Hullabaloo

Sunday, July 19, 2009

 
Too Big To Think About

by digby

I don't think I was alone in finding it shockingly arrogant for Goldman Sachs to announce their insane bonuses last week. Trumpeting such a thing in the midst of this horrific economy is beyond poor taste.

There was a point not all that long ago in which I thought Goldman doing this would bring about such disapprobation in the public and among lawmakers that they wouldn't even try it. It seemed so stupidly provocative to demonstrate such outsized, piggish greed before the dust even settled, that it seemed impossible they would try. But I was the one who was stupid. They can strut around giving the whole country the finger and daring somebody to do anything about it and nobody cares.

And it's actually more reprehensible than I thought. The venerable Barrons mildly suggests that Goldman is cheating its shareholders, thus leaving themselves undercapitalized. Again. But why would they concern themselves with such a thing? They are too big to fail.

But it's actually worse than that. Here's Matt Taibbi:

Last year, when Hank Paulson told us all that the planet would explode if we didn’t fork over a gazillion dollars to Wall Street immediately, the entire rationale not only for TARP but for the whole galaxy of lesser-known state crutches and safety nets quietly ushered in later on was that Wall Street, once rescued, would pump money back into the economy, create jobs, and initiate a widespread recovery. This, we were told, was the reason we needed to pilfer massive amounts of middle-class tax revenue and hand it over to the same guys who had just blown up the financial world. We’d save their asses, they’d save ours. That was the deal.

It turned out not to happen that way. We constructed this massive bailout infrastructure, and instead of pumping that free money back into the economy, the banks instead simply hoarded it and ate it on the spot, converting it into bonuses. So what does this Goldman profit number mean? This is the final evidence that the bailouts were a political decision to use the power of the state to redirect society’s resources upward, on a grand scale. It was a selective rescue of a small group of chortling jerks who must be laughing all the way to the Hamptons every weekend about how they fleeced all of us at the very moment the game should have been up for all of them.

Now, the counter to this charge is, well, hey, they made that money fair and square, legally, how can you blame them? They’re just really smart!

Bullshit. One of the most hilarious lies that has been spread about Goldman of late is that, since it repaid its TARP money, it’s now free and clear of any obligation to the government - as if that was the only handout Goldman got in the last year. Goldman last year made your average AFDC mom on food stamps look like an entrepreneur. Here’s a brief list of all the state aid that is hiding behind that $3.44 billion number they announced the other day. In no particular order.

Read on. It's enough to make you sick. But if you think that anyone in government is going to do anything about it, think again. Here's Mike Lux:

Goldman Sachs and JP Morgan Chase are becoming bigger, richer, and more powerful, while unemployment, home foreclosures, small business bankruptcies are going up. Goldman Sachs and JP Morgan Chase are not only too big to fail, they are so big that everyone else is failing. As Paul Krugman pointed out, the things they do actually are harmful to the rest of the economy.

This whole Too Big To Fail thing (especially with Goldman and Morgan getting ever bigger and more powerful) is the elephant in the room, the issue on the table central to most of the most serious problems in our economy, but it's the issue almost everyone is too scared to take on. Reporters tell me stories of (relatively progressive) Democratic Congresspeople too frightened to attack Goldman Sachs by name on the record. The White House completely avoids the Too Big To Fail issue in their banking regulatory reform policies (many of which are actually quite good, by the way) because, as folks on the WH staff have told me, they know they would get beaten by the Wall St lobby on the hill. Even the progressive groups working on banking issues, the ones doing very admirable work on other aspects of the financial issues such as Elizabeth Warren's great idea of a new consumer protection agency on financial products, are mostly taking a pass on Too Big To Fail related issues because, as one consumer lobbyist told me, "we don't want to lose our credibility on the Hill."

Credibility. Seriously.

The problem isn't that Goldman Sachs is too big to fail. It's that this level of in-your-face corruption and greed is too big to wrap our minds around. So we're just pretending it isn't happening. It's one of the strangest things I've ever seen.


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digby 7/19/2009 12:00:00 PM |