What Lloyd Blankfein Should Have Said

http://www.futureofcapitalism.com/2010/04/what-lloyd-blankfein-should-have-said

The CEO of Goldman Sachs, Lloyd Blankfein, was duly deferential to the senators at yesterday's hearing, playing along with the theatrics and answering "yes, sir" even as Senator Levin cast aspersions on Mr, Blankfein's integrity.

Here's what Mr. Blankfein might have said were he in a feistier mood:

Mr. Chairman:

Thank you for inviting me here today, but you've got the wrong guy. As far as contributing factors to the financial crisis, me and my firm should be way low down on the list.

Sure, we lost a lot less than some of the others when it came to exposure to the U.S. housing market. We even made some money over some periods and on some trades, though not on that Abacus one that the SEC complaint is about. But what's wrong with that? American companies are supposed to make money, after all. If everyone had been making money, there wouldn't have been a financial crisis.

Why are you calling me up here and not Robert Rubin, the chairman of the executive committee of Citigroup, which lost a lot more money on this stuff than we did, and required even more taxpayer money to save? Is it because he's a former Clinton administration official?

Why am I up here and not the heads of Bear Stearns, Lehman Brothers, or Merrill Lynch, none of which survived the crisis as independent firms because their risk controls were weaker than ours were?

Why are you calling me up here and not Timothy Geithner, who was president of the Federal Reserve Bank of New York when this all went down? Is it because he's now President Obama's Treasury Secretary?

Why are you calling me up here and not all those real estate brokers who took commissions on selling people homes that then went down in value?

Why are you calling me up here and not Presidents Clinton and Bush, who boasted about record-high homeownership rates while lowering the standards for getting a mortgage?

Why are you calling me up here and not Henry Paulson, who destroyed confidence with his "ambush" to seize control of Fannie Mae and Freddie Mac just days after the firms' federal regulator had issued a letter judging them to be adequately capitalized and less than a month after Mr. Paulson himself had issued a statement saying he was focused on supporting the firms "in their current form as shareholder-owned companies," a statement he writes "hoped to calm market fears of a government takeover that would wipe out shareholders"?

All you senators who denounce Goldman's market-making as "gambling" – are you prepared to impose a federal ban on state lotteries? Is it gambling you are against, or just risk-taking where the government isn't the guaranteed winner?

I know I'm expected to endorse financial "reform." Otherwise you'll probably call me up here to testify until I do endorse it (the Democratic senators seem to oppose waterboarding and torture of Al Qaeda terrorists, but favor it for bank executives whose firms managed to survive the financial crisis).

How about this? I'll back it the minute you stop using Orwellian language to describe it. This "resolution authority," for example, sounds innocent. Who could be against resolution? It even includes the word "solution," like solving a problem. How about calling it what it really is – "seizure authority" that would give unelected bureaucrats the power to seize control of a financial firm away from its owners without warning if they thought it might be having trouble.

And this bank "fee" that is in the law? Why not be direct and call it a "tax" that would establish a $50 billion slush fund for Washington politicians and bureaucrats to spend or squander as they see fit?

Again Mr. Chairman, thanks for inviting me. I'll be back whenever you want me. Oh, and one other thing. Next time you and your colleagues of either political party come around Wall Street asking for campaign contributions, we are going to give generously, as we always do. But this time, we are going to videotape it, so that next time you start posturing and denouncing how unethical we are, we'll have the YouTube spots ready to go showing you fawning all over us as you pocket the checks.

For what it's worth, I'd much rather be spending the time serving clients than sucking up to senators.

So long and thanks again.

by Ira Stoll  |  Apr 28, 2010 at 4:56 pm Related Topics:  Banking, Campaign Finance, Capital Markets Regulation, Fannie Mae, Federal Reserve, Goldman Sachs, Henry Paulson, Housing, Politics, President Obama, SEC, Taxes, Timothy Geithner receive the latest by email: subscribe to the free futureofcapitalism.com mailing list