Thursday, April 29, 2010
E Pluribus Bagman
Politicians have one thing in common. They know who’s boss, or at least, subconsciously, they know that they aren’t. Goldman knew that too Tuesday, when they walked confidently into a hearing of the Permanent Subcommittee on Investigations of the United States Senate.
America’s house of lords is not the kind of place where tables are easily turned. It is composed mostly of heavy, graying lawyers from the corn belt who don’t commonly get religion at the podium or on national television.
Hence, Goldman’s manicured officials ran the rather little risk of the committee biting off the hand that feeds them. Like judges, generals and mullahs, they like their positions, and regularly sell their souls for the millions of dollars needed to advertise their campaigns to attain the prefix “The Honorable” in front of their names.
But Tuesday’s was a trial to which few Mullahs are privy. It was carried out before a jury of America’s actual bipartisan body politic: the rural rednecks and urban shut-ins who still have homes to plug their televisions into, but no job to distract them during a mid-morning broadcast.
And it was a trial the prosecutor had been waiting for all his life.
In addition to the investigations committee, Senator Carl Levin chairs the Senate Armed Services Committee. More discretionary spending passes under his gavel than any other legislator in Washington. He’s 76. And the middle class voters for whom he began advocating as a state prosecutor 40 years earlier have never needed a hand as much as they needed one Tuesday.
Michigan was hit particularly hard by Detroit’s automakers abandoning their factories and exporting jobs abroad in the 1980s and 90s. When the current mortgage crisis hit Middle America, a large portion of Michigan’s workforce who were deprived of their jobs were quickly deprived of their homes too. And no more remorseless perpetrator of the mass repossession of the years of paychecks tied up in those homes than Goldman had ever walked into Levin’s courtroom.
No one can argue that delivering defense contracts to the Ford Aerospace factory in Michigan is something Levin can’t do. Delivering a pound of flesh to the folks back home before he calls it quits, however, was overdue.
But Goldman Sach’s CEO Lloyd Blankfein also knows who’s boss. And he knows how many zeros are on a hundred dollar bill. Goldman pays millions in hard and soft money for softball questions to be tossed to him on such occasions. And he knows that relationships between a bank that underwrites military projects and the Armed Services Committee chair are best, for all parties, left unsaid.
The ten member committee had received a half million dollars from Goldman sources in the past election cycle. Levin himself got $19,050. And he didn’t get it for nothing.
But the old prosecutor still had something in him that, perhaps, Goldman was not expecting.
Levin focused on the sale of a security Goldman was peddling called “Timberwolf.” One Goldman official described it in an email as “one shitty deal” for Goldman clients. But Goldman sold its clients hundreds of millions of dollars worth of the stock, then bet against Timberwolf’s success by short-selling it for their own quick profit.
American media is a great defender of the public against the release of revealing information that the public can use to protect its interests. It is an even greater defender against bad words. The networks bleeped out the offending adjective.
Levin followed up by asking Blankfein: "Is there not a conflict when you sell something to somebody, and then you bet against that same security, and you don't disclose that to the person you're selling it to? Do you see a problem?"
Blankfein was nervous. "No,” he stuttered. “In the context of market-making that's not a conflict."
While not admitting to the conflict, Blankfein did reveal what has been known to economists since the original dark ages: Bankers do not have the same interests as their clients. Because labor is the largest expense of almost any business, when unemployment rises, wages drop, and the businesses that banks loan capital to, or invest in, do well.
But the U.S. media missed the point. Most major stories focused on the email with the dirty word. Levin appeared to have predicted this, and brought attention his exchange with Blankfein by referring to it repeatedly as, “this shitty deal.”
Radio, press and television outlets tend to pillage anyone who stands up for anything. And criticism of Levin was the top story in America on Wednesday. They batter the steadfast for violating the fundamentalist code of moral behavior, with hypocritical indignation. It does so at the cost of examining of wrong doing.
Blankfein and company originally appeared self-assured that they’d need only put their heads down and say a few mea culpas for getting caught short-selling the well-being of the nation, and the and global economy. They did not seem at all concerned with the threat of criminal prosecution.
But that pound of flesh Levin delivered turned out closer to a ton. Though Goldman’s mullahs will not likely get the same kind of criminal sentence that Enron’s sacrificial perpetrators got -- 24 years for CEO Jeffrey Skilling, and an expected 20-30 for his predecessor, Ken Lay, before Lay died from a heart attack while awaiting sentencing –Levin’s questioning makes an indictment more likely. Moreover, it gave the folks back home feel a small sense of relief.
Senators Tom Carper received $23,500, Tom Coburn, $6,800, Susan Collins, $33,650, John Ensign $13,750, John McCain (R-Ariz), $382,465, Claire McCaskill, $15,750, Mark Pryor, $21,100, Jon Tester, $10,800 and Levin $19,050 from Goldman sources