Sunday, April 25, 2010

Fight On, Goldman Sachs!

Frank Rich
Op-Ed Columnist
The New York Times
April 24, 2010

MAYBE Lloyd Blankfein was doing “God’s work” after all.

When the Goldman Sachs chief executive made that tone-deaf remark to an interviewer in November, he became the butt of a million insults, the ultimate symbol of Wall Street’s abdication of responsibility for its sleazy role in the Great Crash of ’08. But now we’ve learned that Blankfein was actually, if inadvertently, on the side of the angels. It’s his myopic, unrepentant truculence that left Goldman exposed to a Securities and Exchange Commission accusation of fraud that will be litigated in public rather than bought off in private. And it’s that S.E.C. legal action that has, in a single week, radically transformed the politics and prospects for financial reform in America.

In just that week, the Party of No’s intransigent campaign of obstruction and obfuscation went belly up. The Obama White House moved to get its act together with an alacrity lacking in its health care campaign, abruptly adding Thursday’s New York speech to the president’s schedule. The bipartisan Financial Crisis Inquiry Commission at last issued its first subpoena — to Moody’s, one of the rating agencies that for a fat fee slapped AAA ratings on the toxic garbage Goldman packaged and sold to benighted suckers on the other end of a huge bet placed by a favored client, the hedge fund player John Paulson.

Salutary as this rush of events is, it still adds up so far to just one small step for mankind. We don’t yet know how many loopholes lobbyists will slip into the bill-in-progress. We don’t yet know the outcome of the S.E.C. case, let alone what other much-needed legal pursuit of Wall Street may follow it. And we still don’t know what, if any, true correction lies ahead for the financial sector’s runaway casino culture — much of it legal — that turned a subprime-mortgage bubble in a handful of overheated American states into an international economic meltdown.

But before we get to those gloomy caveats, let’s smell a few roses.

The farcical spectacle of the Republican retreat has been particularly enjoyable. It was only last Sunday that Senator Mitch McConnell went on CNN to flog his big lie that the Senate reform bill somehow guaranteed bank bailouts — a talking point long ago concocted for the G.O.P. by its favorite spin strategist, Frank Luntz. McConnell’s House counterpart, John Boehner, was meanwhile waging a campaign to portray the Democrats as shills for Goldman, a major source of Obama donations and personnel. Never mind that the Bush White House chief of staff, Joshua Bolten, was a Goldman alumnus and that both McConnell and Boehner had voted for the very bailouts they now profess to abhor (a k a TARP) after a sales job by Henry Paulson, the Bush Treasury secretary who was Blankfein’s predecessor as Goldman’s C.E.O.

In another bit of hubris, McConnell boasted of a letter signed by his caucus pledging 41-vote unity to block the reform bill. But on Monday, Senator Bob Corker of Tennessee, a Republican who had been negotiating with his Democratic peers in good faith, took to the Senate floor to start breaking ranks with his dear leader. The bill at hand, Corker said, was “anything but” a mandate for bank bailouts. On Tuesday, the House G.O.P. leadership distributed a spreadsheet publicizing Goldman’s donations to Democrats, and this too backfired. Politico reported the next morning that Goldman’s political action committee donated more money to politicians in March than in all of 2009, most of it to Republicans. The total take for Boehner was double that of Harry Reid’s.

That afternoon Charles Grassley of Iowa, up for re-election this fall, became the first G.O.P. senator to vote with the Democrats on part of the pending package. Maybe someone showed him another spreadsheet — a Pew poll finding that even in a divided America 61 percent favor financial regulatory reform. The unity pledge in McConnell’s pocket was now worth as much as a mortgage-backed security.

The White House’s own shift last week, though far less momentous than the Republicans’, was also promising. A year ago, President Obama had delivered an address labeling the financial crisis a “perfect storm” — the term long favored by Robert Rubin, the discredited guru of bailed-out Citigroup and mentor to many on the White House economic team. At Cooper Union on Thursday, the president, while far from fiery, was no longer likening the calamity to a natural disaster beyond anyone’s control. He chastised those in the financial sector who saw the free market as “a free license to take whatever you can get, however you can get it.” He was no longer describing Blankfein, sitting before him, as a “very savvy” businessman — a compliment he had bestowed on him and Jamie Dimon of JPMorgan Chase just 10 weeks earlier.

Still, the Republicans had half a point when they indicted the White House for being too close to Goldman and its brethren. The truth is that both parties are too often in hock to the financial sector, and both parties bear responsibility for the meltdown. In response to a question from Jake Tapper of ABC News last weekend, Bill Clinton was right to say that he and two of his Treasury secretaries, Rubin and Lawrence Summers, “were wrong” to leave derivatives unregulated. They deserve regulation, Clinton said, because “sometimes people with a lot of money make stupid decisions and make it without transparency.”

Those same people also make smart decisions without transparency — smart for them, if not the country. Even if the reform bill does bring stringent regulation to derivatives — a big if — that won’t rectify capitalism’s worst “innovation” in our own Gilded Age: the advent of exotic, speculative “investments” that have no redeeming social value and are instead concocted to facilitate gambling for its own sake. Such are the Goldman instruments of mass financial destruction that paid off for John Paulson. In 2007 alone, according to Gregory Zuckerman in his book “The Greatest Trade Ever,” Paulson’s personal take amounted to over $10 million a day, “more than the earnings of J. K. Rowling, Oprah Winfrey and Tiger Woods put together.” That “financial alchemy,” as Zuckerman calls it, explains why the finance sector’s share of domestic corporate profits, never higher than 16 percent until 1986, hit 41 percent in the last decade.

As many have said — though not many politicians in either party — something is fundamentally amiss in a financial culture that thrives on “products” that create nothing and produce nothing except new ways to make bigger bets and stack the deck in favor of the house. “At least in an actual casino, the damage is contained to gamblers,” wrote the financial journalist Roger Lowenstein in The Times Magazine last month. This catastrophe cost the economy eight million jobs.

Lowenstein argued for a transfer tax on financial trading, a reform that has found favor with Britain’s prime minister, Gordon Brown, if not our own Treasury secretary, Timothy Geithner. Equally compelling is the notion articulated by Ryan Avent, a blogger at The Economist, that “public anger” and “hooting derision” be increased to shame Wall Street into changing its ethos. This assumes, of course, that there is any capacity for shame. Perhaps the most productive tactic comes from Ted Kaufman, Democrat of Delaware, who is using his lame-duck residence in the Senate (as the appointee to Joe Biden’s old seat) to demand that we root out the “fraud and potential criminal conduct” that “were at the heart of the financial crisis.”

To achieve this overdue reckoning will require action — by the S.E.C., the Justice Department and any other legal authority that wants to get into the act. That no one at Lehman Brothers has yet been held liable for its Enronesque bookkeeping deceit is appalling. That we still haven’t seen the e-mail and documents that would illuminate A.I.G.’s machinations with Goldman and the rest of its counterparties amounts to a cover-up. That investigative journalists have consistently been way ahead of the authorities, the S.E.C. included, in uncovering Wall Street’s foul play is a scandal. If this culture remains in place, the whole crisis will have gone to waste.

As a reminder of the unchastened status quo, Blankfein remains the gift that keeps on giving. On Thursday, The Financial Times reported that he had been calling clients to argue that the S.E.C. case against Goldman would ultimately “hurt America.” The opposing point of view was presented by Ira Glass on his radio show “This American Life” this month. With reporters from the nonprofit journalistic organization ProPublica, it told the story of another hedge fund, Magnetar, that gamed the housing bubble. Bankers who worked on Magnetar deals walked away with their huge bonuses well before disaster struck — or, as the program put it, “bankers made money even when they were buying things that eventually blew up the bank.” Not to mention the economy. And it was all legal.

To award the audience a bonus, “This American Life” concluded with a Broadway song commissioned from a co- author of the satirical musical “Avenue Q.” Titled “Bet Against the American Dream,” it distills a complex financial saga to its essence: Those who shorted the housing market shorted the country.

Go online, listen to it and laugh. But the fact remains that those who truly hurt America are laughing harder still, all the way to the bank.  

Copyright 2010 The New York Times Company

Sunday, April 18, 2010

Welcome to Confederate History Month

Frank Rich
Op-Ed Columnist
The New York Times
April 17, 2010

It's kind of like that legendary stunt on the prime-time soap "Dallas," where we learned that nothing bad had really happened because the previous season's episodes were all a dream. We now know that the wave of anger that crashed on the Capitol as the health care bill passed last month — the death threats and epithets hurled at members of Congress — was also a mirage.

Take it from the louder voices on the right. Because no tape has surfaced of anyone yelling racial slurs at the civil rights icon and Georgia Congressman John Lewis, it’s now a blogosphere “fact” that Lewis is a liar and the “lamestream media” concocted the entire incident. The same camp maintains as well that the spit landing on the Missouri Congressman Emanuel Cleaver was inadvertent spillover saliva from an over-frothing screamer — spittle, not spit, as it were. True, there is video evidence of the homophobic venom directed at Barney Frank — but, hey, Frank is white, so no racism there!

“It’s Not About Race” declared a headline on a typical column defending over-the-top “Obamacare” opponents from critics like me, who had the nerve to suggest a possible racial motive in the rage aimed at the likes of Lewis and Cleaver — neither of whom were major players in the Democrats’ health care campaign. It’s also mistaken, it seems, for anyone to posit that race might be animating anti-Obama hotheads like those who packed assault weapons at presidential town hall meetings on health care last summer. And surely it is outrageous for anyone to argue that conservative leaders are enabling such extremism by remaining silent or egging it on with cries of “Reload!” to pander to the Tea Party-Glenn Beck base. As Beck has said, it’s Obama who is the real racist.

I would be more than happy to stand corrected. But the story of race and the right did not, alas, end with the health care bill. Hardly had we been told that all that ugliness was a fantasy than we learned back in the material world that the new Republican governor of Virginia, Robert McDonnell, had issued a state proclamation celebrating April as Confederate History Month.

In doing so, he was resuscitating a dormant practice that had been initiated in 1997 by George Allen, the Virginia governor whose political career would implode in 2006 when he was caught on camera calling an Indian-American constituent “macaca.” McDonnell had been widely hailed by his party as a refreshing new “big tent” conservative star when he took office in Richmond, the former capital of the Confederacy, in January. So perhaps his Dixiecrat proclamation, if not a dream, might have been a staff-driven gaffe rather than a deliberate act of racial provocation.

That hope evaporated once McDonnell was asked to explain why there was no mention of slavery in his declaration honoring “the sacrifices of the Confederate leaders, soldiers and citizens.” After acknowledging that slavery was among “any number of aspects to that conflict between the states,” the governor went on to say that he had focused on the issues “I thought were most significant for Virginia.” Only when some of his own black supporters joined editorialists in observing that slavery was significant to some Virginians too — a fifth of the state’s population is black — did he beat a retreat and apologize.

But his original point had been successfully volleyed, and it was not an innocent mistake. McDonnell’s words have a well-worn provenance. In “Race and Reunion,” the definitive study of Civil War revisionism, the historian David W. Blight documents the long trajectory of the insidious campaign to erase slavery from the war’s history and reconfigure the lost Southern cause as a noble battle for states’ rights against an oppressive federal government. In its very first editorial upon resuming publication in postwar 1865, The Richmond Dispatch characterized the Civil War as a struggle for the South’s “sense of rights under the Constitution.” The editorial contained not “a single mention of slavery or black freedom,” Blight writes. That evasion would be a critical fixture of the myth-making to follow ever since.

McDonnell isn’t a native Virginian but he received his master’s and law degrees at Pat Robertson’s university in Virginia Beach during the 1980s, when Robertson was still a rare public defender of South Africa’s apartheid regime. As a major donor to McDonnell’s campaign and an invited guest to his Inaugural breakfast, Robertson is closer politically to his protégé than the Rev. Jeremiah Wright ever was to Barack Obama. McDonnell chose his language knowingly when initially trying to justify his vision of Confederate History Month. His sanitized spin on the Civil War could not have been better framed to appeal to an unreconstructed white cohort that, while much diminished in the 21st century, popped back out of the closet during the Obama ascendancy.

But once again you’d have to look hard to find any conservative leader who criticized McDonnell for playing with racial fire. Instead, another Southern governor — who, as it happened, had issued a Confederate Heritage Month proclamation of his own — took up his defense. The whole incident didn’t “amount to diddly,” said Haley Barbour, of Mississippi, when asked about it by Candy Crowley of CNN last weekend.
Barbour, a potential presidential aspirant, was speaking from New Orleans, where the Southern Republican Leadership Conference was in full cry. Howard Fineman of Newsweek reported that he couldn’t find any African-American, Hispanic or Asian-American attendees except for the usual G.O.P. tokens trotted out as speakers — J. C. Watts, Bobby Jindal and Michael Steele, only one of them (Jindal) holding public office.
New Orleans had last attracted G.O.P. attention in 2008, when John McCain visited there as part of a “forgotten places” campaign tour to deliver the message that his party cared about black Americans and that “never again” would the city’s tragedy be ignored. “Never” proved to have a shelf life of less than two years. None of the opening-night speakers at last weekend’s conference (Newt Gingrich, Liz Cheney, Mary Matalin et al.) so much as mentioned Hurricane Katrina, according to Ben Smith of Politico. When Barbour did refer to it later on, it was to praise the Bush administration’s recovery efforts and chastise the Democrats’ “man-made disaster” in Washington.

Most Americans who don’t like Obama or the health care bill are not racists. It may be a closer call among Tea Partiers, of whom only 1 percent are black, according to last week’s much dissected Times/CBS News poll. That same survey found that 52 percent of Tea Party followers feel “too much” has been made of the problems facing black people — nearly twice the national average. And that’s just those who admit to it. Whatever their number, those who are threatened and enraged by the new Obama order are volatile. Conservative politicians are taking a walk on the wild side by coddling and encouraging them, whatever the short-term political gain.

The temperature is higher now than it was a month ago. It’s not happenstance that officials from the Sons of Confederate Veterans in Virginia and Mississippi have argued, as one said this month, that the Confederate Army had been “fighting for the same things that people in the Tea Party are fighting for.” Obama opposition increasingly comes wrapped in the racial code that McDonnell revived in endorsing Confederate History Month. The state attorneys general who are invoking states’ rights in their lawsuits to nullify the federal health care law are transparently pushing the same old hot buttons.

“They tried it here in Arkansas in ’57, and it didn’t work,” said the Democratic governor of that state, Mike Beebe, likening the states’ health care suits to the failed effort of his predecessor Orval Faubus to block nine black students from attending the all-white Little Rock Central High School. That battle for states’ rights ended when President Eisenhower, a Republican who would be considered a traitor to his party in 2010, enforced federal law by sending in troops.

How our current spike in neo-Confederate rebellion will end is unknown. It’s unnerving that Tea Party leaders and conservatives in the Oklahoma Legislature now aim to create a new volunteer militia that, as The Associated Press described it, would use as yet mysterious means to “help defend against what they believe are improper federal infringements on state sovereignty.” This is the same ideology that animated Timothy McVeigh, whose strike against the tyrannical federal government will reach its 15th anniversary on Monday in the same city where the Oklahoma Legislature meets.

What is known is that the nearly all-white G.O.P. is so traumatized by race it has now morphed into a bizarre paragon of both liberal and conservative racial political correctness. For irrefutable proof, look no further than the peculiar case of its chairman, Steele, whose reckless spending and incompetence would cost him his job at any other professional organization, let alone a political operation during an election year. Steele has job security only because he is the sole black man in a white party hierarchy. That hierarchy is as fearful of crossing him as it is of calling out the extreme Obama haters in its ranks.

At least we can take solace in the news that there’s no documentary evidence proving that Tea Party demonstrators hurled racist epithets at John Lewis. They were, it seems, only whistling “Dixie.”

Copyright 2010 The New York Times Company