News and Views

On one of the Sunday news shows a couple of reporters explained why they felt the civil and legal actions against Goldman Sachs were questionable. Apart from various perceived technical flaws in the charges, they felt the dire and largely misunderstood “financial meltdown” unreasonably sponsored this ill- conceived, knee-jerk finger pointing, and demonization of Wall Street titans.
The defense of Goldman Sachs commenced in the argument that they (Sachs) were only “making a market”; that is, simply bringing together a seller and a buyer. Under this scenario it was submitted that Goldman Sachs neither offered nor incurred any fiduciary responsibility to either party. And, after the market was “made”, as denoted by the completed sale between seller and buyer, any of the parties to the transaction could subsequently act in their own interests and make any speculations about the future disposition of the transacted financial instrument, by way of insurance or any other method, as they saw fit. This, it was inferred, is archetypal specialized knowledge and procedure that laypersons are unlikely to be familiar with and therefore their visceral reaction to the ugly appearance of the transaction is prejudiced by ignorance of sophisticated business practices. The modus operandi that resulted in the gross enrichment of one party and the bankruptcy of the other, it is asserted, is the normal verity of risk, and are simply one capitalist guessing right and the other guessing wrong, and do not signify any legal or ethical violation that should arouse any governmental or regulatory intervention. There is a circumscribed legitimate sphere for this attitude, but as regards this exemplar, I believe the government has a necessary and activist role to play.
The conventional political antagonism in our society is between those who would like the government to exercise its discretion either more conservatively, or liberally. But what is often forgotten is that government is not constructed as either conservative or liberal; it is just ‘government’, and gets its direction and instruction from the political process. An examination of the Constitution will not find any mention of the words capitalism, socialism, conservative, or liberal. If the contemporaneous culture wants to conduct its economic affairs capitalistically, socialistically, any hybrid of the two, or employ some opportune future system not yet devised, it will find no mandate codified in our founding document restricting the preference to any particular system of economic arrangement. And neither will any special dispensation for practitioners of any particular economic philosophy currently be found. So, even if the transaction(s) of Goldman Sachs are in compliance with the normal rules and shenanigans accepted among and between capitalists themselves, this doesn’t place them beyond review of a government charged to promote (and presumably protect) the general welfare. There is no binding ecumenical conclusion requiring that activities which grossly enrich a few, while simultaneously being the etiology of a wide and growing swath of social destruction, must be tacitly accepted as sacrosanct components of some catholic economic format. If it is accepted that government can regulate particular activities of capitalists based on “environmental impact”, it would seem to suggest that dubious gadgets such as Derivatives and Credit Default Swaps wouldn’t be entitled to immunity from review or regulation simply because they represent creativity and intellectual invention; especially when the invention’s ultimate value and utility to the general welfare becomes empirically debatable. And, I think it is appropriate and warranted for government to scrutinize methodologies and attached implications, where the conceptualization and marketing of failure is incentivized. The raison d’être of our government is not to validate capitalism, but to be the referee in the various affairs and interests of the public.
So, let the investigations in Congress and/ or the courts go on. I am not saying this to provocatively take a side in the petty differences of political parties, or because of some fascination with the fraternal bickering of lawyers. But I fear the fate of popular democratic government if it loses the power to underwrite the only real ‘currency’ of social order, namely the predictability of human behavior, if by way of these increasingly fanciful and exotic abstractions, it is revealed that the already fragile illusion of ‘money’ has clearly and harmfully devolved into unintelligible mathematical formulations fabricated primarily to enrich self-interested Plutocrats? Elements of capitalism are incompatible with decent democracy, and consequently, our government of the people, by the people, and for the people, is obligated to address these issues.