By Pam Martens and Russ Martens: November 29, 2023 ~
The employee at Apple who was put in charge of conducting due diligence on aligning the Apple credit card brand with Goldman Sachs, needs to be immediately demoted to sorting envelopes in the mail room. It has been a match made in hell, generating headlines in the business press over the billions of dollars Goldman Sachs has lost attempting to ramp up a credit card division from scratch while spawning federal investigations into Goldman’s less than timely handling of credit card customer complaints about fraudulent charges, billing errors, refunds, etc.
After hundreds of those complaints piled up at the Consumer Financial Protection Bureau (CFPB), the Bureau opened a federal investigation. (The CFPB is the federal agency created to hear directly from defrauded consumers following the 2008 Wall Street-generated financial crisis). In the most recent quarterly report filed by Goldman with the SEC for the quarter ending September 30, the firm reports that the investigation is still ongoing, writing:
“The firm is cooperating with the Consumer Financial Protection Bureau and other governmental bodies relating to investigations and/or inquiries concerning GS Bank USA’s credit card account management practices and is providing information regarding the application of refunds, crediting of nonconforming payments, billing error resolution, advertisements, reporting to credit bureaus, and any other consumer-related information requested by them.”
This morning, the Wall Street Journal is reporting that “Apple is pulling the plug on its credit-card partnership with Goldman Sachs” and “The exit would cover their entire consumer partnership, including the credit card the companies launched in 2019 and the savings account rolled out this year.”
The Journal article also reveals that Goldman is not just facing an investigation by the Consumer Financial Protection Bureau but that the Federal Reserve has also opened an investigation into Goldman’s “broader consumer-lending business.” The Federal Reserve is the primary supervisor of Goldman Sachs Bank USA, the federally-insured bank that offers consumer lending at Goldman Sachs – the sprawling international investment bank and trading behemoth. (See Goldman Sachs Is Quietly Trading Stocks In Its Own Dark Pools on 4 Continents.)
Among the hundreds of complaints filed at the CFPB involving Goldman’s handling of the Apple credit card is the following from a resident of Nevada. The complaint was filed on February 8 of this year: (Redacted material was done by the CFPB.)
“Late last year, Apple credit card pulled a hard inquiry on my credit and issued me an Apple credit card. I did not request this credit card, so I contacted XXXX about this matter. Apple credit card closed my account and stated to me that they noted my account was closed because they could not verify that I requested, authorized, or applied for this credit card. I believe this credit card was requested by an XXXX store agent, without my authorization, when I purchased a new iphone. I believe this because the agent signed me up for several other offers that I did not request. These matters have been resolved with XXXX. Regarding the hard inquiry, the XXXX representative told me to contact each credit reporting agency to request that the hard inquiry be removed from my credit report. XXXX will be reporting this account as closed due to unable to verify that I applied for the credit card. Thank you for assisting in the removal of the hard inquiry with each agency.”
This sounds like someone might have been financially incentivizing retail store employees to sign up folks for an Apple credit card with Goldman Sachs when they buy an Apple iPhone.
The really nutty thing about the outset of this relationship is that a big market for Apple products is young people. A lot of those same young people despise Goldman Sachs and have made it a target of their protests during the Occupy Wall Street movement and more recently during the early days of the Trump administration. Trump had promised voters that he would “drain the swamp” in Washington. Instead, he restocked it, tapping multiple Goldman Sachs veterans for key posts in his administration.
Trump made Steven Mnuchin, a 17-year veteran of Goldman Sachs, his Treasury Secretary. Stephen Bannon, another former Goldman Sachs banker, was named by Trump as his Chief Strategist in the White House. The sitting President of Goldman Sachs, Gary Cohn, was named by Trump as Director of the powerful National Economic Council, which sets policy for both domestic and international issues.
In a move that outraged watchdogs, Trump made a Goldman Sachs outside lawyer, Jay Clayton of Sullivan & Cromwell, Chairman of the Securities and Exchange Commission. Adding to the taint, Clayton’s wife worked as a Vice President at Goldman Sachs at the time of his nomination to head the SEC.
On January 17, 2017, these chants from protestors could be heard outside the Goldman Sachs headquarters at 200 West Street in Manhattan:
“Goldman, Goldman you can’t hide, we can see your greedy side”; “Hey, hey, ho, ho, Government Sachs has got to go”; and “Hey Sachs, get off it, put people over profit.” Some protesters wore garish swamp creature masks to mock Donald Trump over his abrupt flip-flop on draining the swamp.
Goldman’s sordid history dates back to the leadup to the Wall Street financial crash of 1929. During the asset bubble of 1928, Goldman ran the Goldman Sachs Trading Company, a closed end fund (called a trust in those days) that Goldman Sachs created and offered to the public at $104 a share. The trust was filled with conflicted investments while paying Goldman a hefty management fee. Within a few years after the crash, the Goldman Sachs trust was trading at a buck and change. On May 20, 1932, Walter Sachs, President of the Goldman Sachs Trading Company, was interrogated by the Senate Committee on Banking and Currency. The Committee concluded that Goldman Sachs fleeced its customers to line its own pockets.
On April 27, 2010 the U.S. Senate’s Permanent Subcommittee on Investigations held a hearing and interviewed multiple executives of Goldman Sachs over its role in the subprime crisis. That hearing was following by an in-depth report from the Subcommittee. Among the findings were the following regarding Goldman Sachs:
“When Goldman Sachs realized the mortgage market was in decline, it took actions to profit from that decline at the expense of its clients. New documents detail how, in 2007, Goldman’s Structured Products Group twice amassed and profited from large net short positions in mortgage related securities. At the same time the firm was betting against the mortgage market as a whole, Goldman assembled and aggressively marketed to its clients poor quality CDOs that it actively bet against by taking large short positions in those transactions. New documents and information detail how Goldman recommended four CDOs, Hudson, Anderson, Timberwolf, and Abacus, to its clients without fully disclosing key information about those products, Goldman’s own market views, or its adverse economic interests. For example, in Hudson, Goldman told investors that its interests were ‘aligned’ with theirs when, in fact, Goldman held 100% of the short side of the CDO and had adverse interests to the investors, and described Hudson’s assets were ‘sourced from the Street,’ when in fact, Goldman had selected and priced the assets without any third party involvement. New documents also reveal that, at one point in May 2007, Goldman Sachs unsuccessfully tried to execute a ‘short squeeze’ in the mortgage market so that Goldman could scoop up short positions at artificially depressed prices and profit as the mortgage market declined.”
Goldman Sachs also has the distinction of being the only Wall Street firm to have an executive submit his resignation via the OpEd page of the New York Times. On March 14, 2012, Greg Smith, a 12-year veteran of Goldman Sachs and a Vice President, explained why he was resigning, writing in part: “…how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as ‘muppets.’ ”
Smith’s reference to Goldman Sachs’ clients as “muppets” went viral on the internet. Law professor and former Wall Street veteran Frank Partnoy joined the fray, reworking the lyrics of Bret McKenzie’s song, “Man or Muppet,” and releasing the video below.
For what Goldman Sachs has been up to more recently, see our reports: Goldman Sachs Criminally Charged by Justice Department – and Its Stock Closes Up $2.49 and Goldman Sachs Is Being Sued for 27 Separate Stock Offerings It Underwrote.