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business newsWall Street and Washington's Game Is Rigged
April 19 and 20 have traditionally held significance in the market. Will this year follow suit?
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I hear Jerusalem bells a’ringing
Roman Cavalry choirs are singing
Be my mirror, my sword and shield
My missionaries in a foreign field
For some reason I can’t explain
-- When I Ruled The World (Coldplay)
“Even when I lie, I tell the truth.”
-- Tony Montana
“Greed, for lack of a better word, is good. Greed is right. Greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms -- greed for life, for money, for love, knowledge -- has marked the upward surge of mankind.”
-- Gordon Gecko
Recently I touched on the significance of April 19/20 in history. Did Friday’s reversal in the markets on the heels of the SEC charging Goldman Sachs (GS) with fraud set the stage for another financial system collapse?
I can’t help but wonder if, in its attempt to present itself as gallant defenders of the people against evil Wall Street and morally bankrupt banks, Washington will sabotage last year’s rescue. As above, so below? There is something fittingly ironic about Washington "saving the system" only to see them undue it. And Government Sachs isn't just another SB (Speculation Banker, as opposed to Investment Banker); it is the heart and soul of the American brand of capitalism. It's not a raison d’être for a correction; the scandal is a potential force in turning the trend. It's not just a catalyst for a correction, an excuse for profit taking, but if, as I like to say, the driving principle is that the news breaks with the cycles, then if Goldman has foisted itself on its own petard it may be the financial Sword of Damocles that overhangs the market and cuts the thread connecting Main Street and Wall Street, Reality and Dreamville. Why? Goldman is the market. It used to be what’s good for GM is good for America. It is the iconic representation of “greed is good”, laissez faire Cowboy Capitalism.
“Behind every great fortune, there’s a great crime.” -- Balzac
Now, I’m not making a judgment call on Goldy’s lack of innocence or the ability to being proved guilty, but everyone loves a scapegoat and America hates Goldman. Guilty or not it is a convenient whipping boy for the administration’s effort to pass financial reform. It is a convenient beast of burden to carry the weight of the wreck.
“There are no coincidences.” -- Elliott Spitzer
I can’t help but wonder what animal spirits will look like without the spirits. When you disinfect the profit motive and sanitize drive and ambush ambition, for the sake of social engineering, do you risk committing the same foul that the financial engineers and paper pushers committed? Perhaps the issue isn't the issue but the issue is power and control. It sounds like a cliché, but clichés are so called because they are often times so true. In the name of organizing and branding society in the likeness of one’s own intellectual predisposition, is there a risk of self-sabotaging the goose that laid the golden egg?
Empirically, there is a natural tension between investment banking, banking, research and selling that research, market making and trading for the firm account. That tension must be just right to carry the capitalist trapeze act or risk imitating a financial version of the Flying Wallendas.
Is there anyone out there who still trusts that the game in Washington and Wall Street is not rigged, that the tautness in the ties that bind is unraveling? The senators have surrounded Caesar.
Public anger is being metastasized against the perception of those who are pounding money out of rocks rather than serving as some sort of social utility.
A flotilla of lawyers forms at the left, circling like vultures on the carcass of the crisis. Think lawsuits, thousands. Will Goldman ever be the same? Too big to succeed? Is the government cutting off its own nose to spite its face? Perhaps those in a glass House shouldn’t throw stones. Now the head of what is left of Lehman Brothers wants to know who was shorting the stock. The Goldman Sachs investigation has opened up a can of worms. Everything will be investigated. And like making sausage, the workings of wealth can be a messy sight to behold.
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