“God gave me my money.” – John D. Rockefeller
One and the Same
Today, we take a break from discussions surrounding the economy and markets to explore a different path. With a touch of humor and a hint of curiosity, we delve into the murky depths of our thoughts, searching for deeper meaning.
Our muse for this exploration is none other than Lloyd Blankfein, the long-serving CEO of Goldman Sachs. News has emerged that he plans to step down as CEO, possibly by the year’s end, prompting a moment for introspection and perhaps even celebration.
Rewind to fall 2009, shortly after the bright lights of a bullish market began to shine again. It was then that Blankfein shared a striking revelation with The Times of London, declaring himself just a banker doing “God’s work.” At the time, many were left wondering what exactly he meant by that. Were you puzzled too?
Perhaps he intended to elevate the role of his firm to that of a noble cause, one dedicated to the efficient allocation of capital. By Blankfein’s assertion, the business of Goldman and the will of God appeared intertwined.
However, The Times seemed skeptical of Blankfein’s claims. The article noted that Goldman Sachs generates revenue by charging substantial fees—typically between 2% to 4%—for advisory services and asset management. Among other earnings, the firm also profits from trading with its own capital.
Natural and Moral Order
It’s worth noting that Blankfein neglected a significant aspect of his narrative. Just a year earlier, during the peak of the financial crisis, taxpayer dollars helped rescue Goldman and other major banks through AIG bailouts. Was that also considered “God’s work” in his eyes?
We certainly cannot claim to understand the divine will; however, Ralph Waldo Emerson, in his essay Nature, offers a perspective on the inherent order of the universe.
In following Emerson’s line of thinking, we recognize undeniable truths about how the world operates. Attempting to counter these truths often leads to consequences, regardless of individual opinions. These facts hold firm whether we agree with them or not.
For instance, Pi is an irrational number, and no matter how one rounds it, the relationship between a circle’s circumference and diameter cannot be simplified to a fraction. This discrepancy exists independently of our perceptions.
Similarly, there are fundamental moral truths: often, one cannot have everything they desire. Budget deficits matter, artificially lowering interest rates skews the economy, and bad financial decisions lead to regrettable outcomes. Ultimately, actions have consequences, and what one puts forth frequently comes back around.
So here’s the crux…
Good Riddance, Lloyd Blankfein!
While we may not grasp the full extent of divine intentions, we certainly can surmise what they aren’t. The logical response to the mortgage-backed securities crisis would have been to allow failing banks to collapse completely. A sweeping panic should have eradicated all financially insolvent institutions.
Nature exhibits no mercy for the notion of “too big to fail.” Taxpayer-funded bailouts of major banks likely contradict true divine intentions. No matter how Blankfein positions himself, a business that privatizes profits while socializing losses strays from the path of righteousness.
The bailout of the U.S. financial system, enacted through the Emergency Economic Stabilization Act of 2008, is now nearly a decade old. While many may believe it’s ancient history, its significance endures.
The effects of the bailout ripple through financial markets and the broader economy. Hazardous mortgage-backed securities still linger on the Federal Reserve’s balance sheet, and part of its quantitative tightening efforts involves gradually reducing these holdings. Coupled with rising federal funds rates, this might trigger the next recession.
Therefore, with Blankfein’s impending exit from Goldman Sachs, there’s no way we’ll grant him an easy departure. While the bailout was being formulated, Blankfein stood in the midst of the action, supporting his Goldman peers Hank Paulson and Neel Kashkari, securing his bank’s share of taxpayer assistance. Following the bailout and a lucrative bonus, he offered a non-apology:
“Certainly, our industry is responsible for things. We’re a leader in our industry, and we participated in things that were clearly wrong and we have reasons to regret and apologize for.”
—Lloyd Blankfein, chairman and chief executive, Goldman Sachs, November 17, 2009.
Good riddance!
Sincerely,
MN Gordon
for Economic Prism
