Normally, it is better to put pins in your eyes than to watch a congressional hearing. But, today is not a normal day. Today, executives from Goldman Sachs, the Wall Street investment firm recently indicted by the SEC, will be testifying before the Senate Permanent Subcommittee on Investigations and the nation, via its elected representatives, will be able to indulge a bit of schadenfreude at least.
Goldman Sachs is accused of several things, some transgressions of the law and others transgressions of ethics. If they knowingly sold investments that had been designed to fail, that is against the law. But, the much more difficult problem that needs to be addressed is the fact that most of what Goldman Sachs evidently did was perfectly legal. They bet against the housing market. Wall Street now lives on futures and derivatives and hedges and the Devil knows what else, none of it directly related to creating a more productive economy with good-paying jobs or a sustainable manufacturing sector, all of it directly related to making lots and lots of money for the Wall Street firms.
E-mail exchanges among Goldman Sachs executives have been released and they show that the company was doing what it does best: Assessing the value of different markets, betting on their future and doing so one step ahead of the other guys. Admit it, as you read about how Goldman made billions of dollars during the economic meltdown and because of the meltdown, didn’t a part of you wish you had invested with them? That itch, the sinful itchy manifestation of greed has, in today’s lower Manhattan, become a culture of greed, and the whole country will get a window into that culture during today’s hearings.
The hearings come while the Republicans are resisting Democratic efforts to reform the financial markets. Good luck with that. After today’s hearings, what will become clear is that Goldman Sachs was not getting rich based on illegal activity. This is not a case of a bad apple. Goldman largely succeeded because of perfectly legal activities that happened to take place in an unregulated market. No one is suggesting that we ban derivatives or other financial instruments. No one is suggesting that the government nationalize the financial sector. What is being suggested is that without outside regulation, this kind of malfeasance will occur again and again. I am not party to the negotiations, and perhaps the arguments being made behind closed doors are reasonable and smart. But, I can bet that after today’s hearings, the pressure to compromise will be even greater and several GOP senators will be looking for a reason to jump to the "Aye" column.
Schadenfreude is a sin, make no mistake about that. But, in a democratic society, the instinct to see the mighty fall is a healthy one and, in this case, a just one. It is now clear that Goldman executives not only took delight in the misery of others, they took billions of dollars from families losing their homes because of the collapse of the housing market. It is not enough to appoint regulators, there should also be some expression of public shame. In colonial times, towns put transgressors in the stocks and pillories, making them the object of public scorn. Today, the congressional hearing is the equivalent. Be sure to tune in.
Michael Sean Winters