[THS] Matt Taibbi: Will Goldman Sachs Prove Greed is God?

[The Harder Stuff in news and commentary]

http://www.informationclearinghouse.info/article25317.htm

Will Goldman Sachs Prove Greed is God?

The investment bank's cult of self-interest is on trial against the whole idea of
civilization – the collective decision by all of us not to screw each other over even if
we can

By Matt Taibbi

April 26, 2010 "The Guardian" - April 24, 2010 --  So Goldman Sachs, the world's
greatest and smuggest investment bank, has been sued for fraud by the American
Securities and Exchange Commission. Legally, the case hangs on a technicality.

Morally, however, the Goldman Sachs case may turn into a final referendum on the
greed-is-good ethos that conquered America sometime in the 80s – and in the years
since has aped other horrifying American trends such as boybands and reality shows
in spreading across the western world like a venereal disease.

When Britain and other countries were engulfed in the flood of defaults and
derivative losses that emerged from the collapse of the American housing bubble two
years ago, few people understood that the crash had its roots in the lunatic greed-
centered objectivist religion, fostered back in the 50s and 60s by ponderous emigre
novelist Ayn Rand.

While, outside of America, Russian-born Rand is probably best known for being the
unfunniest person western civilisation has seen since maybe Goebbels or Jack the
Ripper (63 out of 100 colobus monkeys recently forced to read Atlas Shrugged in a
laboratory setting died of boredom-induced aneurysms), in America Rand is upheld
as an intellectual giant of limitless wisdom. Here in the States, her ideas are roundly
worshipped even by people who've never read her books oreven heard of her. The
rightwing "Tea Party" movement is just one example of an entire demographic that
has been inspired to mass protest by Rand without even knowing it.

Last summer I wrote a brutally negative article about Goldman Sachs for Rolling
Stone magazine (I called the bank a "great vampire squid wrapped around the face
of humanity") that unexpectedly sparked a heated national debate. On one side of
the debate were people like me, who believed that Goldman is little better than a
criminal enterprise that earns its billions by bilking the market, the government, and
even its own clients in a bewildering variety of complex financial scams.

On the other side of the debate were the people who argued Goldman wasn't guilty
of anything except being "too smart" and really, really good at making money. This
side of the argument was based almost entirely on the Randian belief system, under
which the leaders of Goldman Sachs appear not as the cheap swindlers they look like
to me, but idealised heroes, the saviours of society.

In the Randian ethos, called objectivism, the only real morality is self-interest, and
society is divided into groups who are efficiently self-interested (ie, the rich) and the
"parasites" and "moochers" who wish to take their earnings through taxes, which are
an unjust use of force in Randian politics. Rand believed government had virtually no
natural role in society. She conceded that police were necessary, but was such a
fervent believer in laissez-faire capitalism she refused to accept any need for
economic regulation – which is a fancy way of saying we only need law enforcement
for unsophisticated criminals.

Rand's fingerprints are all over the recent Goldman story. The case in question
involves a hedge fund financier, John Paulson, who went to Goldman with the idea of
a synthetic derivative package pegged to risky American mortgages, for use in
betting against the mortgage market. Paulson would short the package, called
Abacus, and Goldman would then sell the deal to suckers who would be told it was a
good bet for a long investment. The SEC's contention is that Goldman committed a
crime – a "failure to disclose" – when they failed to tell the suckers about the role
played by the vulture betting against them on the other side of the deal.

Now, the instruments in question in this deal – collateralised debt obligations and
credit default swaps – fall into the category of derivatives, which are virtually
unregulated in the US thanks in large part to the effort of gremlinish former Federal
Reserve chairman Alan Greenspan, who as a young man was close to Rand and
remained a staunch Randian his whole life. In the late 90s, Greenspan lobbied hard
for the passage of a law that came to be called the Commodity Futures Modernisation
Act of 2000, a monster of a bill that among other things deregulated the sort of
interest-rate swaps Goldman used in its now-infamous dealings with Greece.

Both the Paulson deal and the Greece deal were examples of Goldman making
millions by bending over their own business partners. In the Paulson deal the suckers
were European banks such as ABN-Amro and IKB, which were never told that the
stuff Goldman was cheerfully selling to them was, in effect, designed to implode; in
the Greece deal, Goldman hilariously used exotic swaps to help the country mask its
financial problems, then turned right around and bet against the country by shorting
Greece's debt.

Now here's the really weird thing. Confronted with the evidence of public outrage
over these deals, the leaders of Goldman will often appear to be genuinely confused,
scratching their heads and staring quizzically into the camera like they don't know
what you're upset about. It's not an act. There have been a lot of greedy financiers
and banks in history, but what makes Goldman stand out is its truly bizarre
cultist/religious belief in the rightness of what it does.

The point was driven home in England last year, when Goldman's international
adviser, sounding exactly like a character in Atlas Shrugged, told an audience at St
Paul's Cathedral that "The injunction of Jesus to love others as ourselves is an
endorsement of self-interest". A few weeks later, Goldman CEO Lloyd Blankfein told
the Times that he was doing "God's work".

Even if he stands to make a buck at it, even your average used-car salesman won't
sell some working father a car with wobbly brakes, then buy life insurance policies on
that customer and his kids. But this is done almost as a matter of routine in the
financial services industry, where the attitude after the inevitable pileup would be
that that family was dumb for getting into the car in the first place. Caveat emptor,
dude!

People have to understand this Randian mindset is now ingrained in the American
character. You have to live here to see it. There's a hatred toward "moochers" and
"parasites" – the Tea Party movement, which is mainly a bunch of pissed off
suburban white people whining about minorities consuming social services, describes
the battle as being between "water-carriers" and "water-drinkers". And regulation of
any kind is deeply resisted, even after a disaster as sweeping as the 2008 crash.

This debate is going to be crystallised in the Goldman case. Much of America is going
to reflexively insist that Goldman's only crime was being smarter and better at making
money than IKB and ABN-Amro, and that the intrusive, meddling government (in the
American narrative, always the bad guy!) should get off Goldman's Armani-clad back.
Another side is going to argue that Goldman winning this case would be a rebuke to
the whole idea of civilisation – which, after all, is really just a collective decision by all
of us not to screw each other over even when we can. It's an important moment in
the history of modern global capitalism: whether or not to move forward into a world
of greed without limits.