In “Olive Oil and Snake Oil” MoDo says Goldman’s wise guys heard lectures on ethics and casino metaphors on Capitol Hill, but the firm’s stock price rose on Wall Street Tuesday. The Moustache of Wisdom, in “Failure Is Not an Option,” says while our lawmakers in Washington are stalling on a bipartisan climate/energy/jobs bill, Beijing is celebrating. When will I stop hearing the word “bipartisan?” Gawd… Here’s MoDo:
You kept expecting Tom Hagen to jump up and object to a senator’s question on behalf of his Don.
The wood-paneled Senate committee room had an old-school look. The combed-over committee chairman, Carl Levin, had an old-school look. And the Congressional hearing trying to illuminate surreptitious and avaricious behavior by an amoral, macho gang was the 2010 equivalent of the 1950s Mafia hearing depicted in “Godfather II.”
“Government Sachs,” as the well-connected Goldman Sachs is known, was called to account by the actual government on Tuesday. And the traders and executives who dreamed up the idea of packaging smoke were every bit as slick, evasive and dismissively unapologetic as Michael Corleone. He only claimed to trade in olive oil; they actually delivered the snake oil.
You know you’re ethically compromised when Senator John Ensign scolds you about ethics. The Nevada Republican is under investigation by the Senate Ethics Committee and the F.B.I. for chicanery surrounding an affair with a staffer. His wealthy parents paid off the mistress and her husband, who was also on Ensign’s payroll.
“I think most people in Las Vegas would take offense at having Wall Street compared to Las Vegas. Because in Las Vegas, actually people know that the odds are against them. They play anyway,” said the righteous Ensign. “On Wall Street, they manipulate the odds while you’re playing the game. And I would say that it’s actually much more dishonest.”
There was a bipartisan jackpot in casino metaphors.
“How does that differ from going out to Caesar’s Palace, the sports book, and making a wager on the outcome of an athletic contest?” Senator John McCain of Arizona asked C.E.O. Lloyd Blankfein.
But the Republicans’ whacking of Wall Street’s wise guys lost a little of its punch when you knew that they were ducking out to the Senate floor, trying to thwart Democrats’ efforts to pass a bill tightening regulation of Wall Street. Republicans ignored the contradiction in this, the same way Goldman Sachs ignored the conflict in betting against the product it sold to clients.
President Obama bashed Wall Street to pose as a tough populist. The S.E.C. dragged itself away from porn long enough to make an example of Goldman Sachs to shore up its image as a strict enforcer. And Goldman Sachs came to Washington to try to recover an image for integrity.
As Americans lost homes and lined up for jobs, Goldman made $13 billion in 2009, and Blankfein got a bonus of, as he haltingly admitted to McCain, “um, um, nine million.”
“The idea that Wall Street came out of this thing just fine, thank you, is something that just grates on people,” Delaware Senator Ted Kaufman told Blankfein. “They think that you didn’t just come out fine because it was luck. They think that you guys just really gamed this thing real, real well.”
Baby-faced Josh Birnbaum, the former managing director who urged betting against subprime mortgages, did not polish the firm’s reputation with his elitist smirk and name-dropping of Wharton.
“Mr. Birnbaum, do you know what a stated income loan is?” Senator Kaufman asked.
“I think it’s just what it sounds like,” Birnbaum replied, like a petulant schoolboy in detention.
The Goldman crowd was certainly cosmopolitan. Blankfein dropped a Latin phrase (Goldman had a “de minimis” business in direct home loan mortgages) and French peppered Senate Exhibit No. 62, from the petite, handsome Fabrice Tourre, the S.E.C. target who called himself “the fabulous Fab” in a 2007 e-mail.
“More and more leverage in the system, l’edifice entier risqué de s’effondrer a tout moment. … Seul survivant potentiel,” gushed the highflying Frenchman charged with creating subprime mortgage investment deals intended to fail. That translates loosely to: the cheese stands alone.
Continuing to talk about himself in the third person, he wrote, “Standing in the middle of all these complex, highly levered, exotic trades he created without necessarily understanding all the implications of those monstruosities!!! Anyway, not feeling too guilty about this. …”
In an e-mail to his girlfriend, he called his “Frankenstein” creation “a product of pure intellectual masturbation, the type of thing which you invent telling yourself: ‘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?’ ”
In another e-mail to her, he blithely joked that he was selling toxic bonds “to widows and orphans that I ran into at the airport.” At least the Fabulous Fab had the good manners to cloak his feelings of fabulousness in front of the committee and put on an earnest mask. Luckily for Goldman, greed may trump ethics. The firm’s stock closed higher Tuesday. Wholesale olive oil closed higher as well.
And now here’s The Moustache of Wisdom:
China is having a good week in America. Yes it is. I’d even suggest that there is some high-fiving going on in Beijing. I mean, wouldn’t you if you saw America’s Democratic and Republican leaders conspiring to ensure that America cedes the next great global industry — E.T., energy technology — to China?
But, before I get to that, here’s a little news item to chew on: Applied Materials, a U.S. Silicon Valley company that makes the machines that make sophisticated solar panels, opened the world’s largest commercial solar research and development center in Xian, China, in October. It initially sought applicants for 260 scientist/technologist jobs. Howard Clabo, a company spokesman, told me that the Xian center received 26,000 Chinese applications and hired 330 people — 31 percent with master’s or Ph.D. degrees. “Roughly 50 percent of the solar panels in the world were made in China last year,” explained Clabo. “We need to be where the customers are.”
And what kind of week is America having? After months of heroic negotiations, Senators John Kerry, Lindsey Graham and Joseph Lieberman had forged a bipartisan climate/energy/jobs bill that, while far from perfect, would have, for the first time, put a long-term fixed price on carbon — precisely the kind of price signal U.S. industry and consumers need to start really shifting the economy to clean-power innovations. The bill was supposed to be unveiled on Monday, but it was suddenly postponed because of Graham’s justified fury that the Senate Democratic leader, Harry Reid, had decided to push immigration reform first — even though no such bill is ready — in a bid to attract Hispanic voters to revive his re-election campaign in Nevada.
After all the work that has gone into knitting together this bipartisan bill, which has the support of key industry players, it would be insane to let this effort fail. Fortunately, on Tuesday, Reid was hinting about a compromise. But, ultimately, the issue isn’t just about introducing a bill. It’s about getting it passed. And there we are going to need the president’s sustained leadership.
President Obama has done a superb job in securing stimulus money for green-technology and in using his regulatory powers to compel the auto industry to improve mileage standards to a whole new level. But he has always been rather coy when it comes to when and how much he will personally push an energy/climate bill that would fix a price on carbon-emitting fuels. Without that price signal, you will never get sustained consumer demand for, or sustained private investment in, clean-power technologies. All you will get are hobbies.
The president clearly wants this energy bill to pass, but his advisers are worried that because the bill will likely result in higher electricity or gasoline charges, Republicans will run around screaming “carbon tax” and hurt Democrats in the midterm elections. I appreciate the president’s dilemma. But I don’t think hanging back and letting the Senate take the lead is the right answer. This is a big leadership moment. He needs to confront it head-on, because — call me crazy — I think doing the right and hard thing here will actually be good politics, too.
I’d love to see the president come out, guns blazing with this message:
“Yes, if we pass this energy legislation, a small price on carbon will likely show up on your gasoline or electricity bill. I’m not going to lie. But it is an investment that will pay off in so many ways. It will spur innovation in energy efficiency that will actually lower the total amount you pay for driving, heating or cooling. It will reduce carbon pollution in the air we breathe and make us healthier as a country. It will reduce the money we are sending to nations that crush democracy and promote intolerance. It will strengthen the dollar. It will make us more energy secure, environmentally secure and strategically secure. Sure, our opponents will scream ‘carbon tax!’ Well, what do you think you’re paying now to OPEC? The only difference between me and my opponents is that I want to keep any revenue we generate here to build American schools, American highways, American high-speed rail, American research labs and American economic strength. It’s just a little tick I have: I like to see our spending build our country. They don’t care. They are perfectly happy to see all the money you spend to fill your tank or heat your home go overseas, so we end up funding both sides in the war on terrorism — our military and their extremists.”
Much of our politics today is designed to make people stupid, confused and afraid of change. The G.O.P. has been particularly egregious on energy and climate. I believe if you talk straight to the American people on energy and climate, they will give you the right answers, and, ultimately, the support needed to trump the vested interests and lobbyists who have kept us addicted to oil. Obama has all the right instincts on this issue. He just needs to trust them. If he brings his A-game to energy legislation, Americans will follow — and then maybe we can have a good century.
I wonder how many Friedman Units that will take?
