Turn a profit and you must be a genius, despite two successive bubbles that is still the essential view of too many.
Yesterday Goldman Sachs reported record earnings mostly because they are profiting from a government system they (or their former-for-now employees) helped create.
In the wake of Countrywide, Madoff, Bear Stearns, Enron, AIG, etc., etc., it would be nice to think a we had acquired even a slight sense of skepticism. But even many of our supposedly cynical reporters rushed to gush over Goldman winning a rigged game.
Here’s NPR’s Yuki Noguchi on All Things Considered: “Dick Bove is senior vice president of research at Rochdale Securities. He says Goldman suffered during the crisis. It shed 16 percent of its workforce in the last year. But what revived Goldman, Bove said, is the diversity of its business and its superior internal systems. So while some aspects of its business falter, the rest goes gangbusters.”
“Superior internal systems”? Is that a euphemism for no competition left standing? Nor is she alone in using effusive praise in the place of actual facts. Reuters quotes Michael Holland as saying:
What they have continued to do during the worst financial crisis in 25 years shows that they are the smartest guys in the room and, therefore, it doesn’t necessarily translate to the other people who are in the room.
“The smartest guys in the room.” Mr. Holland uses the old Enron catchphrase without a trace of irony. Here is a view from Australia:
The fact Goldman Sachs made as much money in the second quarter as it did for all of 2008 is undeniably good news. It shows markets are open for business, and given that many of its peers are dead or recovering the investment bank demonstrates the benefits of well judged risks.
The markets are open for business? Doesn’t the second half of that sentence beg a few questions of the first half?
No surprise that our elected officials are only too happy to jump on board the bandwagon. Richard Shelby, the top Republican on the Senate Banking Committee: "I’m not surprised. Goldman Sachs has a history of being well run and sometimes ahead of the others."
All this happy talk leads to a rise in the markets which is used as further evidence of the brilliance of Goldman, et al. It was only two and half years ago when Countrywide was considered one of the most esteemed companies in the US.
Anyone remember that?
Thankfully not everyone is falling for it. Over at the Washington Post, Binyamin Appelbaum even put some skepticism in the lead: “… as the decimation of its Wall Street rivals allowed the investment bank to romp across the financial landscape, buying low and selling high.” While Goldman has repaid its $10 billion government loan, Applebaum (and a few others) had the temerity to point out that the company “has not disclosed to what extent it continues to rely on other federal rescue programs, such as borrowing from the Federal Reserve.”