As you may have heard, Goldman Sachs investment bank just posted record profits for the quarter, creating bonuses to put its employees’ earnings at an average of $770,000 each this year. This evening Wisconsin Public Radio interviewed Rolling Stone magazine’s Matt Taibbi about his recent article excoriating Goldman Sachs, calling them “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” Also on the show was a consultant to Goldman Sachs—I haven’t been able to find his name online—whose defense opened by comparing the resultant public anger to “stubbing your toe in the dark and looking for someone to blame” and continued with the rationale that everyone of us is to blame for contributing to an economy based on personal debt.
Let me take a calming breath before I continue.
Okay, I’m not against people gaining wealth. As citizens of the United States, most of us are among the wealthiest people on the planet anyway. But reckless gaming of the system, for the exorbitant wealth of a few at the expense of the many, is culturally counterproductive (not to mention ethically disgusting). Haven’t these guys ever heard of Marie Antoinette’s fate?
The fact is, we’re not all to blame. Yes, I’ve heard some lawmakers in Washington chastising the “deadbeat borrowers” who signed up for sub-prime mortgages. But imagine for a moment that you’re living at or near poverty-level, in some ratty apartment, and a banker—whose full-time occupation is devoted to knowing how these things work—tells you that you can have your own home, with little or no down payment, and that the rising housing market pretty much ensures you’ll make money in the long run on this investment.
You’d be a fool not to sign.
The problem (and blame) lies on these bankers who then packaged all those loans together and sold them to investors as triple-A investments. How could they do this? Because the government insured housing loans via Fannie Mae and Freddie Mac. So even if the bubble burst, the investments were guaranteed, right?
In other words, those guarantees, and our bailing out the banks, took the risk out of foolish practices like sub-prime mortgages—for the bank officers, that is. But in truth, it just transferred all that risk to the federal government, i.e. the taxpayer.
Yes, we had to shore up the banks or have the whole economy come tumbling down. But it’s time to recognize that this puts banking outside the realm of free-market capitalism. And because the taxpayer has been forced to become a major contributor to the banks’ continued health, the taxpayer should be assured that some banking heads will roll.
If I screw up at my occupation, I’m chastised. Screw up bad enough, and I’m fired. If our soldiers in Iraq and Afghanistan screw up, they could well pay with their lives. Only Wall Street bankers can get away with gambling our entire economy, muck it up, and then not only retain their jobs, but score huge bonuses.
For a great history of how we’ve come to this point, with all the glory and shame involved in economic development, I highly recommend Niall Ferguson’s The Ascent of Money.
One thought on “No, We’re Not All to Blame”
Testify Brother Lester!
I’ve had this argument with a couple friends and end up pointing them to the NY Times’ ethicist.
The blame lies with the bankers who knew damn well what they were doing when they loaned money to poor risks, gambled on questionable investments and/or found a way to pass the buck on to the taxpayers. Isn’t that why these so-called “best” and “brightest” have MBAs for? Oh wait, one of their own was in charge and asleep at the wheel the whole time.