Commentary—

Wall Street Gets It

By Donald Kaul

I don’t know why people, even smart people, keep saying that bankers and the rest of the Wall Street crowd don’t get it.

Dana Milbank, writing in The Washington Post, said it just the other week after Lloyd Blankfein, the Goldman Sachs chairman, testified before the Financial Crisis Inquiry Commission.

It was a remarkably arrogant performance, even for a Wall Street prima donna. Blankfein’s firm, the very exemplar of the too-big-to-fail model, received a many-multibillion-dollar bailout from the federal government last year as the Obama administration struggled to save the economy from a 1929-style grave.

It was also given permission to make itself into a bank holding company, thus avoiding the fate of Lehman Brothers, a too-big-to-fail firm that failed.

Having passed through a financial Valley of Death with the aid of the federal government, you would think that Blankfein would be a little humble. Grateful even.

Nope.

He bragged, “We do a very, very good job,” and that “key attributes of our energy, culture and processes were validated” by the crisis.

So good a job had he and his colleagues done that his company was setting aside nearly $17 billion to reward them. (Blankfein himself was paid $68 million in 2007, when the seeds of our current disaster were being sown.)

The chairman of the commission tried to get Blankfein to take some sort of responsibility for something — anything at all.

“I’m troubled by your inability to accept the probability or certainty that your firm would not have made it through the storm but for the vast array of federal assistance,” the chairman said.

And later: “You were securitizing and underwriting packages of mortgages, and when it was clear the market was going bad…you kept moving this product.”

Blankfein was still having none of it.

“I know it’s become part of the narrative to some extent that people knew what was going to happen,” he said. “We did not know at any minute what would happen next.”

Did I mention he made $68 million in 2007?

My income is in the high four figures; I don’t know what’s going to happen next. When they pay you 68 million bucks, you should know.

And there’s pretty good evidence that Blankfein and his gang did know. Goldman was selling mortgage securities to its loyal customers as good investments while at the same time making (winning) bets that those securities would fall in value.

Yet Dana Milbank, one of Washington’s better reporters, began his otherwise excellent report (from which I borrowed shamelessly) by saying: “Goldman Sachs Chairman Lloyd Blankfein still doesn’t get it.”

Dana, baby, they get it. We’re the ones who don’t get it. The only reason these guys aren’t (officially) crooks is that, for the most part, they can bribe politicians to legitimize their scams. They laugh in the faces of people like those on the Financial Crisis Inquiry Commission. And they’d keep laughing all the way to the bank, except they are the bank.

It’s been said that Bernie Madoff was, if nothing else, a clever scoundrel. He wasn’t. He was a fool. He broke the law. You don’t have to break the law to cheat people on Wall Street. Just play by the rules (which is easy when you make the rules) and the billions come rolling in.

Which is why I hope President Obama is right when he says he’s going to be able to tax the big banks out of some of their “profits.”

There wouldn’t have been any profits had the federal government not come to the rescue of the economy. Half of the now-prosperous banks wouldn’t be here.

Instead of that bleak landscape, big banks and securities firms are on pace to pay their people about $145 billion in 2009, a record sum.

In the name of justice — a word not heard much in Washington recently — those banks and financiers should pay something back to us to help ease the pain they caused.

(Columnist Donald Kaul lives in Ann Arbor, Mich.)