American Life
Neil Macdonald
Shamelessness on Wall Street, who knew?
Last Updated: Thursday, November 12, 2009 | 6:00 PM ET
By Neil Macdonald, CBC News
Big surprise on all the cable newscasts this week: Carrie Prejean, the Christian, family-values beauty queen who's made a name by opposing gay marriage, once made a video of herself masturbating.
The video, which she says she made for an ex-boyfriend, has surfaced all over the internet, just as Prejean is on a national tour flogging her new book.
Convenient, that. Nothing like a sex tape to boost your box office, as any number of Hollywood types will tell you.
Miss California Carrie Prejean, first runner-up in the Miss USA pageant, reads from a Bible during a service in San Diego in April 2009. (Denis Poroy/Associated Press) Shamelessness pays, to use the words of a public relations professional I know and admire.
And in this country, it can pay off big. Just look at the performances of Lloyd Blankfein and his cohort on Wall Street. They make Carrie Prejean look like an obedient nun.
Blankfein is the chairman and CEO of Goldman Sachs, the incredibly successful investment house that makes billions during economic booms, and billions more during recessions, with a little help from its friends in government.
Nicknamed "Goldmine" on the Street, Goldman just posted a profit of $3.18 billion in the third quarter of this year.
In this awful, miserable, depressed year, at a time when at least one in 10 Americans are jobless, the average pay for Goldman's 30,000 employees is expected to clock in at $700,000.
That means tens of millions for the masters of the universe at the top of the Goldman feeding chain.
This at a company that enthusiastically participated in the system-wide, industrial-scale fraud of mortgage securitization, which nearly dragged the American economy, and much of the world, off a cliff last year.
A company that, like so many of the other quick-buck artists on Wall Street, had to be rescued by big government, which is something hard-core free-enterprisers proudly claim to despise, at least until they need help.
'God's work'
Anyway, Blankfein is not only proud of all this, he thinks Americans should be grateful. Goldman Sachs, he says, is doing "God's work."
"We're very important," he told the Times of London in a recent interview. "We help companies to grow by helping them to raise capital.
"Companies that grow, create wealth. This, in turn, allows people to have jobs that create more growth and more wealth. It's a virtuous cycle. We have a social purpose."
Shamelessness barely begins to describe that declaration. The fact is this: The free-market Wall Street swashbucklers recording all these profits are doing so only because they've been allowed to make some smart bets with taxpayers' money.
Bailout time
Basically, after nearly ruining the economy, Wall Street execs went running last fall to Washington, begging some very well-placed friends (foremost among them George W. Bush's then secretary of the treasury Hank Paulson, a former Goldman CEO) for a handout.
Goldman Sachs chairman Lloyd Blankfein. (Associated Press) Congress, terrified by apocalyptic predictions of ATM machines running out of cash, responded with hundreds of billions in loans and the Federal Reserve decided to start lending banks trillions of dollars, essentially for free.
As a special favour, the Fed broke an 80-year tradition and let Goldman turn itself from an investment bank into a bank holding company.
Without going into boring details, that little technicality effectively backstopped certain types of future losses.
The idea was to get the banks lending again, to unfreeze the credit market and get money into the hands of creditworthy consumers and businesses, which found themselves being strangled as the economy went south.
Instead, though, the captains of Wall Street held onto the money and sat back, watching approvingly as struggling companies across the country laid off employees by the millions (8.2 million since the beginning of the recession and climbing).
Then, having helped cause all the carnage, big firms like Goldman stepped in with their sacks of government cash and started making their own bets on the survivors.
When the slimmed-down companies began to show profits again and the stock market began to rally, the billions flowed back in. Goldman then paid back its government loan, and warmed up the bonus-cheque printer.
Casino capitalism
Put more precisely, this was a brilliant exercise in privatizing profit and socializing risk.
Which is the American way, no matter what conservatives here want to believe about the risk-taking, enterprising, can-do spirit of rugged individualism that supposedly separates American businesses from their spoiled counterparts in the socialist nanny states of Europe and Canada.
To their credit, a great many Americans have seen this for what it is, are angry about it and have called their politicians.
Some of those politicians have had the courage to call people like Blankfein on their nonsense about doing God's work.
Democratic Senator Maria Cantwell has a better term: "casino capitalism."
"Wall Street is not providing access to capital for companies that make things," she says. "Wall Street is using government bailouts to lever up."
Having been told the financial institutions had to be rescued because they were "too big to fail," Cantwell and others like her quite reasonably want some proper regulation to stop it from happening again.
But the big financial institutions, understanding that guarding against such systemic risk to the economy would probably significantly restrict their greedy machinations, have dispatched phalanxes of lobbyists to defeat any such measures.
So far, they've managed to strangle reform in its crib.
Woolly-headed
More than a year after it played a leading role in the meltdown, trading in derivatives, such as credit-default swaps, for example, remains unregulated.
Trillions of dollars worth of these complicated instruments are still exchanged in a dark market, away from public view.
Cantwell, frustrated at being frustrated by the lobbyists, has now proposed turning the regulatory control over such trades over to the state gaming commissions that supervise casino gambling.
It isn't likely her effort will fly, but her logic is sound. This country not only allows financial institutions to keep on making bets that could ruin everyone, it's actually been providing the money for some of the action.
Like sheep for the shearing. As my friend the PR pro used to say, you can make nice warm mittens out of most voters.
