Fight On, Goldman Sachs!

Bet Against the American Dream from Alexander Hotz on Vimeo.

By FRANK RICH
Published: April 24, 2010
MAYBE Lloyd Blankfein was doing “God’s work” after all.

When the Goldman Sachs chief executive made that tone-deaf remark to an interviewer in November, he became the butt of a million insults, the ultimate symbol of Wall Street’s abdication of responsibility for its sleazy role in the Great Crash of ’08. But now we’ve learned that Blankfein was actually, if inadvertently, on the side of the angels. It’s his myopic, unrepentant truculence that left Goldman exposed to a Securities and Exchange Commission accusation of fraud that will be litigated in public rather than bought off in private. And it’s that S.E.C. legal action that has, in a single week, radically transformed the politics and prospects for financial reform in America.
In just that week, the Party of No’s intransigent campaign of obstruction and obfuscation went belly up. The Obama White House moved to get its act together with an alacrity lacking in its health care campaign, abruptly adding Thursday’s New York speech to the president’s schedule. The bipartisan Financial Crisis Inquiry Commission at last issued its first subpoena — to Moody’s, one of the rating agencies that for a fat fee slapped AAA ratings on the toxic garbage Goldman packaged and sold to benighted suckers on the other end of a huge bet placed by a favored client, the hedge fund player John Paulson.
Salutary as this rush of events is, it still adds up so far to just one small step for mankind. We don’t yet know how many loopholes lobbyists will slip into the bill-in-progress. We don’t yet know the outcome of the S.E.C. case, let alone what other much-needed legal pursuit of Wall Street may follow it. And we still don’t know what, if any, true correction lies ahead for the financial sector’s runaway casino culture — much of it legal — that turned a subprime-mortgage bubble in a handful of overheated American states into an international economic meltdown.
But before we get to those gloomy caveats, let’s smell a few roses.
The farcical spectacle of the Republican retreat has been particularly enjoyable. It was only last Sunday that Senator Mitch McConnell went on CNN to flog his big lie that the Senate reform bill somehow guaranteed bank bailouts — a talking point long ago concocted for the G.O.P. by its favorite spin strategist, Frank Luntz. McConnell’s House counterpart, John Boehner, was meanwhile waging a campaign to portray the Democrats as shills for Goldman, a major source of Obama donations and personnel. Never mind that the Bush White House chief of staff, Joshua Bolten, was a Goldman alumnus and that both McConnell and Boehner had voted for the very bailouts they now profess to abhor (a k a TARP) after a sales job by Henry Paulson, the Bush Treasury secretary who was Blankfein’s predecessor as Goldman’s C.E.O.

In another bit of hubris, McConnell boasted of a letter signed by his caucus pledging 41-vote unity to block the reform bill. But on Monday, Senator Bob Corker of Tennessee, a Republican who had been negotiating with his Democratic peers in good faith, took to the Senate floor to start breaking ranks with his dear leader. The bill at hand, Corker said, was “anything but” a mandate for bank bailouts. On Tuesday, the House G.O.P. leadership distributed a spreadsheet publicizing Goldman’s donations to Democrats, and this too backfired. Politico reported the next morning that Goldman’s political action committee donated more money to politicians in March than in all of 2009, most of it to Republicans. The total take for Boehner was double that of Harry Reid’s.
That afternoon Charles Grassley of Iowa, up for re-election this fall, became the first G.O.P. senator to vote with the Democrats on part of the pending package. Maybe someone showed him another spreadsheet — a Pew poll finding that even in a divided America 61 percent favor financial regulatory reform. The unity pledge in McConnell’s pocket was now worth as much as a mortgage-backed security. LinkHere