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Comment on ‘The Goldman Drama’ (David Brooks, 04/29/2010)

April 29, 2010

In response to:

The Goldman Drama

New York Times | April 29, 2010

I generally like David Brooks. He’s clearly smart, generally thoughtful & undoubtedly well-educated. He very often comes across, in that distinctly Canadian way that so many of us find pleasantly charming, as sincere and well-intentioned. He also seems to have a good heart – or at least to want to have a good heart – which is particularly impressive given that the influence during his formative years of The University of Chicago’s philosophical school of self-serving neo-con ideology and its rather dour view of human nature. He’s also capable of being refreshingly open-minded for someone who insists that he’s a conservative – so much so, in fact, that there have been consistent suggestions on both the left and the right that he’s not really a conservative at all. In short, he’s “one of the good ones.”

But David often can’t seem to escape the gravity of his ideological roots, as his piece titled “The Goldman Drama” published yesterday in The New York Times sadly demonstrates.

To summarize the column: Brooks claims that the real estate bubble that preceded the Crash of ’08 was caused by some sort of broad social delusion, and that the fact that people like bankers & traders didn’t recognize the danger was nothing more than a tragic artifact of the fact that “people who make it into the establishment work and play well with others.” His argument rests on the notion that such people aren’t narcissists blinded by greed, he but rather are merely incapable of seeing past the prevailing groupthink. Because of this they’re cognitively incapable of heeding the warnings (presumably coming from unwashed non-establishment types, such as those little grey bureaucrats from Washington) that their happy little party is in a rowboat headed over Niagara Falls.

Having established this naïve bit of credulous apologia as his premise, he then proceeds to force himself, not unlike a clumsy sophomore on an over-served Freshman woman in a dark corner at an early September frat party, to the conclusion that because regulators are also part of “the clueless establishment”, they too would never have been able to figure out that The Golden Boys were up to no good.

Oh! Insult to our intelligence! How must we loathe thee? Let me count the ways:

  • Contrary to the characterization implied by Mr. Brooks caricature, “the “establishment” is no monolith comprised of well-meaning, collegial gents & gentesses, coolly sipping cocktails and nodding their heads in polite agreement to bon mots murmured gently just above the dulcet tones of chamber music. To the contrary, some – in fact, most – of the meanest, most narcissistic, amoral and opinionated jerks I know are members of “the establishment”. While it’s certainly true that they tend to have been well-trained in the art of pursuing their ends through means more characteristic of a minuet than a mosh pit, below the surface – but not all that far below – they’re deeply committed practitioners of nature red in tooth & claw, more than happy to step on the head of the guy whose birthday they feted last night if it in any way serves their interests. In fact, I think it’s fair to say that most of “the establishment” people I know generally consider it a badge of honor if they can find some way to profit at the expense of the people they dine with regularly. I don’t know if Brooks suffers from the blinders of outsider envy (being a Jewish Canadian could certainly foster that kind of psychology), but if he truly believes that the people who sling large sums of money around in pursuit of a few extra basis points of return give a rats ass about what their peers think, he’s deeply misguided.
  • Brooks slips into his premise the notion that regulators and the regulated are all part of the same “establishment.” This idea is absurd, and ignores the fact – taken as gospel by everybody who knows anything about organizational behavior – that people self-select for their roles in society (and, similarly, seek out the communities that come with them) according to their own beliefs, values and aptitudes. Regulators are decidedly not members of the same cliques that produce the denizens of the Wall St apparatchik, or shouldn’t be if the administration that hires them is doing its job. While regulatory capture is certainly the goal of Wall Street and most regulated industries, let’s not get taken in by the cynical notion that it’s inevitable. Treating it as a given is an illegitimate and self-serving little bit of rhetorical skullduggery. To the extent that it lumps all people with a particular kind of technical knowledge into a single monolithic group, Brooks’ argument is actually a back-door attempt at a case against any kind of regulation. See yesterday’s  ‘Illegitimati Non Carborundum piece for a discussion of that detestable bit of foolishness.

  • Brooks favored solution would be for financial institutions to issue bonds that could be converted to equity “when some [mythical] regulator deems them to have insufficient capital” (I added the “mythical”). The inadequacy of this scheme is stunning – if regulators aren’t capable of escaping a herd mentality, or if they’re easily manipulated by the people they’re supposed to regulate, how could they possibly make the determination that capital was insufficient? (see: SEC, 2000-2008) Does David really believe that investors, who’ve demonstrated zero compunction against creating carnage if they can make a few extra bucks in the process, wouldn’t find some way to game that system? What happens when some smart financier figures out that the money he’d lose by defaulting on debt (and triggering the insolvency of the financial institution which held it) would be more than offset by the money he’d make when his bonds were converted to equity ? If you think CDOs created moral hazard, try creating a lottery in which ownership of an investment bank is the prize!

I could certainly go on, but hopefully you get the point.

Brooks piece is yet another boorish, intellectually-dishonest attempt by neo-con ideologues to maintain the fictional dream that markets would somehow function for the greater good of all if only dimwitted spoilsports would get the hell out of the way. David, and the rest of his fellow-travelers, can’t open their minds, which have for so long been marinated in the toxic broth of cynicism and distrust, to the notion that there are people in the world whose primary motivation something other than greed and self-interest.  They can’t see that there are people who believe in good governance as part of a vision of a just and sustainable society, and who would be perfectly satisfied devoting their professional efforts to maintain a system that promotes the commonweal. (As an aside, this is a strange position for people so often express a fetishistic adulation for soldiers, firemen and cops. I guess that only working class patsies can put the interests of others before their own selfish desires….)

The financial crisis wasn’t caused by a bunch of well-meaning people drinking their own kool-aid. Neither do its roots lay primarily in the overreach of unqualified home-owners, nor government policies aimed at spurring investment in disadvantaged areas, nor even the warped incentives which led front-line salespeople to push crappy mortgages on ill-informed consumers.  The asset bubble and the crash that followed it were the direct result of the greed and irresponsibility of the people who found a way to make boatloads of money by sealing fragile, toxic crap in bubble-wrap and calling the package clean & unbreakable. I’ll describe that in more detail in the next installment of my ‘Goldman Sach’s Toxic Asses’ series. But to self-deluded apologists who insist on clinging to the bankrupt notion that regulation is impossible and anathema to prosperity, I hope you’ll all join me in saying “Bugger off!”

One Comment leave one →
  1. April 29, 2010 11:01 pm

    Very well put. Brooks is no more than regurgitating the talking points spoon fed to them by grover norquist and the like. his sentiment, and indeed sometimes his very words, are the same that are circulating the blogosphere and talk radio during the last week.
    excellent post, artistically crafted and on point.

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