The End of the Goldman Sachs Glaze

by Zachary Adam Cohen on February 26, 2010

Where I’m from, which, incidentally, is still where I am and always hope to be, working for Goldman Sachs was the pinnacle of achievement and success.  I went to the best private schools, I was given every opportunity; tutors, music lessons, access to high culture in the form of theater and museums. My college education was paid for. I came into adult life without any obligations or debts. I was bred to be either a lawyer or a banker. And coming out of college just after the turn of the millennium, Goldman Sachs was where everyone wanted to be.

How Far The Mighty Have Fallen

I am going to say this loud and clearly. If I worked for Goldman Sachs today, I resign as soon as I possibly could. This is starting to make me sick to my stomach:

As far back as 2000 and 2001, Goldman helped Athens quietly borrow billions to mask its poor finances by creating derivatives that essentially transformed loans into currency trades that Greece did not have to disclose under European rules.

They make money helping a sovereign country hide its debt. And then…

Mr. Bernanke said the Securities and Exchange Commission was also concerned about how derivatives — financial instruments that are largely unregulated and do not trade on public exchanges — have contributed to Greece’s problems. “Obviously, using these instruments in a way that intentionally destabilizes a company or a country is counterproductive,” he said.

Senator Christopher J. Dodd, Democrat of Connecticut and the chairman of the Senate Banking Committee, also took aim at credit-default swaps, which allow banks and hedge funds to wager on whether a company or country might default.
Critics say the swaps have contributed to Greece’s problems and increased the odds of a financial collapse.
“We have a situation in which major financial institutions are amplifying a public crisis for private gain,” he said.

“Amplifying a public crisis for private gain.” What was done was technically legal. And I don’t care. It is still clearly wrong, and that is precisely what is so decrepit about our society right now. Just because you can do something, does not mean you should.
Although that is not how I was raised. I was raised to “get mine.” Not by my parents, or my teachers, or tutors or professors. Nah, they were all good people. Moral, honest, authentic. It was my culture. It was the culture around me that said it was OK, in fact, that it was advisable, to seek out my own private gain at all costs. No thought should be paid to the effects of my private gain. No thought given to what society gained or, more likely, lost by my singular attention on my own situation.

Next Steps For Goldman Sachs

Prosecution is probably the most appropriate action that could be taken, but since there is no justice in this world, or if there is, its probably being directed by former Goldman employees, I’m not holding my breath. So what are the next steps for Goldman?
Lloyd Blankfein, Goldman’s Chief, should immediately hold a very public press conference and apologize. But what would he be apologizing for?

1. For profiting on both ends of a very fucked up trade whereby Goldman made money helping Greece hide its debt obligations so that it could gain entry into the Eurozone, and then, when Greece was weakened, deploying sophisticated derivatives to bet on Greece’s default. Blankfein should simply say, “We got this wrong, and although nothing illegal occurred, it still wasn’t right and we are immediately going to refund our profits from these activities and donate our time and advice to the Greek government, to help them find a way out of this.”
2. Blankfein should then go on and apologize for the larger problem of which Goldman is a very big part. That problem is the short-term lunacy of Wall Street’s demands, of minimizing long term financial, environmental and cultural sustainability to the demands of quarterly earnings. He should apologize for putting Goldman’s profits above societies well-being.
3. He should announce a commission made up of internal and external independent experts to examine Goldman’s actions, philosophies and culture over the past decade. That commission should be given the power to make sweeping changes to Goldman’s operating ethos. Futhermore, he should announce that 6 months from today, the results of that commission will be made public and that he will be present at another press conference to take questions from the press, for as long as they wish to ask them.
4. Blankfein has an opportunity to show real leadership. As the head of the most prominent investment bank, and a private citizen, he can show, by example, that changing the culture of greed, of “getting mine,” is no longer functioning, and that furthermore, it is clearly and without a doubt hurting the whole of society. Our political class is not capable of this kind of leadership. Republican and Democrat alike. But private citizens can show true leadership, and in times like these, can have even more of an effect than even our elected officials.
5. Blankfein should immediately announce pay caps. I don’t care how hard you work, or the risks involved in what you do; no one should make more than $10 million a year. He should put these caps in place for 10 years, and mandate there will be no workarounds, no hiding of actual payments. He should urge every other bank and financial institution to follow his lead. He should openly dare people to quit. “If you think that $10 million is too little, then we don’t want you here.” Let them leave. The people who do, and there will certainly be a handful, are NOT the people that Goldman wants. I don’t know who would want them, but remind me not to invest my money with them, mmkay?

Look, I had a short, barely noticeable career in finance. I wasn’t that good. I have many friends at Goldman Sachs and sprinkled all over the “Street.” I love and care for many of these people. It is true I am growing apart from them, a natural consequence of a new line of work, a new, less conventional lifestyle; in general I am becoming interested in things that no longer interest many of my friends. I try hard not to treat my friends in finance so badly. But I am finding it tougher and tougher to explain away why so many smart and talented people would sacrifice their lives for the illusions of security and financial well-being. I wish I could reach out their future selves and just tell them it’s not worth it.
The entire financial services industry has lost its moorings. It’s lost its fucking mind, and it needs drastic and immediate shock therapy knock it back into place. And there is a place for financial services in the 21st Century. But it is going to have to do some serious self-examination and self-correction. Because if it doesn’t, a whole lot of people are going to find themselves in jail. And whether its a jail with cells or a prison of the mind, an emptiness of the soul, doesn’t really make a difference. The fact is they’ll be imprisoned.