No one is ever going to accuse Andrew Ross Sorkin, the New York Times financial industry beat reporter and keeper of its Dealbook, of being a populist, but his article this morning concerning Goldman Sachs has to be one of his worst efforts on record, dangerously straddling the line between advocate and shill. In trying to capture the country’s ill-at-ease feeling regarding the bank bailouts, Mr. Sorkin somehow penned this paragraph:
“But we can’t have it both ways, either. At one moment, many in the nation crossed their fingers hoping Goldman and the rest of Wall Street would be saved to halt the country’s downward spiral. But when the banks finally get up on their feet, we want them to fall flat again. Mr. Blankfein can’t win.”
Really? “Many in the nation crossed their fingers”? This might be remotely true if the nation Mr. Sorkin had in mind ended at the Hudson River. Of course folks wanted “to halt the country’s downward spiral,” but almost as many would have rather done it without the malefactors who created the mess in the first place. The country was basically told by then Treasury Secretary Hank Paulson, “If you want to save yourselves, you have to save the banks.” Even today, after a month or so of triumphal speeches by central bankers telling us that “the worst is over,” I am not so convinced that the bailouts were a good idea, and almost certainly, the terms at which the money was given were a very bad deal for taxpayers.
And try telling the folks on Main Street that “the worst is over” – you’ll get laughed out of the room. Unemployment continues to spike, real wage earnings have been flat for a generation, health care costs continue to soar, public services are under strain from being underfinanced, tuition costs are ridiculous, and to top matters off – the bank bailouts that Mr. Sorkin chides us about wanting “both ways” threaten to undermine the long-term financial condition of the federal government. And for what? So Mr. Blankfein can create a $23 billion bonus pool for his bankers?
Mr. Sorkin reminds us that Goldman paid back the $10 billion in TARP money, that it didn’t need the money in any event. Maybe that’s true, but who knows in the middle of a bank run what will happen – I’m sure the Goldmanites were glad to have the extra capital. In any event, what Mr. Sorkin doesn’t mention is that Goldman is one of the principal beneficiaries of the massive AIG bailout. It’s all very well documented how Goldman was a counterparty in many of the derivatives transactions that sank AIG, so I won’t warm over what someone else has already prepared, but you’d think that intellectual honesty would have led Mr. Sorkin to at least mention how the AIG bailout saved Goldman Sachs billions of dollars, dollars that presumably will go toward the giant bonus pool that the bank is amassing.
There’s a second point in Sorkin’s quotation above that I find infuriating, that bit about “when the banks finally get up on their feet, we want them to fall flat again.” The banks may be back on their feet, but they are a group of staggering drunks. The government has liberally filled the punch bowl for the banks. With interest rates where they are and government printing presses working day and night, how could the big banks not make a ton of money over the past two quarters? In short, the banks haven’t earned the rebound they experienced, just as they hadn’t earned their profits during the bubble years. The rebound, too, I’m afraid, is nothing but funny money, again completely enabled by damaging long-term federal policy that stacks the deck in their favor. Alas, Mr. Sorkin chooses to leave this little bit of context out of what is chiefly a puff piece for Goldman Sachs. Instead of describing the justified anger of “most people,” he decides that they are just being wishy-washy and petulant whereas the banks are concerned. It is an unfortunate point of view for an otherwise smart and conscientious fellow.
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