Economics

Rich Bastards Find Common Ground In Preserving Rich Bastard System

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If you have not had your fill of nonfiction pieces wherein the author relives some week in 2008 that remade the financial system in ways not seen until some other week in 2008; if you're hungry to read 12,000 words about hysterical fancy lads acting like tough guys; and especially if you have a high tolerance for male glamour shots—this time featuring all the architects of the credit collapse posed in artsyfartsy monochrome—you may like Andrew Ross Sorkin's celebrated account of the government's efforts to rescue Goldman Sachs and Morgan Stanley.

Former Treasury Secretary Henry Paulson, who appears to have cooperated on this story and on another that-was-the-week commemoration that ran in The New Yorker a few weeks ago, is taking image management seriously. So it's sad to report that Sorkin's narrative presents the most straightforward case yet that Paulson abandoned any sense of public duty in order to save his former Goldman Sachs colleagues. The Tell is how paranoid the people around Paulson, and occasionally Paulson himself, are that the public might object to a government intervention on behalf of the investment banks.

I've seen this fear of the appearance of conflict of interest before. It never translates into any concern that you might actually have a conflict of interest and thus shouldn't be doing what you want to do. That pattern holds here: At several points in Sorkin's story, officials who used to work at Goldman or Morgan, who have multiple professional and personal overlaps with the firms, are quickly granted waivers from Treasury and Fed conflict-of-interest rules so they can help out their old allies. Hypocrisy being the tribute vice pays to virtue, we should probably be grateful that anti-conflict niceties exist at all. But it's just the old constitution-is-not-a-suicide pact dilemma: The rules exist right until the moment they're actually needed; then you suspend the rules.

There's also some hilarious what's-good-for-me-must-be-good-for-America self-delusion. Bailout ringleaders are repeatedly commended for their patriotism. At one point, Goldman traders rise to sing "The Star-Spangled Banner" after the regulator in the United Kingdom bans short-selling of Goldman stock.

And there's a priceless example of how arrogant and threatening a person can be when he knows the government will keep him on his perch. Dig this exchange between Goldman Sachs co-president Gary Cohn and a hedge fund manager:

Stanley Druckenmiller, a George Soros acolyte worth more than $3.5 billion, had taken most of his money out earlier that week, concerned about the firm's solvency. If word got around that a hedge-fund manager of Druckenmiller's reputation had lost confidence in Goldman, that alone could cause a run. Cohn called him and tried to persuade him to return the money to the firm. "I have a long memory," Cohn, who was taking this personally, told Druckenmiller, in whose honor he had even once hosted a charity cocktail party. "Look, the one thing I'm doing is I'm learning who my friends are and who my enemies are, and I'm making lists."

Druckenmiller, however, was unmoved. "I don't really give a shit-it's my money!" he shot back. Unlike most hedge funds, Druckenmiller's consisted primarily of his own money. "It's my livelihood," he said. "I've got to protect myself, and I don't really give a shit what you have to say."

"You can do whatever you want," Cohn said in carefully measured tones. But, he added, "this will change our relationship for a long time."

You might want to skip the opening paragraphs. They include a vomit-inducing early-morning epiphany by then-chairman of the New York Fed Tim Geithner, who sees a ferry bringing back-office workers from New Jersey and realizes that, damn it, he's doing it all for the Common Man.

But speaking of vomit induction, here's another reason to read the rest: Paulson actually does puke later in the story. Seriously.

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  1. Tim Geithner.

    He joins Jamie Gorelick as oddly popping up in the biggest disasters this country faces in recent history.

    First off, Geither’s father worked directly with Obama’s mother in banks in Indonesia… so who knows for how long these two idiots have known each other.

    Geithner was in Clinton’s Treasury Dept, when Citibank merged with Travelers , in violation of the Glass-S law.

    [Somehow Citibank keeps getting involved in all the chipping-aways that led to the economic crisis

    For instance Obama sued Citibank in early 90s for ACORN to force Citibank to submit to CRA]

    Geithner was shipped out to the IMF just in time for the Asian Economic Crisis of 1998.. where he sent several Asian countires into a ditch… causing China to reject any advice or help from IMF and led to them managing thier own growing surplus of money

    Then he pops up at the Federal Reserve in NY , in time to establish the Too Big To Fail – So We’ll Destroy the Country Instead policies.

    Fuck him. Maybe Peter Orzag might be up for it.

  2. I threw up a little inside reading that article.

  3. At one point, Goldman traders rise to sing “The Star-Spangled Banner” after the regulator in the United Kingdom bans short-selling of Goldman stock.

    I’ll bet they didn’t sing this part:
    “And where is that band who so vauntingly swore
    That the havoc of war and the battle’s confusion,
    A home and a country should leave us no more!
    Their blood has washed out their foul footsteps’ pollution.”

  4. At one point, Goldman traders rise to sing “The Star-Spangled Banner” after the regulator in the United Kingdom bans short-selling of Goldman stock.

    I’m not getting this. Shouldn’t they have been singing “God Save The Queer”?

    1. RC’z law?

      1. No, he typed it right.

  5. Oh look, preview is back.

  6. At one point, Goldman traders rise to sing “The Star-Spangled Banner” after the regulator in the United Kingdom bans short-selling of Goldman stock.

    Isn’t that a bit like spitting on someone grave?

    1. Oh god, how I’d love an edit feature … maybe just for the first 2 minutes after posting.

      1. Suppressing your own errors is anti-libertarian.

  7. The worst part is that there is a very good chance that the TARP bailouts will not be enough to save many of these “too big to fail” companies (in the case of GM there isn’t a bailout big enough to stop them from selling too many shitty cars that people don’t want to buy) and sooner or later we will start hearing the calls for another round of bailouts.

    Don’t believe me?

    Let’s ask Timmy G.


    Brad Sherman Vs Tim Geithner July 10, 2009


    TARP on Steroids: Brad Sherman Vs Tim Geithner Sept. 23, 2009

    And these guys still think Cash for Clunkers saved GM.

    Gad this stuff is so depressing.

    1. It’s time to start a new meme.

      Poison for Politicians will be so much more successful than Cash for Clunkers.

  8. speaking of vomit induction

    I think you mean vomit inducement, unless you’re referring to a method of reasoning that moves from a specific instance of vomit to general vomit.

    1. Na, I think it just meant putting enough current near this guys that it makes them vomit as they fry. That would be a good use of electrical induction.

  9. “You can do whatever you want,” Cohn said in carefully measured tones. But, he added, “this will change our relationship for a long time.”

    Who does he think he is, Ari Gold?

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  11. [At one point, Goldman traders rise to sing “The Star-Spangled Banner” after the regulator in the United Kingdom bans short-selling of Goldman stock.]

    Uh, I hope that is sarcasm.

    I’m still waiting for Goldman to pay back the money they got as part of the AIG bailout. The AIG bailout was really noting more than a bailout of Goldman and a few other firms.

  12. Sure, I hold millions in GS shares, but trust me when I say that there is no conflict of interest here. Plase move along citizens.

  13. unless you’re referring to a method of reasoning

    Drink?

    Any beginning or influence is “induction.”

    Fuck Bacon, yo.

    1. I just thought induction sounded funnier than inducement.

      1. You’re already talking about vomit, you don’t need any extra funny. haha.

        1. EMETIC, BITCHES

  14. Tim,

    You had me right here: if you’re hungry to read 12,000 words about hysterical fancy lads acting like tough guys

    Yum!

  15. Excellent site,Thanks for this great post ? I will be sure to check out your blog more often.Just subscriped to your RSS feed..

  16. I thought I was too big to fail but I just bought a new shirt, and I feel much better.

  17. All this reminds me of the book I’m reading now, Extraordinary Popular Delusions and the Madness of Crowds. The two chapters I’ve read so far feature self-interested and incompetent figures in the governments involved making things worse and essentially steering their economies into troughs that take decades to crawl out of.

  18. Jamie Dimon, JP Morgan, Bear Stearns, Tim Geitner, NY Federal Reserve Bank, $30 billion, That’s a conflict only a Mother could love. Well, a Mother Fucker.

  19. I only had to read to this line:

    “that Treasury bills were trading for less than 1 percent interest, as if they were no better than cash, as if the full faith of the government had suddenly become meaningless.”

    to know that the author has absolutely zero concept of how finance works. The lower the rate the HIGHER the credit dumbass! It was a flight to quality. (Not that I think anything denominated in USDollars has any quality, just surely at that moment more than almost anything else)

    1. I meant to point that out, Khan, but it seemed like such a glaring error that I figured I must be making some mistake in the way I was reading it. I mean, is there some level of meaning I’m missing here, or is that sentence as wrong and cluless as it seems?

  20. “Hypocrisy [is] the tribute vice pays to virtue?” I thought hypocracy was the vaseline of social intercourse…

    (thanks for the return of preview!)

    1. And, apparently I should actually USE the preview…

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  23. Druckenmiller is worth $3.5 billion, and this Goldman clown thought he could threaten him.

    They call it “fuck you” money for a reason, Goldman clown. He’s not one of your minions, you know, that you can pound in the ass whenever you need to feel like a big man. Good for Druckenmiller.

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  25. Look, the one thing I’m doing is I’m learning who my friends are and who my enemies are, and I’m making lists.

    I just can’t let this go. At that point, I would have gotten right in the Goldman clown’s grill and asked him just what he was going to do. And I would have ridden his ass until he backed down and ran away like the fancy lad he is.

    I’ve had to work with these faux-tuff-gai bankers off and on for years, and I can’t tell you how much I despise them.

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