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Levin v. Goldman: Big Solution For a Big Problem?

Levin v. Goldman: Big Solution For a Big Problem?

by | Apr 27, 2010

Crisis On Wall StreetWhen Senator Levin says “Goldman made a lot of money by betting against the mortgage market” what do we think he might have meant? Knowing some of the political philosophy of the esteemed senator from Michigan, it is obvious that his inference was that Goldman was acting in a fashion that was either illegal or immoral. How could any American institution bet against motherhood, apple pie or the American dream of universal home ownership? And certainly the notion of ”making a lot of money” is of dubious quality on its face. The Senator is literally screaming “These people are the enemy of the state, and they need to be leashed, or chained, or imprisoned, or tortured…all for the good of the system of the people.”

It is always amusing when a single statement contains such a large number of fallacies. Let us count the ways.

First, Goldman was acting in their role as an investment broker. Everything they do is essentially either a bet for or against something…or the facilitating of someone else doing the same thing. More technically, they are simply acting as brokers, and not as agents. Agents represent a buyer or seller. Brokers facilitate the transaction. This is the “market mechanism” and it is what guides the whole system of the effective allocation of resources. It is fundamental to our material progress. As significantly, if people would have actually listened to Goldman, the whole mortgage disaster might have been avoided. Starting in 2004 Goldman was very publicly saying that the US housing market was overpriced and that we were headed for real trouble. Unfortunately, too few actually listened to them, including Senator Levin. In the case of the SEC-driven synthetic CDO case, Goldman was actually not making a bet against the mortgage market…an investor was. But even if they were, it was completely their right to do so.

“But the disclosure wasn’t adequate…” Please. If you hear anyone say this just say “stop,” and remember that these things were bought (not sold) by some of the most sophisticated investors the world has ever seen. These buyers were high-powered investors looking for levels of interest unavailable in our low-interest world, and they got torched. Anyone who uses the word “disclosure” in this argument is either very poorly educated, or more likely concealing a very ugly hidden agenda. Funny, have you heard anything from the actual investors who lost all the money? Most of the money that was lost in the mortgage meltdown was not even held by the banks. Unlike the power-mongering Senator Levin however, they all know and accept the penalty for the sin of their ill-fated and over-reaching greed.

Secondly, and contrary to Mr. Levin’s fear of profit, the world has proven over and over again that without the opportunity for “profit” the world tends towards universal impoverishment. We should very quickly notice that profit is not a word to be used exclusively with respect to corporations; it is a universally human word. All of us require “profits” as a source of motivation. Mr. Levin demonizes corporate profits, but fails to recognize the evil of “government profits,” which are the desired fruits of his labors. In the case of government, the profits take the form of the shifting of funds from individuals and corporations into the pockets of government. Profits, thus defined, always flow out of a system where productivity is advancing. It has to. The only question is who gets them. Mr. Levin has decided that they should flow to him and his kind, as opposed to those with the brains and drive to actually create something of real value. Profit is virtuous. The conscription of profits by the government is the true evil. This is particularly evident in the case where the “disclosure” of the intentions of the government (think Mr. Levin) is what is so entirely deceptive and completely lacking.

Lastly, Mr. Levin effectively is saying “And what we need is a really, really, really big solution to this really, really, really big problem.” What we have in the case of the mortgage crisis is actually a really limited problem with a very large set of consequences. The failure that we experienced was a classic simultaneous failure of the banking and insurance systems resulting from too little capital required to support the levels of risks being taken. This is hardly a new problem. The current financial services bill, like the health care bill, is just an opportunistic ruse that only tangentially relates to the real problems that we face. All we need to fix the problems with mortgage-backed securities and their “derivatives” are a set of rules around the capital needed to support both their issuance and their holding. End of story. Mr. Levin actually knows this. And that is the real problem…and a crying shame.

Sophisticated systems like ours create “sophisticated solutions” to create take-overs by the government that are accepted by “We the people.” The financial services bill is sophisticated only its complexity, and has nothing to do with the problems we really face. And herein we see the real evil. Goldman is not our problem. Levin is.


Levin v. Goldman: Big Solution For a Big Problem?

The Tea Party Movement: The New Civil Rights?

by | Apr 22, 2010

Man with bullhornThe Civil Rights Movement that culminated in the 1960’s was an important movement towards the advancement of equality for all Americans.  While artificial and fundamental hatreds will likely always exist between disparate people groups, the relative harmony that has been experienced in this country over the last forty years is likely unprecedented in the history of the world.  To create equality of opportunity for all of a society’s individuals and to simultaneously provide an environment free of the expression of abusive power of one group of people over another is a seldom seen accomplishment.  America has been a place where these goals are thought by many to actually be within reach.

Last week, the former President, Bill Clinton, made comments linking the Tea Party Movement to the worst act of domestic terror that has ever been experienced in our country’s history.  The Oklahoma City bombing was a tragedy of massive proportion.  Apparently, Mr. Clinton believes that the same ideological forces that motivated the bombers of the Federal Building are those that now motivate those that gather under the Tea Party banner.  To consider this comment reckless and irresponsible is to understate its vitriolic intent.  It is almost impossible to adequately underscore the complete disconnect between the former President’s “I feel your pain” tone with his real message. Farcical messages delivered with a level of alleged caring are amongst the most dangerous.  It is reminiscent of the initial tempting of mankind in the Garden of Eden.

The reason the Civil Rights Movement emerged was that a people group was being treated unfairly and were being oppressed by a system that stood for a higher principle than was being observed.  And there were those who at the time “stood up” and said that what was happening was both immoral and evil.  Most people of conscious knew that this situation needed to be fixed, with the only differences of opinion coming in terms of the appropriate means to that agreed-upon end.  We humans are endowed with a sense of justice that transcends both our group distinctions and our distorted modern media coverage.  We know injustice when we see it.  The only question is whether we “stand up” and voice our disaffection.  Mr. Clinton must certainly understand this attribute of a liberal democracy such as ours, as he was a societal product of the 1960s.

The only difference between the Tea Party Movement and the Civil Rights Movement is the nature of the oppressor.  The driving force behind each of the movements is the same.  In both cases a minority group is passionately expressing a very heartfelt concern that their individual liberties are being violated and that their freedoms are being abused by a tyrannical oppressor. In the 1960s the oppressor was a racial group.  In 2010 the oppressor is the Federal Government and the Obama Administration. Both movements were asking for something quite simple: just treat us with fairness.  To believe that one of the movements was racial and the other ideological, and that they are therefore different, is to miss the obvious common factor.  It is a distinction without a difference.

Can the evils of an oppressive system cause certain rogue individuals to take actions that are legally inappropriate and even reprehensible?  The answer is obviously yes.  But that is not the point, and the former President knows it.  The Civil Rights Movement created some very ugly scenes. For purposes of this discussion, let’s remember the situation in Detroit in the summer of 1967.  Would Mr. Clinton ever think to link Civil Rights and Detroit?  No.  He does not cast himself in the role of oppressor in either situation.  He rather sees himself as a liberator.  And in his self-analysis is his error.  Until the liberal left comes to see themselves as the real oppressors, we will continue to hear the same insulting and condescending rhetoric.  Funny thing: Vladimir Lenin didn’t see himself as an oppressor either…he saw himself as a liberator.


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