Michael Hirsch
writes:
OK, so who do we believe? In a cover story in New York magazine last month melodramatically headlined "The Emasculation of Wall Street," journalist Gabriel Sherman made the case that the big financial firms were engaged in "something that might be called soul-searching" about their many sins and their wildly overcompensated contribution to the U.S. economy. Wall Street, under the whip of the giant Dodd-Frank law, was learning to behave. Reduced compensation packages and increased capital requirements were going to tame or snuff out some of the riskier and most reckless practices that brought the nation to the edge of a second Great Depression, Sherman wrote. Best of all, the domestication of Wall Street would redirect the best minds in the nation back into useful things like real engineering rather than financial engineering. Cool!
Now comes Greg Smith, an apparently conscience-stricken renegade from Goldman Sachs, who tells us that not only has nothing changed in the firm's culture, but he "can honestly say that the environment now is as toxic and destructive as I have ever seen it."
Can these two things both be true?
Actually, maybe yes. But the larger point is: We need to pay a lot more attention to Greg Smith than to Gabriel Sherman. There is, first of all, every reason to think Smith was telling the truth.
Some smart observers of the Street, like the Pulitzer-Prize-winning author ("Lords of Finance") Liaquat Ahamed, say that while Sherman is correct to say Wall Street is much more restrained at the moment, much else has not changed. "Greg Smith is dead right," Ahamed wrote me in an email today. "Goldman and all the other investment banks are plagued by conflicts of interest. The problem is that over time all of them, but especially Goldman, have shifted from the business of advising clients or raising capital for clients to trading on their own account. I have the impression (from books about the Pecora hearings) that in the 1930s Glass Steagall was motivated as much by outrage at conflicts of interest (e.g. Citibank famously stuffing the accounts of its deposit holders with foreign bonds that then went bankrupt) as the desire to make the banking system more stable."
But we didn't get a new Glass-Steagall. Instead, courtesy of Tim Geithner and Co., we got the milquetoasty Volcker Rule (which the Treasury only backed, after a year of ignoring Paul Volcker, when Barack Obama insisted on it, as I have previously written), dubious rules about unwinding Wall Street's still-giant firms in a crisis, and a Consumer Financial Protection Bureau that is under constant assault on Capitol Hill. So it beggars common sense to think that we're really getting a new Wall Street. [...]
Blast from the Past. At Daily Kos on this date in 2003:
Offensive? Hell yes. But not to Tommy Franks.
Determined to spur his ground war commanders to renew the push toward Baghdad, General Franks flew to General McKiernan's headquarters in Kuwait on March 31, [2003] where he delivered some harsh criticism. . . .
One of the most critical moments of the meeting came when General Franks indicated he did not want to be slowed by overly cautious generals concerned about holding casualties to a minimum, though no one had raised the issue of casualties. To dramatize his point, according to one participant, General Franks put his hand to his mouth and made a yawning motion.
To date, 2,313 U.S. soldiers have been killed in Iraq, along with 206 in the coalition forces, and perhaps as many as 37,754 Iraqis. But there's no official tally of that. "We don't do body counts," says Franks. Yawn.
Tweet of the Day:
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In honor of Santorum's promised crackdown on internet porn, tonight I will masturbate to the Constitution.
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