were of the worst possible quality.

Which begs the next question: “is it possible that it actually had nothing to do with corruption?” And the answer to this is in fact “yes”. Other explanations are possible and even the totally disgusted Senator Carl Levin himself, who headed the American Senate’s enquiry committee, conceded this since he said that the Justice Department’s decision “shows  either weak laws or weak enforcement”.

Evoking “weak enforcement” is tantamount to maintaining that the Department of Justice is complicit. So is this an accusation of corruption on the part of Levin? Not necessarily. It could simply be the result of Goldman Sachs having far more clout than the Justice Department. In the past, I have detailed a number of incidents proving that the balance of power between transnational firms (and sometimes even national ones) and States, is loaded firmly in favour of the former in the vast majority of cases.

Talking of ‘weak laws’, is the equivalent of saying, using the terms I employed previously that “exploiting the trust of their best clients to sell them junk products; organizing bets and participating actively in these bets on complex securities which had been manipulated to ensure they were of the worst possible quality”, does not come under the remit of American law. What can be more worrying than that? Let’s look at that in more detail.

First of all, “sales of junk financial products to the firm’s best clients”. Milton Friedman, Professor of Economics at Chicago University for nearly thirty years, winner of the Nobel Prize for economics in 1976, successfully spread the idea that a firm worked uniquely for its shareholders; not for its clients, nor for its employees. Friedman is considered the second most eminent economist of the 20th Century (after John Maynard Keynes); one of his books alone has sold a million copies. Judging from this perspective, the sale of junk products is justified if it increases profits.

Next, “making rigged bets on the collapse of a financial sector”. During his hearing before the American Senate Committee chaired by Carl Levin, in April 2010, Lloyd Blankfein, Chief Executive Officer of Goldman Sachs, maintained that the idea that financial bets are reprehensible did not make sense to him since a bet is a kind of “risk transfer”. In one of my previous articles dedicated to this hearing (in French) I thanked Senator McKaskill “for having reminded the boss of Goldman Sachs of the difference between an insurance policy and a bet. Blankfein had replied that for the market maker there was no difference, to which she replied that for the average American, that’s probably where the problem lies.” The error is of course a major one, as a bet creates out of nowhere a risk which had not previously existed. Nonetheless, I am sure that we would easily find half a dozen economists, holding some of the most prestigious economic chairs, to confirm without any hesitation Blankfein’s remarks that bets are just ‘risk transfers’ like any others.

But quite apart from the watering down of the laws under the influence of economists, there are other possible explanations for the Justice Department’s decision on Friday not to prosecute Goldman Sachs, and the principal one is that of the State: the operations of the firm Goldman Sachs may be so intertwined with the very functioning of the American state that any genuine challenge is impossible to envisage.

Over the years, I have reported here the theories of various traders, also bloggers or involved with the media in some way, who maintain that Goldman Sachs is the right arm of American State manipulation aiming to create a “bullish sentiment” on the stock markets, or, in other words, the tool of the ‘Plunge Protection Team’, according to the nickname of the ‘Working Group on Financial Markets’, set up by the Secretary of the Treasury, the President of the Fed, the President of the Securities and Exchange Commission (the regulator of the stock market) and the President of the Commodity Futures Trading Commission (regulator of the futures and options market). There is no actual proof of these allegations; curious souls can however regularly consult the site Nanex, a firm which collects information on financial transactions.

Does this amount to saying that there is only one choice: that either the American Justice Department has been in one way or another corrupt in this affair (for financial reasons or for state ones); or that the financial sector as a whole is untouchable? No, because as the recent interventions from the American regulatory authorities against the British banks Barclays and Standard Chartered prove, there are indeed some financial establishments in the firing line and in serious trouble. The British will no doubt feel slightly bitter that these kinds of double-standards exist, and there is no doubt that the next compromising revelations will come from that direction in the form of reprisals. Unless of course, as the independent trader Alessio Rastani maintains, Goldman Sachs really does rule the world, in which case nothing will happen. This is moreover not the kind of hypothesis that can be easily dismissed.