April 28, 2010
As I’m sure you know by now, several employees / ex-employees of Goldman Sachs appeared yesterday before a committee chaired by Senator Carl Levin to answer questions regarding Goldman’s conduct before, during and after the financial crisis of 2008. Also appearing was Goldman Sachs CEO Lloyd Blankfein, although his questioning came independently of and after the others. An awful lot of the hearing was very boring due to a lot of grandstanding by both the commission and panel; however there was some valuable information obtained. But “information” was not the thing that stood out the most.
(The case — greatly simplified: “betting against the odds”, then “betting against or for the better”, then “betting against or for the better who betted against or for the better”. Clarified: A man rolls the dice at a crap table in Las Vegas betting he will win against the odds. A second man makes a side bet on whether the dice roller will win or loose; a third man makes a side bet on whether the second man will win or loose. Got it? Ok, then; that’s Goldman Sachs; and others.)
The thing that stood out in the hearing:
Without exception, everyone being questioned insisted on redefining “responsibility” and “ethics”. At the very least, they used very broad variations of the meanings. “Morals” was also referenced in many instances. The latter can be, and often is, left up to personal interpretations. And there was no lack of that yesterday.
Earlier this year I pointed out in this post a major problem with the definition of morals. In essence, I said “morals are continually being redefined and/or tweaked by those who loose them bit by bit as they live out their lives”. And this is obviously the case for Goldman Sachs members facing the committee yesterday.
Steven Pearlstein addressed the hearing in his Op-Ed published today. He referred to it as planet earth and planet Wall Street, correctly pointing out that Wall Street lives in a different world than the rest of us. As such, they create their own rules and define their own words; among other things.
Concepts such as fairness, loyalty, shame and greed simply had no meaning on Planet Wall Street.
Tutored by Goldman’s army of lawyers, the [first] four responded to each question with a question – “What paragraph are you referring to?” “Do you mean the firm as a whole or just our group?” — or with a parry suggesting that the question was based on false premises or a misunderstanding of how things worked.
After he left the hearing, Blankfein repeated to David Faber of CNBC what he told the commission; that Goldman’s success depends strongly on the growth of the country. That’s the problem, but Blankfein missed it — for a decade before the financial crash the country was not growing — we were stagnated at best, and most of the time, declining. 2.4 million jobs over the eight preceding years were lost to China alone. Household income fell for the first time in our history (the great depression and wartime excluded). But Goldman, along with the rest of the industry, not only grew, but skyrocketed. How? Through the very mechanics they now have to defend themselves from — money manipulation.
As Senator Levin pointed out to Blankfein (as have many others over the past year), the very industry that led us into this crisis is the only industry that not only recovered quickly but hardly missed a beat. Most of the leaders of that industry — Blankfein being one of them — barely felt a pinch. Their salaries, bonuses and benefits were hardly scratched, and the little it was didn’t amount to a hill of beans. Yet the rest of the country — the people who provided the vehicle that kept the industry from feeling a pinch — have suffered greatly, are still suffering and will continue to suffer for years to come. But those words fell on deaf ears — deafened by a redefining of “responsibility” “ethics” and “morals”.
Never underestimate the difficulty of changing false beliefs [with] facts.
Economist Henry Rosovsky