Tuesday, April 27, 2010

Goldman in the Crucible

A bit of a witch trial in Washington today. I cannot say that the Goldman folks acquitted themselves well, but that’s not really very interesting. What was interesting was that Senator Levin had a mission to make Goldman look bad, so when they didn’t, he simply said they did. He asked stupid, unanswerable questions, or questions in service of non-sequiturs as if the answers mattered, and got all steamed when the Goldman guys refused to pretend that he was making sense. I thought of that Congressman worrying about whether too many marines would cause Guam to capsize. What do you say to the man who asks whether you walk to school or carry your lunch?

Two examples. In an email, one Goldman guy writes to another, referring to the portfolio in the SEC case as having been picked by “ACA/Paulson.” According to the author of the email, who was sending it to someone who fully understood Paulson’s role, whatever that was, “ACA/Paulson” was shorthand for that relationship, not an indication of Paulson’s status as an equal partner in the deal. Levin only wanted to know if the email was “accurate.” Well, as between the sender and the recipient, it was accurate if the recipient understood it to mean what the sender intended it to mean. But to Senator Levin, the email, if it were “accurate,” would prove that ACA and Paulson were equal partners in the selection process, because that’s what the words would mean to an outside observer. Now, it’s entirely possible that the author of the email is lying about the import of the note, but Levin didn’t say that. He simply acted as if his interpretation of the note matters more than those of the sender and the recipient, and that’s beyond stupid.

But Senator Levin wasn’t done. He grilled Goldman’s CFO over whether the firm was “short” the mortgage market throughout 2007. This is important to Sen. Levin because he wants to say that Goldman was peddling mortgage paper during the year despite being short all year. The CFO said that the firm’s net position was mostly short during the year, but not consistently so, and not significantly so. Well, that didn’t help the Senator, who wanted no part of the CFO’s obfuscatory use of the word “net.” “I don’t care about net,” said the Senator, or words to that effect, “I just want to know if you had a short position throughout the year.” The witness tried to explain that the firm had short positions at all times, but was net long at times, which, one would think, would be what matters in determining whether the firm had a conflict of interests. But not to Senator Levin. He just wanted to establish that the short positions were in place, no matter what the firms’ uses for them or its net position on the mortgage market. Since witnesses don’t get to ask questions, the CFO never got to say “What the fuck difference does it make, you moron?” But the thought was hard to escape.

Well, they say we get the government we deserve. What we did to deserve Sen. Levin isn’t clear to me, but I want to apologize from the bottom of my heart for my part in whatever it was, because it must have been a doozy.

(None of this is meant to deny that investment banking has lost its way or that Goldman Sachs has some ‘splainin’ to do. But that’s sort of the point. Intelligent questions from Senators who actually wanted real answers would have been very helpful in illuminating what has gone wrong. Instead, we got theater intended to promote the regulatory bill making its way through the sausage factory. Pity.)

No comments:

Post a Comment

Comments are moderated and will be posted if approved. This blog is for real people. Please use your real full name. Disagreement is welcome; disagreeableness, not so much.