Between the kabuki of Sonia Sotomayor’s confirmation hearings and the banging of the drums on health care reform the lords of money at Goldman Sachs picked an opportune moment to slink back to massive profitability: $3.44 billion dollars net in the second quarter alone. This is a firm that, along with so many others, was saved from extinction less than a year ago by the federal government. Their own epic failures put them into such a perilous state and now, as the damage they wrought has virtually every other part of the economy reeling, they’ve returned record profits. This is like a drunk driver walking out of the hospital and heading to the nearest watering hole in a car on loan from his doctors while the kids who were in the school bus he hit are connected to ventilators and struggling to breathe. It’s an affront to anything that even vaguely passes for decency.
That it is Goldman Sachs posting such numbers will come as no surprise to readers of Matt Taibbi’s thoroughly reported and brutal takedown in Rolling Stone. The firm has long been the toast and envy of Wall Street for exceeding all of its competitors in creating money from nothing and skating away when bubble after bubble bursts in its wake. Taibbi counts five popped bubbles which Goldman not only played a major role in inflating but also managed to escape most of the fallout when they inevitably burst. It’s a vital read for any layman who wants to understand how the finance clergy have been molesting us all.
(In the nearly two months since the article was first published Taibbi has all but gone to war, rebutting silly counter charges all while mirthfully pointing out that no one from Goldman or any of its apologists has even so much as quibbled with any of his facts.)
Writing more recently in Vanity Fair, Michael Lewis corroborates much of the context of Taibbi’s article. (Though he’s awfully gentle on ex-AIG stooge Jake DeSantis.) The point of Lewis’s article isn’t so much to damn AIG as the enabler that allowed firms like Goldman to run amok and destroy the world, but to point out that if it hadn’t been AIG it would’ve been someone else. As the financial game was constructed it would’ve almost certainly lead to this disaster even if Joseph Cassano, the biggest fool (and that’s saying something) at AIG Financial Products, had never existed.
Then there’s Donald MacKenzie’s almost anthropological portrait of the culture of banking in The London Review of Books. The article is a review of a new book called “Fool’s Gold: How Unrestrained Greed Corrupted a Dream, Shattered Global Markets and Unleashed a Catastrophe” by Gillian Tett, an editor at The Financial Times and it is here that we really begin to see Goldman and its less successful imitators in not just their monetary context, but in their larger social context as well. The highest heights of banking and finance were, and are, a tiny little slice of society that appears to have very little use for the rest of us (until, that is, they get in over their heads):
Fool’s Gold begins in a conference room in Nice in spring 2005. Tett admits that at that point she was baffled by the technical language – ‘Gaussian copula’, ‘attachment point’, ‘delta hedging’ – used by the participants. However, before joining the FT she had conducted fieldwork in Soviet Tajikistan for a PhD in social anthropology, and the ethnographer in her was now reawakened. The conference reminded her of a Tajik wedding. Those attending it were forging social links and celebrating a tacit world-view – in this case, one in which ‘it was perfectly valid to discuss money in abstract, mathematical, ultra-complex terms, without any reference to tangible human beings.’
That is about as succinct an explanation as is possible of just how these fucking people conned themselves into thinking they’d found the Fountain of Money: a “world-view” that says that money isn’t really real. That’s so unbelievably obtuse, callous and downright stupid that there isn’t a metaphor for it. Alcohol fueled bar stories have more connection to reality.
If you combine the economic ruin all around us with those three articles, MacKenzie’s description of a blind culture gone mad, Lewis’ demonstration of the inevitability of collapse, and Taibbi’s history of the lucre and destruction wrought by Goldman Sachs, only one conclusion is possible. The beast must die.
It won’t be easy, but there is hope. Taibbi’s article, perhaps unintentionally, has one very heartening section. Just after describing Goldman’s involvement in the schemes that helped lead to the Great Depression, there is this:
Fast-forward about 65 years.
65 years, from the depths of the Depression to the IPO madness of the tech crazed 1990s Goldman Sachs, the most violent and vicious of the money beasts, the most warlike of the finance tribes, was quietly profitable. It was, by its own mantra, “longterm greedy”. No psychotic short term gambles, no limitless capacity for ripping off even its own customers, just quiet efficiency and steady money.
After Sotomayor takes her seat on the court, after the heath care fracas ends, when Washington and London and all the other centers of regulation turn their attention to preventing this type of thing from happening again, that should be their model. Lending with interest has long been known as a dangerous necessity, and while it’s been out of control for two decades or so there no reason that it cannot be done safely. But doing so means not seeing it as a game, not treating it as a source of limitless wealth with little to no connection to the real world. We’ve done it before, we can do it again, hopefully without another disaster in the interim.
16 July Update: Taibbi’s got a new blog post up today detailing just how outrageous these Goldman profit numbers are. The flak he’s taken for this feels quite similar to the kind anti-war people were getting pre-2005. No one in a position of real media respectability and prominence can quite bring themselves to believe how incredibly fucked up this is, but that doesn’t change the reality that it’s still incredibly fucked up. Read it and weep.
