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PRUDEN: Calling in the clowns to reform Wall Street
Henry Kissinger once observed that it was too bad that Iran and Iraq couldn’t both lose their war with each other. It’s tempting to apply that to the principals in the faceoff between the U.S. Senate and Goldman Sachs.
Who could choose between the arrogance of, say, “Fabulous Fab,” the Goldman Sachs broker who boasts of piling up millions of profits in worthless mortgages sold to the poor who couldn’t afford them, and the obscene demagoguery of Sen. Carl Levin, the fabulously fatuous chairman of the Senate subcommittee on investigations and the tormentor of not-so-innocent stockbrokers.
Mr. Levin displayed astonishing ignorance, whether real or not, of how Wall Street markets work. He demonstrated that he did not understand (or pretended he didn’t, for benefit of the press and tube, exactly why and how some investors sell “short.” Selling short seems complicated to those who never venture onto Wall Street, but a senator, with aides to fetch and carry - who never has to take a restroom break, for example, because he can assign an aide to do it for him - ought to give the impression of understanding what he’s talking about.
It’s easy to beat up anyone who works for Goldman Sachs and the other big Wall Street houses. The partners pull down salaries and bonuses that are unimaginably large to most of us; how many Kobe steaks, how many $500-a-bottle French wines can a Wall Street broker consume? How many Manhattan apartments and vacation homes in the South of France can a Goldman Sachs chairman live in? President Obama, ever the nanny, said Wednesday that “at a certain point you’ve made enough money.” He didn’t say how much is enough, and who would decide how much is enough, but it’s scary to think what Saul Alinsky’s disciple might have in mind for all of us.
The hearings this week into the iniquities of Wall Street descended into the kind of piling on that congressional committees are infamous for - find a villain and kick him while you can to demonstrate how far superior your own ethics and morals may be. Mr. Levin found the naughty euphemism for “excrement” in one of the Goldman Sachs e-mails and had a high old time repeating the obscenity 11 times in his questioning of a witness. It’s not clear whether he was quoting all 11 times, or spraying the hearings with his own obscenity, but he was clearly relishing the opportunity to display his potty mouth, like a toddler discovering that a four-letter word shocks Mommy.
Some of the other senators spent the day showing off as well, trying to look as wise as a tree full of owls and frequently summoning an aide to whisper a credible question. At the end of the day’s work, the senators had proved that nobody had done anything illegal, or even unethical, only that there are some sharp dudes on the street who know how to exploit loopholes in sloppily drawn law. (Full disclosure: I once edited a newsletter for a small brokerage on Wall Street, but only long enough to lose my savings, such as they were, and to learn to keep my savings in a mattress at an undisclosed location.)
Wall Street, like Congress, does what it does because that’s what it does. Playing with stocks is often regarded as something like playing with hunches on Powerball. But if you play a hunch with the lottery and lose, all you get to keep is the worthless lottery ticket. If you buy shares of a company and the price of a share goes down, you still have the shares in the company, and you wait for a sunnier day. Warren Buffett occasionally gets bitten by a dog, too.
Mr. Levin and his conspirators in the Senate are trying to make Wall Street in general and Goldman Sachs in particular responsible for the financial crisis of 2008. Investigators at the Securities and Exchange Commission have accused Goldman Sachs of selling $150 million worth of instruments backed by worthless mortgages to a German bank without disclosing exactly what the bank was buying.
The senators deduced from that that Goldman Sachs was trying to rig the market in subprime mortgages and thus set off the great meltdown of ‘08. The law assumes that not every investment banker is a virgin and does not require that Goldman Sachs relieve its institutional customers from their common-sense duty to know what they’re buying. You could argue that what Goldman Sachs and other investment houses are doing is not nice, but it’s not against the law. Carl Levin could work to fix that, but screeds are more fun.
• Wesley Pruden is editor emeritus of The Washington Times.
About the Author
Wesley Pruden is editor emeritus of The Washington Times.
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