Do You Blame The Goldman Monster Or Its Creator?

John Carney has an excellent piece over at Clusterstock on the rising animus towards Goldman Sachs.

Here’s John:

It’s taken some time but finally people from all over the political spectrum are looking up and noticing that the banner waving on the flagpole stands for Bailout Nation rather than the land of the free. And they’re pissed.

Not everyone understands why they are pissed off. For instance, the Congressmen grilling Hank Paulson today are thoroughly confused. Some want to know why Paulson didn’t fire Bank of America CEO Ken Lewis. Others want to know where Paulson got the temerity to threaten Lewis’s job. Still others just seem to want a chance to vent.

But Matt Taibbi, whose famous Rolling Stone article proposed a somewhat absurd conspiracy theory that described Goldman as a bubble machine, has finally figured it out. What’s wrong with Goldman isn’t that is evil or even uniquely evil. What’s wrong is that it is pocketing money that it is making, in part, because it isn’t subject to market discipline. It is close to a pure play government arbitrage firm these days.

John then does a really good job of using Taibbi’s arguments and some of his own to demonstrate how various government actions have worked to the enormous advantage of Goldman. To his credit he mentions without naming names that Goldman is not the only such beneficiary, just the poster boy du jour.

As so often happens with blogs, though, was that one comment to his post seemed to capture a missing element. A commenter who lists himself (herself?) as Adrian said:

why are all these attacks not leveled at the government instead?

Don’t we blame the behavior of Frankenstein’s monster on Dr. Frankenstein, and not the mindless monster?

The creators of course are the men and women that you and I elected to represent us. None of this would be possible without their explicit approval. Now, Goldman is certainly no mindless monster, rather it is a very smart monster that is doing exactly what one would expect. It sees a vast opportunity and is taking advantage of it. To expect it to do otherwise is to deny the reason for its existence. The critical question is what do the creators gain from their creation. That’s the one that needs to be watched closely.

Carney cleverly uses the yesterday’s excellent Wall Street Journal editorial in his post. I think it would have been worthwhile had he included the last sentence of that piece in his article. It read:

The divergent fortunes of CIT and Goldman Sachs show how much we changed when we stepped in to save certain banks in the name of saving the system.

Has Goldman really morphed into a monster or is it simply the highly competitive, smart investment bank it’s always been that has had an enormously favorable playing field sculpted by others for its benefit?

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