The only thing worse than Goldman Sachs amassing close to $20 billion
in bonus money for its executives based on various government
subsidies and bailout measures is listening to senior executives there
trying to explain it all away. The spin job has been coming from an
unlikely source: The normally media shy Goldman CEO Lloyd Blankfein
has been making the rounds lately, talking to selective reporters,
including William Cohan, who recently wrote a book about the fall of
Bear Stearns and now has the firm's complete cooperation as to write
something on Goldman Sachs, the most prestigious of the Wall Street
firms, even if it needed a bailout to survive last year's financial
crisis..
Cohan's Bear book, the first of many financial crisis tomes (including
my own) wasn't exactly a puff piece, but trading access for
information is a time honored journalistic practice, and it's human
nature to be nicer to someone who gives you information. So presumably
we'll all find out from Cohan how, in the throes of the financial
crisis, Goldman really didn't need the $10 billion in bailout money it received
from the federal government as its stock cratered; that it was forced
to take the cash from then-Treasury Secretary (and former Goldman CEO)
Hank Paulson, or how despite its exposure to troubled insurance giant
AIG, Goldman was miraculously "hedged," against losses, meaning that
the fed's AIG's bailout last year didn't really help Goldman survive
last year's panic. No, Goldman survived because it was built for
survival.
Forget the absurdity of such claims, Blankfein has been on a roll of
late, repeating them time and again, not just presumably to Cohan, but
to a growing number of credulous journalists who will stomach just
about anything to get a few minutes with the CEO of the Great Goldman
Sachs, even if its greatness was put to the test last year.
Blankfein's spinning is reaching epic proportions. Several recent
stories about Goldman have cast the firm as the Great Satan of the
securities markets, or as Rolling Stone's Matt Taibbi put it, the "great vampire
squid wrapped around the face of humanity, relentlessly jamming its
blood funnel into anything that smells like money." No longer is
Blankfein simply trying tell the world Goldman isn't the root of all
evil; rather, old Lloyd is informing us all that Goldman is a source of
goodness in the world. The exact quote, from the Times of London has
Blankfein professing that as CEO of the vampire squid he's actually
"doing God's work," simply by doing what banks get paid to do: Raising
money for clients and investing in businesses.
Oh really, Lloyd? My brother is a doctor who works in the intensive care
unit of an inner city hospital; he could have a cushy lucrative
practice here in New York, but he likes helping people, and yet he has
never once told me he's doing God's work even after he explained one
afternoon how he had just saved a homeless man's life by massaging his
heart.
Believe it or not, I happen not to fall into the camp of Goldman
haters, where people believe the firm is behind every scandal and
conspiracy and may have even created the swine flu virus so it could
corner the market for drug stocks. (Though Goldman and several other
firms did seem to have no problem obtaining for their employees the
swine-flu vaccine, which is in short supply.) Indeed, as I show in my
new book The Sellout, when it came to risk-taking over the last 30
years on Wall Street, Goldman did it better than any other firm on the
Street. The folly that was found at a firm like Bear Stearns, with its
CEO caring more about playing bridge and golf (and allegedly smoking
marijuana) than tending to the firm's balance sheet, would never
happen at Goldman Sachs.
But there is something truly unsettling about the new message coming
from the firm, honed I hear from a phalanx of image consultants who
are literally trying to re-write history as the firm gets ready to
dole out its enormous bonus pool. And that's what all this spinning is
about. For the record Goldman Sachs didn't take down the financial
system last year -- Citigroup, Merrill, Lehman or Bear are much more
responsible for that. And for the record every firm spins -- its called
public relations, and Goldman will need all the PR it can muster as it
decides in the coming weeks how much of the $20 billion it will hand
out to its executives. My sources at Goldman say Blankfein won't be
stingy because he needs to prevent top producers from bolting to hedge
funds and private equity.
What makes Goldman so contemptible is that its level of spin has
almost no basis in reality. We are supposed to believe Goldman wasn't
bailed out; it didn't need the government's money when big investors
where yanking funds from the firm and its stock was plummeting and now
the firm is doing "God's work," even as government bureaucrats
continue to subsidize how the firm makes most of its money -- through
risk taking and bond trading, all on the backs of the US taxpayer.
Goldman, in case you haven't heard, has been classified as a
commercial bank, meaning it can borrow cheaply to finance its risk
taking, and can borrow from the Federal Reserve in a pinch. That's why
it's amassing such massive profits. And yet not a penny of its massive
bonus pool will be lent out to funding-starved small businesses. Think
about that: The Federal Government run by the most Liberal
Administration in years, is subsidizing big business at the expense to
small business.
How did this bizarre scenario develop? Who knows, but it should come
as no surprise that Wall Street -- Goldman in particular -- funneled far
more money to president Obama than it did to his Republican
challenger, John McCain. Maybe that's why the president has been
eerily silent on the Goldman Sachs subsidy, even as Lloyd Blankfein
tells the world he's doing "God's work."