I got a lot of letters from folks this week about an online column for Forbes written by a self-proclaimed Ayn Rand devotee named Harry Binswanger (if that's a nom de plume, it's not bad, although I might have gone for "Harry Kingbanger" or "Harry Wandwanker"). The piece had the entertainingly provocative title, "Give Back? Yes, It's Time for the 99% to Give Back to the 1%," and contained a number of innovatively slavish proposals to aid the beleaguered and misunderstood rich, including a not-kidding-at-all plan to exempt anyone who makes over a million dollars from income taxes.
This article is so ridiculous that normally it would be beneath commentary, but there's a passage in there I just couldn't let go:
"Imagine the effect on our culture, particularly on the young, if the kind of fame and adulation bathing Lady Gaga attached to the more notable achievements of say, Warren Buffett. Or if the moral praise showered on Mother Teresa went to someone like Lloyd Blankfein, who, in guiding Goldman Sachs toward billions in profits, has done infinitely more for mankind. (Since profit is the market value of the product minus the market value of factors used, profit represents the value created.)
"Instead, we live in a culture where Goldman Sachs is smeared as 'a great vampire squid wrapped around the face of humanity'. . ."
What a world we live in, where Mother Teresa wins more moral praise than Lloyd Blankfein! Who can bear living in a society where such a thing is possible? Quel horreur!
It reads like an Onion piece, just hilarious stuff. I mean, Jesus, even Lloyd Blankfein himself didn't go so far as to take the "God's work" thing 100% seriously, and here's this jackass saying, without irony, that the Goldman CEO literally out-God-slaps Mother Teresa.
The thing is, for all its excesses, Mr. Catyanker's piece does reflect an attitude you see pretty often among Rand devotees and Road To Serfdom acolytes. Five whole years have passed since the crash, and there are still huge pockets of these Fountainhead junkies who genuinely believe that the Blankfeins of the world are reviled because they're bankers and they're rich, and not because they're the heads of unprosecutable organized crime syndicates who make their money through mass fraud, manipulation and the shameless burgling of public treasure. In this case you have a guy who writes for Forbes, a business publication, and apparently he isn't acquainted even casually with any of the roughly 10,000 corruption cases involving Blankfein's bank.
That's hard to pull off. There are Japanese soldiers still holed up in Pacific atolls, waiting for the final surrender order, who've probably heard more about things like the Abacus case than Mr. Binswanger apparently has. In the comments section, someone cheekily asked Binswanger to enlighten them as to how Goldman makes its money. This is what he had to say in response:
"On how Goldman Sachs makes money, I repeat what I said in the post: they invest -- i.e., channel savings to their most productive uses. If they make a profit it means they bet right: they funded value-creating enterprises; if they make a loss it means they bet wrong: the venture they funded used up more in value than was produced."
Binswanger clearly knows nothing at all about Goldman other than that it's nominally a bank, and his answer is just a parade of Randian cliches here about how successful banks make money. Asked the same question 20 years ago about a different bank, his answer would have been exactly the same. This would be like someone asking me about A-Rod's steroid use and me answering with a bunch of Bernard Malamud quotes about the sacred art of hitting.
Just for yuks, let's fill Binswanger in on some of the ways Goldman has made its money over the years. This is just the stuff they've been caught for, by the way...
...Way back in 1999, several eras of corruption ago, Goldman serially engaged in manipulation of the IPO markets, including illegal tactics like "spinning" and "laddering," where insiders and top bank clients would be allowed to buy shares in new companies at severely discounted prices, sometimes in return for investment banking business or for promises that those insiders would jump back into the bidding later to jack up the price artificially. In a famous case involving eToys, Goldman paid a $7.5 million settlement for allowing insiders to buy shares at $20, far below the $75 shares the company traded on opening day. The secret discounts might have cost the company hundreds of millions of dollars. The firm went bankrupt in short order, by the way.
...In the infamous "Abacus" case , Goldman teamed up with a hedge-fund billionaire named John Paulson to create a born-to-lose portfolio of mortgage derviatives, which were then marketed by Goldman to a pair of sucker European banks, IKB and ABN-Amro. When the instruments crashed, Paulson made bank on bets he made against his own loser portfolio. Goldman's peculiar role was in "renting the platform," i.e., allowing IKB and ABN-Amro to think that neutral Goldman, not a hedge funder like Paulson massively betting against the product, had created the portfolio. Goldman only made $15 million in the deal that ended up causing over a billion in losses, meaning this wasn't even just about money -- they were just trying to curry favor with a hedge fund client out to screw a bunch of Euros. They were fined $550 million.
... In the even more absurd Hudson deal, Goldman unloaded a billion-plus sized chunk of toxic mortgage-backed crap on Morgan Stanley during a time when Lloyd "Mother Teresa" Blankfein was telling his minions to unload as much of the firm's "cats and dogs" as possible, ie., its soon-to-explode subprime holdings. In its marketing materials, Goldman represented to Morgan Stanley that its interests were aligned with Morgan, because Goldman owned a $6 million slice of the Hudson deal. It didn't disclose that it had a $2 billion bet against it. Morgan Stanley, which was subsequently bailed out by taxpayers like Harry Binswanger, lost $960 million.
...Goldman bought a series of aluminum warehouses and has apparently been serially delaying the delivery of aluminum in order to artificially inflate the price. Even Binswanger might have heard of this one. The CFTC sent a wave of subpoenas on this score just last month.
... Goldman paid a fine to the SEC in 2010 after it was caught breaking rules governing short-selling on at least 385 occasions -- it is currently embroiled in numerous lawsuits that similarly allege that Goldman has engaged in widespread "naked" short selling, a kind of stock counterfeiting that artificially depresses the prices of companies by flooding the market with phantom shares.