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How Wall Street Creates Socialists

Posted on Apr 28, 2010

By E.J. Dionne

Maybe the next time someone calls Barack Obama a socialist, the president shouldn’t issue a denial. He might instead urge his accuser to read the hearing transcript of this week’s congressional testimony from the Goldman Sachs guys in their beautiful suits.

Capitalism has not taken a hit like this since Mr. Potter made his appearance as the evil banker in “It’s a Wonderful Life.” No leftist polemicist could come up with as damning a description of contemporary capitalism as the contents of an e-mail that Goldman’s Fabrice “Fabulous Fab” Tourre sent to his girlfriend.

“Well,” he wrote, “what if we created a ‘thing’, which has no purpose, which is absolutely conceptual and highly theoretical and which nobody knows how to price?”

Perhaps Fab once read the Karl Marx who wrote: “The more abstract money is, the less natural its relationship to other commodities.”

If money is an abstraction, the investment industry’s creative inventions are abstractions of abstractions of abstractions. Banks no longer just give people loans to buy houses. Now Wall Street’s geniuses—and they are ingenious—trade bizarre financial products in which the original loan is packaged with thousands of others and buried under piles of equations and economic gibberish.

Goldman may face SEC charges, but it’s the entirety of our deregulated financial system that’s on trial. In this new order, the inventiveness of our entrepreneurs goes not only into creating products that actually enhance our lives (from refrigerators to laptops to iPods) but also into fashioning “absolutely conceptual and highly theoretical” financial products whose main function is to enrich a very small number of well-placed people.
The ever-more-complex financial instruments are defended on the grounds that they make life better for everybody. Tourre offered this justification in another of his revealing e-mails: “Anyway, not feeling too guilty about this, the real purpose of my job is to make capital markets more efficient and ultimately provide the U.S. consumer with more efficient ways to leverage and finance himself, so there is a humble, noble and ethical reason for my job ”

Then he added: “amazing how good I am in convincing myself !!!”

Tourre’s unconventionally punctuated observations go to the heart of the debate we need to have: How many of the arguments offered on behalf of these exotic transactions are nothing more than rationalizations for the capacity they give a few investment bankers to get very, very rich?

Does it make sense to have investment houses playing the role of “market makers” peddling financial junk with one hand that they then bet against with the other? Let’s assume for the sake of argument that this is perfectly legal. The real question is: Why should it be?

I’m prepared to believe that some of these financial innovations do real work for the real economy. Yes, it’s good that farmers can use the futures markets to lock in prices, and the secondary mortgage markets may well free up capital. But Wall Street has gone way beyond the original purposes of such devices and created a world unto itself in which the gains are reserved for privileged insiders and the losses are borne by everybody else.

At one point during the hearings, Sen. Carl Levin played the Jimmy Stewart good-banker role from “It’s a Wonderful Life” by describing capitalism as it’s supposed to be. Levin noted that Wall Street “has been seen as an engine of growth, betting on America’s successes and not its failures.”

Well, that’s what Wall Street proclaims in its advertisements for itself. But when defending themselves against legal charges, Wall Streeters retreat to honesty by saying that everybody knows they are really there to make money and that it’s naive to hold them accountable for the social impact of what they do.

It is, indeed, naive to expect Wall Street to act as charitably as the Salvation Army, and you have to respect Fabulous Fab’s brutal candor about this. Which brings us back to socialism.

Marx’s predictions about the inevitable collapse of capitalism have been wrong so far because the system has worked reasonably well thanks to the rules and redistributive programs established after the Great Crash.

The lesson is that the surest way to save capitalism is to regulate it in the public interest. The surest way to create socialists is for everyone to experience the economic consequences of counting only on the goodness in the hearts of Mr. Potter and Fabrice Tourre.

E.J. Dionne’s e-mail address is ejdionne(at)washpost.com.


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Added: Apr-29-2010 Occurred On: Apr-28-2010
By: gregory_peckory
In:
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Tags: wall street, socialists, goldman-sachs, obama
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  • Great writing , spot on .

    Posted Apr-29-2010 By 

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  • Look at all the dumbazz amerikan, your trying to explain something their controlled brains can't understand. Keep trying little buddy some day you will break free the capitalist chains that keep your country men/women slaves too that dollar.

    Posted Apr-29-2010 By 

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    • No one is fleeing my country through shark-infested waters on rubber rafts.
      Also, dollars don't have slaves, dollars don't care who spends them.
      You must have dollars confused with your murdering, racist dictator.
      It's weird, you are the only person on the internet I know isn't black, since Cuba is one of the most racist regimes on Earth and the number of blacks with a computer could probably be counted on one hand.
      Calling other people slaves doesn't make you less of one.
      Now go make more Che t More..

      Posted Apr-29-2010 By 

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  • No, the free market is the bestest most efficient system there is. We need less regulation so that Wall Street can screw us more efficiently.

    Posted Apr-29-2010 By 

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  • What exactly are you refering to when you say "Wall Street"?

    Posted Apr-29-2010 By 

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  • I'll agree in the respect that Wall Street (and any successful individual or organization existing in Capitalism) turns some people into Socialists. It's called work vs. entitlement.

    You see, the successful ones work for the dollar. The unsuccessful ones feel entitled to a dollar. Our government allows it to happen, they distribute the dollar. Taken from the wealthy and given to the poor. It's Robin Hood syndrome.

    It's one thing to be greedy and it's another to be envious. But if you're en More..

    Posted May-6-2010 By 

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  • Gregory ,you are one dumb socialist.As if you cared what happened at all.I bet you dont own a bicycle.

    Posted Apr-29-2010 By 

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