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Pablo Martinez Monsivais / AP Photo The hearings into the roots of the recession aren’t scaring Wall Street. What’s really frightening is public anger at the industry shows no signs of abating, and Lloyd Blankfein, the man leading the charge to turn that around, is only making matters worse—and possibly putting his job at risk.
Wall Street is scared, and it has nothing to do with the investigation by the Financial Crisis Inquiry Commission, the congressionally mandated committee led by former California State Treasurer Phil Angelides that is looking into the root causes of the 2008 financial meltdown. At the committee’s first hearing last week, after the CEOs of Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Bank of America were forced to swear they wouldn’t lie, I heard one of the committee members admit the probing questions he would be sending the heads of these firms would not be from his staff of crack investigators but from The New York Times.
The reality is that Wall Street couldn’t care less about what the commission comes up with about its past practices in mid-December, when it’s supposed to produce a report, largely because so much of it is well-known. A myriad of books have been written on the causes of the meltdown, including my own, and most have chronicled the greed and arrogance of Wall Street and how lax regulation and a proclivity to bail out the risk-takers over the past three decades through easy money and other mechanisms aided and abetted the mindless risk-taking in the first place.
The least appealing CEO on Wall Street is leading the effort to change the public perception that the system is rigged against the little guy suffering through 10 percent unemployment while the big banks party on.
No, what has Wall Street worried, at least according to the senior officials I spoke with in the days following the hearings, is not the past but the future. Wall Street sees no end to the massive public anger directed its way. (It’s why the president’s new banking tax seems to have little opposition, even among Republicans, who generally oppose higher taxes on anyone.) No matter how many times they say they’re sorry for taking all that risk and leading the country into the Great Recession, which destroyed the banking system and led to 10 percent unemployment, Americans can’t seem to forgive them.
Two big reasons why Wall Street sees no end to its low public standing is its difficulty in spinning the billions of dollars it’s handing out in bonus money just a year after being bailed out by the taxpayers, and Wall Street is increasingly being defined by one firm, Goldman Sachs, and its least capable spokesman, CEO Lloyd Blankfein.
If the hearings proved one thing, it’s just how much of a liability Goldman and Blankfein are to Wall Street’s attempt to massage its rotten image as an organization that feasts off government subsidies while Main Street suffers. Goldman is making bundles of money, which will make its shareholders happy. But it’s also emerged as a lightning rod because of its obvious manifold ties to government (former Treasury Secretary Hank Paulson, also a former Goldman CEO, gave his old firm $10 billion during the height of the meltdown, but let Lehman Brothers fry) and because Blankfein has spent most of the past six months on a high-profile charm offensive, clumsily trying to explain how his firm deserves to hand out the $20 billion in bonus money it accumulated since the 2008 bailout.
In the old days, anti-Goldman public opinion wouldn’t matter, but now it does. The firm loves to shape policy, and being the most hated player in the financial world—and having your CEO tell a newspaper he’s doing “God’s work” by simply trading bonds—makes it difficult for Goldman to play a role in the public-policy debates, particularly those that affect Wall Street, such as the new bank tax. Then there’s the issue of making money. Goldman can trade better than everyone else—hence its enormous profit margins—but will corporate America hire Goldman as its adviser on mergers and acquisitions if it’s the constant target of scorn and ridicule?
View as Single Page 12 Back to Top January 18, 2010 | 11:49pm Facebook | Twitter | Digg | | Emails | print Finance, Business, Wall Street, Wall Street Anger, Phil Angelides, Financial Crisis Inquiry Commission, Corporate America, Wall Street Bailout, Main Street, Bonuses, Jpmorgan Chase, Bank Of America, Aig, Barack Obama, John Mack, Lloyd Blankfein, Jamie Dimon, Morgan Stanley, Goldman Sachs, Bill Clinton (–) Show Replies Collapse Replies Sort Up Sort Down sort by date: wfleet
I thought, as I rose lurchily from the couch to carom off to actual bed, of a word-coin ('received' just that moment from dear The Blue) 'werewolfwithal' (cf wherewithal), & how to put it in a pithy preferably vicious sentence to shiv the Bloatos between their greasy ribs; along the lines of "Wall Street dispenses senseless always appalling excesses of werewolfwithal to the Masters of Greed, clearly cunning suckers of bodily fluids, otherwise so humanly and inhumanely stupid"-ish;
Flag It | Permalink | Reply 12:55 am, Jan 19, 2010 confusedMr. Gasparino has overlooked the fact that most likely the unemployed were not "investors", and thus neither the government nor wall street cares about us or our opinions.
Flag It | Permalink | Reply 7:26 am, Jan 19, 2010 THINKNIUMI wish all Goldman Sachs people go to HELL.
Flag It | Permalink | Reply 7:42 am, Jan 19, 2010 wareagle82I will take this manufactured outrage at the financial sector a bit more seriously when it spreads to Fannie/Freddie, GM, and Chrysler, all of whom received taxpayer money but no imperative to repay it. And, in the case of F/F, the kitty includes seven-figure bonuses. Evidently, it's okay to funnel money to partisan hacks but not so okay when private businesses pay them from their own pockets. In case you missed it, Obama's proposed 'tax' is a sham - most banks that got TARP money have repayed it, but the tax would apply not only to them but also to big institutions that were given no money in the first place. GM and Chrysler are not expected to repay the Treasury; neither are F/F.
Flag It | Permalink | Reply 8:36 am, Jan 19, 2010 hockeydogReading Charlie is a gas, gas, gas! But, no Charles, there are not "a myriad of" ways to use the word "myriad". Just as there are myriad problems with the assertion that Wall Street fears anything other than the stock market crashing, the assertion that a nebulous term like "Wall Street" can fear populist outrage is another disingenious slant on a very real problem. Sorry about the excessive wordage. The system is broken, the deal is rigged. When we have allowed the "smartest guys in the room" to borrow something belonging to someone else, and place a bet as to whether or not the value of that something will go either up or down; well we have taken the idea of gambling to new lows. In Las Vegas, at least they are up front about the rules. If you play blackjack, you are not allowed to use your brain and count cards. But here in Charlie's world, the boys make up the rules as they go along. So, let's say you have entrusted your savings to a 401k plan, and those savings are invested through a mutual fund of your choice. You, in good faith, assume that the people managing where that money is invested have your best interests at heart. As long as your statement shows that your 401k is growing, you don't really care about the mix. Then you discover that the guardians of your hard-earned money have entrusted your funds to another guardian named Bernie Madoff, and that he really did not care about what happened to you, or your money. But, that was then, and this is now. Now we have a different set of foxes guarding the eggs. They loan the eggs out to other foxes, who then bet that the value of eggs will go up or down, and as the price fluxuates, they break a few of the eggs and treat themselves to a nice omelette. The omelettes are tasty, and life is good, and since the price of eggs is going along as predicted, everybody is hap, hap, happy. This is when "the smartest guys in the room" award themselves these nice ten million dollar bonuses. By the time, the house of cards takes its inevitable tumble, these old boys will be sipping pina coladas on the yacht, and there will be a new bunch borrowing the eggs, and placing the bets. Meanwhile, people like my buddy Joe, are counting the days until the company he works for moves their operation to Mexico. Yep, Joe told me yesterday that the machining work he has been doing, and the company he works for is moving operations south of the border. That Joe has a wife and children who depend on him working, doesn't matter. What matters is that we focus our attention on the devastation in Haiti, so that Lloyd Blankfein, Jamie Dimon and the others can continue lining their pockets. Populist outrage? You bet your ass!!!
Flag It | Permalink | Reply 9:06 am, Jan 19, 2010 artoisGoldman's problem is not uniquely Blankfein. Goldman's problem is that they behave like they're an arm of the government. If the banks had been allowed to go their way and their smarts really tested... and really smart financiers (not "smart" because they can get into taxpayers' pockets) had been allowed to pick up the pieces, none of this would be a problem.
Flag It | Permalink | Reply 12:08 pm, Jan 19, 2010 artoisIf you want a really juicy story Charlie, do a little pro-forma analysis of where JP Morgan would be had the Bear Stearns backdoor bailout not happened. Jamie Dimon would be on a bread line...
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