Swans Commentary » swans.com May 3, 2010  



Blips #99
 From The Martian Desk


by Gilles d'Aymery





"Always tell the truth. Then you don't have to remember anything." Mark Twain, Roughin' it
"The most difficult character in comedy is that of a fool, and he must be no simpleton who plays the part."
—Miguel de Cervantes (1547-1616), Don Quixote, 1605


(Swans - May 3, 2010)   BREAD AND CIRCUS: A Pantomime uses a mixture of comedy, tragedy, and sex in which there's always a crafty, smart player and a goofy, stupid one among the servants of the "father" and the "lovers." TV audiences were treated to a great pantomime last Tuesday, April 27, 2010, when the US Senate hauled former and current Goldman Sachs operators and executives before its Permanent Subcommittee on Investigations. In that play, the "father," unbridled capitalism, stayed in the background. The "lovers" were the Goldman Sachs executives, and the "servants" alternated among the GS operators (the smart ones) and the senators (the goofy ones). Or, maybe, it was a Commedia dell'arte -- literally, a "comedy of the profession" -- played in the House of smoke and mirrors...

I WATCHED THE ENTIRE HEARINGS, over 10 hours of them. It was yet another spectacle of the fake shows Congress throws here and there to channel the anger of the populace. Instead of questioning the witnesses and analyzing what had gone awry in order to put in place new regulatory policies, the senators engaged in tongue-lashing with mendacity that matched their usual hypocrisy. It was obvious from the opening remarks by the subcommittee chairman, Senator Carl Levin (D. Michigan), that he favored confrontation over understanding. He'd already made up his mind that the boys at GS had "contributed [in 2007] to the economic collapse that came full blown the following year." High-seated on his perch, with all his senatorial colleagues, he looked down to the villains du jour, ready to start pillorying the company.

PROBLEM IS, the company, especially the first panel, was not in a mood to play the role that had been assigned to them. And the four participants in that panel were far smarter and knowledgeable than their would-be executioners. They dodged the bullets, stonewalled the questioning with abandon, parsed their answers, not once admitted to any wrong-doing, thus leaving the questioners and executioners to whine about their own frustrations of not being able to have the Golden boys play the game. It was like, "eh guys you are supposed to feel guilty and express remorse...and make us look good in the eyes of the American people..." But the boys were unfazed and would not give an inch to please the crowd, even though they looked uncomfortable most of the time since they were unaccustomed to the settings and the grilling to which they were subjected as they were accused, in the words of a New York Times editorial, of having "turned the financial system into a casino" (without deigning to explain who created the casino in the first place).

THE ISSUE IN MY MIND is not whether these four individuals were wrong -- until proven otherwise, they were not and played the system by its rules -- but whether the whole system was wrong in the first place, which was never addressed by the senators, for good reasons: they were the ones who designed, or at the very least abetted that system. In the absence of a real debate, one was left with scoring each and every exchange, and on that score board, the boys were way ahead. They had an intimate knowledge of the game the legislators had unknowingly fashioned. Their collective IQ must have been higher than that of the senatorial gang altogether, including that of their staff! It was fun to watch, especially when one has a sense of what it means to be, for example, an alumni of the École Centrale Paris, a school that has been churning out some of the most creative and intelligent minds for generations.

BUT FORGET ABOUT "Fabulous" Fabrice Tourre, who is collateral damage at the center of the civil suit filed against GS by the SEC. Forget about the thoughtful Daniel Sparks, the former partner and head of the GS mortgage trading department, or Michael Swenson, the managing director who looked quite uncomfortable during the hearings. The member of the villains that I enjoyed the most was Joshua Birnbaum, who also was a managing director before resigning and moving on with his life. I felt that he had decided he would have nothing to do with this public lynching. Consequently, he was the most combative of the quartet even though his demeanor was somewhat stiff. His contempt toward the know-nothing, self-exculpatory, accusatory bunch of fake legislators who get their re-election money from his likes and turn around to denounce and attempt to humiliate them was palpable. The interrogating and finger-pointing scumbags did not impress this would-be scapegoat. I gave him a AAA rating for his mordant and unapologetic performance!

I AWARDED another deserved AAA rating to David Viniar, the executive vice president and chief financial officer, for his smoothness. Viniar, who was on the second panel with Craig Broderick (the chief risk officer), managed the onslaught of vituperative venom with a smiling poise while displaying great knowledge of the issues and their intricacies that the senators either willfully or plainly lacked. Broderick, for his part, responded to the questions with short matter-of-fact answers, unencumbered by the prevalent nastiness. The last panel consisted of one witness only, the much anticipated Lloyd Blankfein, the chairman and chief executive of the firm. He looked somewhat hesitant, feeling baffled by the spectacle. He was constantly interrupted, unable to provide any answer in full. The pack of dogs would not allow it. He seemed befuddled by the line of questioning, especially when it focused on ethics and morality, and the questioning and rebuke came from no less than Republican Senator John Ensign (Ensign is under investigation by the FBI and the Senate Ethics Committee for having committed adultery with a member of his staff and having his parents pay almost $100,000 to her and her husband to keep them quiet about the affair. Talk about Commedia dell'arte!).

THEN CAME THE unctuous John McCain, who condescendingly berated Blankfein for his abrogation of moral responsibility and lack of common decency for sticking it to the little people who lost their homes when he, Blankfein, lives in luxury. "And what was your bonus last year, Mr. Blankfein?" asked the Arizona senator looking down with despicable smugness on the harried man. That spiteful peroration designed to help the lawmaker in his Senate race was particularly sickening in light of the facts that: 1) Blankfein, who has reached the pinnacle of the financial world, is the son of a postal worker and a receptionist, and is known for giving, himself and through the firm he leads, substantial donations to causes that are supposed to help the little people -- i.e., he's never forgotten his origins; and 2) John McCain is the scion of a blue-blood American family, married to a wealthy beer queen, owns in the vicinity of 10 houses, is worth over $100 million, is not known for giving much of his worth to helping the underclass, and is famous for asserting in September 2008, in the middle of the economic and financial meltdown, that the economy was doing great. In the wake of Ensign and McCain's conceited bloviations I had to go outside and throw up, just to clear out the bile that had accumulated in my body.

NOW, I AM NOT RUSHING to the defense of the Golden boys -- believe me, they do not need me...they need smart lawyers -- but I'm offended by the whole hypocrisy behind the political pantomime, whose show (the hearings) the directors specifically designed to deflect the attention of the gullible and vengeful public from the real culprits -- the policymakers. The GS market makers, members of a big herd, acted within an environment they mastered and exploited for the benefits of the firm and its shareholders, and for their own profits (salaries and bonuses). Anyone who's ever worked in trading as I did for a while in the energy field understands that traders are not in the business of morality; they are in the business of making money and laugh at the notion of "ethical" capitalism, an oxymoron par excellence. They take advantage of circumstances to endeavor to "make a killing," to "fuck" their counterparts, and transform any "shitty" product they can put their hands on into gold. Trading rooms have long been known for their scatological predilections, but before the advent of e-mail they were kept within the confinement of those floors. That barking-dog Carl Levin and his groveling colleagues looked shocked illustrated the extent to which their smug chutzpah served the purpose of hiding their own responsibilities for the economic and financial crisis.

MAKE NO MISTAKE, by channeling public anger toward a few actors, however distasteful or offensive you may find them, the purpose of the deceitful exercise is to point to a few trees -- sacrificial lambs -- in order to hide the forest. The environment in which the Golden boys operated, especially the members of the first panel who were either too young or low-level managers for having had much if any input in the formulation of the policies, was put in place by Congress and repetitive administrations from both parties. This was a bipartisan deregulating trend that began some 40 years ago. It was reinforced by gutting all the regulatory agencies, implementing deliberate, proactive governmental policies to put real estate on steroids (FHA, Fannie May, Freddie Mac), a conscious monetary policy to open the floodgates of cheap credits, the specious AAA ratings on toxic securities, and of course, the prevailing ensuing speculation based on fraudulent, faulty underwriting mortgages and equity lines of credit, and predatory lending -- among various other factors.

WHEN THE STORY of this mother of all crises is finally understood and told, people will realize that although Wall Street and Main Street intertwine, the crisis began on Main Street, which triggered the financial crisis, which in turn compounded and deepened the economic crisis, thus creating a vicious loop that has yet to subside. In my own estimation, I suspect that the economic engine came to a halt around 2003 when people began to max out their credit lines, at least in the USA (I'm less familiar with the European timeline). It did not immediately show up in the official statistics, but once the Fed began increasing its base rate in mid-2004, the crisis started unraveling pretty fast. By 2005, it was becoming obvious and "shorters" embarked on their short-selling spree, which would culminate in the 2006-2007 period. By that time the financial markets withered in the wake of Main Street's implosion. It may be emotionally self-satisfying for the public, and politically expedient for the legislators, to tar and feather a few scapegoats -- the banksters -- but it does nothing of import in regard to addressing the fatal flaws of a system designed to fleece the majority for the benefits of the few. Sorry to admit, especially because I'm a contrarian, but in this lullaby I stand on the side of the Joshua Birnbaums and Lloyd Blankfeins of this world. They played the casino as devised by the real gamers located in Washington, D.C.

NOTE, IF YOU PLEASE, that on the day the SEC launched its civil suit against Goldman Sachs, the Treasury Department raised another $51 billion, bringing the national debt close to $13 trillion. Note also, if you will, when I reported in my last Blips on March 22, 2010, that the FDIC had had to tackle 37 failed banks since the beginning of the year, that the count has grown to 64 banks as of April 30, 2010, with an estimated aggregated losses of about $16 billion in just four months -- an amount that dwarfs the alleged shenanigans of the Golden boys. Please keep your eyes on reality. It's the entire system that requires your attention -- the choreographers, not the players.

CHANGE THE SYSTEM and the boys will adapt in stride -- or keep enjoying the pantomime and falling into despair and anger as the demagogues raise their ugly heads. It's your call.

 . . . . .

C'est la vie...

And so it goes...


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Gilles d'Aymery on Swans -- with bio. He is Swans publisher and co-editor.   (back)


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Swans -- ISSN: 1554-4915
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Published May 3, 2010