Monday, August 10, 2009

August 10,2009/1

We spent the weekend in upstate New York where, through the generosity of friends, we saw/heard as good a La Traviata as can be imagined at Glimmerglass, and were well fed and entertained. We also visited the Baseball Hall of Fame, which is probably the only museum in the world in which the average American tourist has some idea of what's going on.
Among my wiser friends, the consensus is that the credit crisis, if not strictly speaking over, is at least contained. I agree, much as I hate the fact that the containment has been accomplished with a methodolgy that allowed Goldman Sachs to game the program in way both contemptible and contemptuous. And I have this caveat: if the credit crisis has meaningfully abated, it is on the buy side only, on the wholesale, or lending, side of the equation. On the sales end, where people borrow, a combination of shock and avarice still holds sway. Foreclosures continue. credit card horror stories abound.
Apart from the bottom line, which I suppose is all that counts, it has not been a good fortnight for Goldman. First, Blankfein's memo to the troops, in which he sounds like Polonius ("rich, but not gaudy..."), is leaked. Then Mrs. Blankfein behaved as such people inevitably do, completely ignoring her husband's admonitions - the pressures brought on by wealth can be psychologically as irresistible as the exactions of poverty - and threw her gilded weight around at a Hamptons charity do. Next, GS president Gary Cohn publicly asserts that the frm was never in real danger, and holds fast to that point even as damage control rages all about him. This raises the interesting question as to what exactly was GS's position last fall? What exactly was represented to Paulson, Bernanke, Geithner etc. ? Was the decision to become a bank, take TARP money and gain access to the discount/guarantee funding pool, largely opportunistic, as I suspect, or a function of desperate need? what about the AIG contracts? Were they hedged, as Goldman now says, or were they not? if the former, why were they paid off by the taxpayer? I think we need to know; I think we can know. There has to be a paper trail. And, by the way, what is Goldman now? How long can it be a bank, when its banking functions are purely ceremonial? With TARP repaid, and Federal guarantees off the table, is it still finding ways to avail itself of low-cost taxpayer money? What about its "excess reserves"?
Finally, there's Sunday's uproar over Paulson's communications with his old firm, which has the conspiracy-theory beagles in full cry. This will need looking into.
Character, they say, is destiny. Where there's smoke, there's fire. I think Goldman was, is now and ever will be a firm of liars. That is to say, a firm that regards truth as fungible and flexible. I except a brief "Camelot" period when the firm was presided over by John Weinberg, but even then, behind the scrim of Weinberg's probity, the moral descendants of Gus Levy were busy laying the groundwork for the great future to come, a future only realizable if Goldman could achieve what it palpably has: topput in place a web of connections, overt and under the table, policy inputs and information sources that permit it to be on all sides of every deal, every regulatory initiative, every subsidy. When I imagine GS's "public face," I see a hydra-like creature whose multiple brainstems support faces whose features are a combination of Janus, the two-faced deity, and Alfred E. Newman, of "What, me worry?" fame. Nice work if you can get it.

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