Bought and Paid For by Charles Gasparino

Author:Charles Gasparino
Language: eng
Format: epub
Publisher: Penguin Group USA, Inc.
Published: 2010-09-23T04:00:00+00:00

The growing anti-Wall Street populism had John Mack, now the chairman of Morgan Stanley, concerned. Normally, hate mail rarely makes it to the desks of Wall Street’s top executives, as underlings intercept and deal with it. But as the public was growing increasingly frustrated with Wall Street, Mack began occasionally reading some of the more vitriolic letters, in part because it helped him gauge the public’s foul mood toward the industry and anticipate what politicians might do in response.

In the fall of 2009, after reading a particularly nasty piece of hate mail that was addressed to both him and Lloyd Blankfein, Mack called the Goldman CEO to express his concern.

“That’s nothing,” Blankfein replied. “I get seventy-five to a hundred of those a day.” Goldman now disputes the magnitude of the hate mail, but what it won’t dispute is that around this time Blankfein was resigned to the fact that Goldman was being unfairly singled out as the great villain of the great recession, much as J. P. Morgan had been during the Great Depression a generation earlier. He had directed his press staff to keep telling reporters that Goldman hadn’t been bailed out at all or, to be more precise, never needed a bailout.

But Mack, himself a recipient of government money, knew the argument could never hold water, not with the public, not with Wall Street’s new masters in the federal government like the banker-hating Congresswoman Maxine Waters, and not with unemployment hovering around 10 percent while Morgan Stanley, Goldman, and the rest of Wall Street were feasting on the benefits of the 2008 financial rescue that President Bush had enacted as an emergency and that President Obama had left firmly in place.

While John Mack was continuing to take the high road, the partners at Goldman were acting as if they were entitled to the vast riches they had received on the backs of taxpayers, which brought even more attention and further condemnation. Maybe it was because the firm believed its own mythology of Goldman as something special, the elite of the elite on Wall Street. In the world of Goldman Sachs, its partners were special because they are, after all, plucked from the best schools, and they deserved (well, they believed they deserved) those multimillion dollar salaries, having survived in a corporate culture that demanded nothing short of success.

This Goldman myth is best exemplified in Blankfein’s already famous interview with the Times of London, in which he defended Goldman’s success and executive bonuses by saying, “As the guardian of the interests of the shareholders and, by the way, for the purposes of society, I’d like [my bankers] to continue to do what they’re doing.” He concluded by saying he was simply “doing God’s work.”

The Goldman myth is just that, a myth, because it ignores or at least downplays some very important facts. First, Goldman had been far from infallible; the firm owned much of the same toxic housing debt that took down Merrill, Citigroup, and the rest, even if Goldman had hedged its bets better than most.

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