”That there is a gigantic combination of the money dealers, a powerful international trust of usurers, asserting a superiority above all jurisdictions, and having for its servants the so-called statesmen and potentates of various nations, who willingly register the decrees of this money power upon the statute-books of the respective states, is a fact that can bc sustained by irrefutable evidence. This great international monetary trust now menaces the very life of this nation, and the people must dethrone it and subordinate it to their will, or American liberty will vanish. ( M.W. Walbert, 1899 ) On the capitol hill testimony of last week, we heard of the birds and the bees, the bears; and a lot of bull.In fact, much of the ”systematic risk” may have been in listening to the proceedings. Getting answers of any substance was like a willingness of the respondents to have their teeth pulled:
”Unlike the firm’s press releases and annual reports, all carefully scrubbed to a state of professional blandness, the dossier provides a rare glimpse under Goldman’s hood. The executives curse, joke, jockey for praise and criticize the higher-ups. They say unkind things about the products they created, then hard-sell them to clients.
Mortgage-related deals to be sold are “dirty,” “pigs,” “crap pools,” “junk” or something that “stinks.” The start date of one complicated transaction that rapidly went sour is a “day that will live in infamy,” one trader remarks wryly after the fact. Another agrees: “[B]oy, that … was one shitty deal.”At one point, Fabrice Tourre, the trader at the centre of the SEC complaint, suggests the firm focus its attention on comparatively less savvy institutional investors. In an e-mail, he notes that a list of suggested clients is “a little skewed toward sophisticated hedge funds” that “will be on the same side of the trade as we will and … know exactly how things work and will not let us work for too much $$$.” He suggests focusing on “buy-and-hold ratings-based buyers” instead.
Late in 2006, a Goldman employee talks about the challenges of selling deals viewed as “junk that nobody was dumb enough to take first time around.” Jonathan Egol, a senior mortgage trader, responds with the letters “LDL,” which pop up in various messages. They stand for “let’s discuss live” – rather than through e-mail. ( Joanna Slater, Wall Street Journal )
Last week’s testimony of Goldman-Sachs on capitol hill was another exercise that confirmed the long-standing hypothesis that no one has the gift of the United States; a genius for showmanship and spectacle that began with the Revolution and never really took pause for reflection. The Lloyd Blankfein testimony personified the theatricality, endless hyperbole and inherent hucksterism and flimflamming wrapped around an American flag dripping with materialism and individuality.
The revolution was very effectively mythologized by Thomas Paine, Jefferson and Patrick Henry, but what was lost in the poetic rhetoric was the pertinence to the Banking system: the Revolution was a dirty little tug-of-war over taxes. All countries swaddle themselves in myths, and Americans are not really more self-indulgent than other nations, but they are more successful and they operate on a grand theatre , enjoying large economies of scale as befits a country of unprecedented power and influence in the world.Goldman-Sachs was just one ingredient in this uninhibited fermentation that in general is garish, corrupting,fatuous, but always entertaining except for those who have suffered from. The story of American political theatre and economic banking crises have a strong correlation; if not a straight line, then certainly a continuous one.
It is a fact rooted in the mists of American antiquity, between Johnny Appleseed and Washington’s cherry tree, that politics in the United States, even when marked by sleazy or morbid events, are often absurd and humorous as the Goldman testimony amply showed. It may be that the real successors to the original founding narrative creators, were the P.T. Barnum’s, and Walt Disney’s who simply brought the same fantasists ideology to a higher level, yet one that seems to permeate all levels of society as if it were a common language, a culture existing, indomitable, alongside the cherished institutions. Joseph Stack was almost the warm-up act for the Goldman-Sachs hearings.
The said, Joseph Stack, carried out a suicide, small-plane attack on the Internal Revenue Service building in Austin, Texas, killing a 68-year-old Vietnam veteran who worked there. He was well-known locally for his frequent imputation of conspiracies to the Roman Catholic Church and organized labour, and was particularly aggrieved that the IRS would not grant tax-free status to his home, which he purported to have converted into a Protestant church. No believer in half-measures, he burned his house down before his suicide flight. Demonstrating that Massachusetts had gone for something altogether different when it chose Scott Brown to fill the Senate seat held for 57 years by John F. and Edward M. Kennedy, Mr. Brown acknowledged that Mr. Stack’s reaction was “extreme” but was caused by thence of “transparency” in Washington, and added that “no one likes to pay taxes.”
”Stack was a lone madman, and it would be both glib and inaccurate to call him a card-carrying Tea Partier or a “Tea Party terrorist.” But he did leave behind a manifesto whose frothing anti-government, anti-tax rage overlaps with some of those marching under the Tea Party banner. That rant inspired like-minded Americans to create instant Facebook shrines to his martyrdom. Soon enough, some cowed politicians, including the newly minted Tea Party hero Scott Brown, were publicly empathizing with Stack’s credo — rather than risk crossing the most unforgiving brigade in their base.
Representative Steve King, Republican of Iowa, even rationalized Stack’s crime. “It’s sad the incident in Texas happened,” he said, “but by the same token, it’s an agency that is unnecessary. And when the day comes when that is over and we abolish the I.R.S., it’s going to be a happy day for America.” ( Frank Rich, New York Times )
Like Tiger Woods, Goldman-Sachs whizz kid Fabrice Tourre seems to have been partly undone by text messages to his girlfriend on his Blackberry. His role in inventing controversial mortgage backed derivative products for the investment bank was a job he described as ”pure intellectual masturbation”. Since all his interrogators in Washington, Carl Levin’s , McCain’s, Dodd’s et al. have already succumbed to the temptations of rascality and fiscal gymnastics, you could sense that the heavy artillery was designed to create collateral damage only. There would be some purgations of public repentance but no shooting of golden geese. The seasoned grumbler-rousers were not to be awakened. Unlike Elin Nordegren, none of these elected officials were going to use a 9-iron to smash the windows out the banking system.
Tourre’s smoking gun was his e-mail, ” Well what if we created a ‘thing’ which has no purpose, which is absolutely conceptual and highly theoretical and which nobody knows how to price?” Or from Daniel Sparks, head of mortgages, ” They structured like mad and traveled the world, and worked their tails off to make some lemonade from some big old lemons”. On the surface, criminal fraud is highly plausible, since it appears there may have been intent to deceive, or the whole exercise is simply to create a more level playing field for the rest of the wannabees. After all, Goldman may have been the aces, but were hardly the only firm that was creating toxic securities and trading them both ways. The pure capitalism they practice, is like any other fundamentalist religious creed, and it has to become imperialist and expansive to continue to survive, and this involves greater risks as all the low hanging fruit has already been harvested.
Like the archetypical American story, Goldman will fall from Grace, somewhat like Michael Vick; they were betting on synthetic dogs and cats, and they will undergo the scripted purgations of public repentance, at least for a few quarters, before returning to the all-star game. Whether the culprit was the Abacus synthetic collateralized debt obligation, or it simply served as a pretext for the investigation is not entirely clear; even if the spectacle devolves into a ”truth commission” . Perhaps Goldman is simply a sacrificial lamb to protect the Federal Reserve. Ultimately, the banks have more power than the White House. And they know it. What we view is strictly showboating, with a small smidgen of sincerity.
”It was endlessly fascinating, and I’m not just talking about committee chairman Carl Levin’s comb-over, which deserves an investigation of its own. There was Senator Claire McCaskill, Democrat from Missouri, dressed and talking like the chairman of a PTA committee. She tore into Daniel Sparks, the besuited former head of the mortgage department at Goldman’s of Wall Street. She talked to him like he was a bookie in Times Square.“What is the vig you make, if all you’re trying to do is not playing, but just staying close to home?” Ms. McCaskill kept saying, like she was arguing with an obstinate husband.
And there was Mr. Sparks, his massive head like a tombstone on top of his necktie, answering as slowly and unhelpfully as he could, implying every question was incomprehensible, drawing the hearings out – and yet begging on national TV: “Can I not use the betting analogy?” It was like watching a small terrier bark excitedly at a lump of clay. It was as entertaining as many movies. ( Ian Brown )
”Rather than faulting the Fed for creating yet another boom-and-bust cycle, Gordon blames the current economic debacle on “the baleful influence of Thomas Jefferson.” Jefferson was the foremost opponent of a bank capitalized with tax dollars and operated by politicians and their appointees from the nation’s capital — Hamilton’s Bank of the United States (BUS), a precursor of the Fed. Thus, despite the fact that the real blame for the current economic crisis lies squarely in the lap of the Fed and its ideological underpinnings — particularly the legends and myths surrounding Hamilton — Gordon attempts to convince us that opposition to politicized, centralized banking is the real problem. Anyone who believes this could easily be persuaded that up is down, white is black, and day is night. The purpose of the Fed, according to Gordon, is to serve as a sort of a monetary benevolent despot: “To guard the money supply … regulating the economy thereby.”
What Jefferson opposed was Hamilton’s mercantilist policies of government-controlled banking, corporate welfare, protectionist tariffs, heavy excise taxation, excessive public debt, and other interventions. Unlike Hamilton, Jefferson had read and understood Adam Smith’s Wealth of Nations and his Theory of Moral Sentiments, as well as the work of David Ricardo, Jean-Baptiste Say (who Jefferson tried to get to join the faculty of the University of Virginia), Richard Cantillon, and other economic theorists of that era. Hamilton was ignorant of or ignored all of this. His major intellectual influence was a propagandist for the British mercantilist regime named Sir James Steuart.
As Murray Rothbard wrote in an article entitled “A Future of Peace and Capitalism,”
Jefferson was very precisely in favor of laissez-faire, or free-market, capitalism. And that was the real argument between [Hamilton and Jefferson]. It wasn’t really that Jefferson was against factories or industries per se; what he was against was coerced [economic] development, that is, taxing the farmers through tariffs and subsidies to build up industry artificially, which was essentially the Hamilton program. Jefferson … was a very learned person. He read Adam Smith, he read Ricardo, he was very familiar with laissez-faire classical economics. And so his economic program … was a very sophisticated application of classical economics to the American scene … classicists were also against tariffs, subsidies, and coerced economic development…. The Jeffersonian wing of the founding fathers was essentially free-market, laissez-faire capitalists.