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A year after the financial crisis of 2008, Lloyd Blankfein, the CEO of Goldman Sachs,  found himself vilified for his firm’s quick return to risky trading in spite of its new bank holding company status. Populist resentment at the time was especially pitted against the hefty bonuses from the trades. Also, people were upset about the benefits that the bank had obtained from the decisions of its alums in the U.S. Government—specifically, in the U.S. Department of the Treatury. For instance, Goldman Sachs and other AIG counterparties got a the dollar-for-dollar payout from AIG thanks to an infusion of funds for that specific purpose by Treasury. Regardless, in an interview with the London Times, the highest-paid CEO (at least in the financial sector) dismissed such talk and defended his money-making machine and its compensation.  In addition to being the engine of economic recovery, according to Blankfein, Goldman Sachs provides a social function in making capital available to companies so they can expand. Stunningly, he adds, “I’m doing God’s work.”[i]  Such a claim is a far cry indeed from Thomas Jefferson’s warning that banking institutions are more dangerous to our liberties than standing armies.[ii]  Perhaps God intends to undo our liberties by bailing out the banks.

Besides these rather obvious problems with Blankfein's religious claim is his presumption to know what God's work is, and, furthermore, that he is doing it.   Even though a feckless system of corporate governance can enable a CEO to essentially function as his or her own boss, including doing the board's job of evaluating his or her own performance, it is a tall order for a human being to be able to evaluate his performance as God's work.   To be sure, it is possible that God is an intelligent being that bestows favor on his golden stewards for doing His work.

Lloyd Blankfein may have been involved in two conflicts of interest: 1) that of having excessive power over the board whose principal task it is to oversee him, 2) having communicated with GS alums in high posts in the U.S. Government (e.g., Hank Paulson) and perhaps having them enact policies on GS's behalf.   It may be that institutional and personal conflicts of interests can become so ubiquitous that they are simply not seen by the culprits. Furthermore, it could be that the denial enabled by a tacit presumptuousness is like a white movie screen on which even doing God's work can be projected. How ironic it is, that sordid proprietary interest could operate not merely under the subterfuge of being a neutral "market-maker," but also as God's work. Such work is two degrees of freedom away from squalid greed. So it is remarkable that the two could become conflated in a mind.

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[i] John Arlidge, I’m doing ‘God’s work. Meet Mr. Goldman Sachs, The Sunday Times, 11/9/09.
[ii] Thomas Jefferson to John Taylor, Monticello, May 28, 1816, in Paul L. Ford, ed., The Writings of Thomas Jefferson (New York: G.P. Putnam’s Sons, 1892-99),  XI, 533.

Goldman Sachs’ (GS) board considered buying AIG in late June, 2008, so GS could use AIG’s premium float for capital (rather than becoming a bank holding company and using deposits to fund trades or as collatoral for leveraged trading).  Strangely, GS’s board didn’t realize that another part of GS was questioning the “mark to market” valuations that AIG was making on its swaps.  Also, AIG had revised its Nov and Dec 07 losses from $1b to $5b.  GS and AIG had the same public accountant (Price), which GS was using to get AIG to down-value the value of its assets. On that week in Sept, 2008, when Lehman went under, JP Morgan and GS were working to put together a loan of $50 billion to cover AIG’s deepening hole  At the same time, the two banks were demanding new collateral payments from AIG, pushing the insurance giant deeper into its hole.  The Fed and AIG wondered if the fees and interest rate being set by the two banks for themselves and other contributing banks wasn’t essentially stealing the company.

As it turned out, AIG received funding from the Federal Reserve in exchange for the government taking warrants on a 79.9% ownership of the company.  Goldman had bought $20 billion of insurance from AIG and received as much as $13 billion from AIG when the Fed funded AIG with $90 billion.  The counterparties were paid in full, rather than the sixty cents on the dollar that AIG negotiators had been pressing. Even though GS was hedged because it had purchased credit default swaps in case AIG were to default, one has to ask whether Blankfein at GS used Paulson to have the government pay GS through AIG.  Blankfein claims that his bank would not have gone under had AIG imploded, but surely GS relies on there being a financial market. Also, when the Fed essentially took over AIG, Paulson wanted to appoint a new CEO.  Paulson was of course an ex-CEO of GS.  Paulson had one of his advisors, also a GS alum, look at candidates.  The aid favored Ed Liddy, who was on GS’s board.   GS would be running AIG.  Hence, the insurance giant would not run interferance on the $13 billion going to GS.

Besides these conflicts of interest, Goldman trades securities for big firms and pension funds. It also acts as adviser to many of the companies whose securities it trades.   In other words, the problem is in its core business. So a person could be excused for wincing at Lloyd Blankfein’s statement that his bank is performing not only a social function in providing capital to firms so they can expand, but is “doing God’s work” as well.   John D. Rockefeller used the same expression in regard to his Standard Oil monopoly that offered its remaining competitors the choice to be bought up or drowned.  According to Rockefeller, Standard Oil was Noah’s Ark, saving the oil refining industry from destructive competition.   So what if the uncooperative were put under?  They deserved it. Besides, the industry would be saved.  In this regard, the monopolist viewed himself as a Christ figure.   Are the golden boys the incarnation of this figure?   It goes without saying, but I will anyway, that Blankfein has no misgivings in paying (and being paid) record bonuses in 2009.    The presumptuousness of those bankers aside, Jefferson’s dictum that a national bank would be more dangerous than a standing army to democracy seems apt.  We, the American citizens, have an amazing ability not to see things, and then to tacitly enable that which is in actuality hardly a savior.

Source: http://www.timesonline.co.uk/tol/news/world/us_and_americas/article6907681.ece?token=null&offset=0&page=1