Wall Street Greedheads are Back and Ready to Steal Your Money
Well as long as we’ve got Paul Krugman up on the site, let’s talk about today’s column titled “The Joy of Sachs.” Paul’s always been good at puns, but he’s best at clearly describing what’s going on in our economy, how it affects us, and what needs to be changed.
Krugman’s column is about how and why Goldman Sachs is making billions again and is about to reward its employees with huge bonuses. How can this be? We haven’t even seen the worst of this recession yet. How can they possibly be making so much money again? Paul gives you three reasons:
1. They are really good at what they do – making money out of nothing.
2. The compensation system for financial “wizards” hasn’t gone away.
3. Government hasn’t yet done anything to protect us from another crisis.
Krugman writes:
Financial firms, we now know, directed vast quantities of capital into the construction of unsellable houses and empty shopping malls. They increased risk rather than reducing it, and concentrated risk rather than spreading it. In effect, the industry was selling dangerous patent medicine to gullible consumers.
Goldman’s role in the financialization of America was similar to that of other players, except for one thing: Goldman didn’t believe its own hype. Other banks invested heavily in the same toxic waste they were selling to the public at large. Goldman, famously, made a lot of money selling securities backed by subprime mortgages — then made a lot more money by selling mortgage-backed securities short, just before their value crashed. All of this was perfectly legal, but the net effect was that Goldman made profits by playing the rest of us for suckers.
And Wall Streeters have every incentive to keep playing that kind of game.
…
Now the last time there was a comparable expansion of the financial safety net, the creation of federal deposit insurance in the 1930s, it was accompanied by much tighter regulation, to ensure that banks didn’t abuse their privileges. This time, new regulations are still in the drawing-board stage — and the finance lobby is already fighting against even the most basic protections for consumers.
Who do you think will win the battle? I’m betting on the greedheads. They always win, and everybody else loses.
The only way they don’t win is with tight government regulations that make the “perfectly legal” things they do now – making money off the lies they tell us - a felony, and then the greedy bastards get prosecuted, their assets get forfeited, and they get thrown in jail.