It is getting more and more difficult to contain my animosity toward Wall Street these days. I have always had a cynical view, colored mostly by my experience living in a town that has become a haven for financial executives, but the anecdotal evidence of Wall Street’s excesses and exploits is now being outrun by the hard evidence outlined daily in the press. The latest news is that Goldman Sachs (“The Evil Empire”?) has been slapped with a civil lawsuit by the SEC regarding its alleged defrauding of investors who partook of their offering of synthetic Collateralized Debt Obligations. Apparently Goldman neglected to inform investors that John Paulson, a billionaire hedge fund manager, had paid $15 million to Goldman in exchange for the investment bank creating a CDO for him to then bet against. Paulson made $1 billion betting that people would lose their homes. Nice!
These sorts of manipulations are nothing new. In fact, for some on Wall Street, exploitative bets are business as usual. While there is no doubt (well, maybe a little to the truly cynical) that the majority of professionals in the financial industry are honest, hard-working people, we can no longer look past the unethical practices of the top players who effectively control the market. It is more clear than ever that top financial executives play with Monopoly money, and the payouts are incredibly inflated. Do people on Wall Street work hard? Sure, but so do lots of other people who have to fight for a wage. I believe in capitalism, but I also believe in ethics, and treating people with respect and kindness. Making money by betting that someone will lose their home is a dirty business. It’s not illegal, but it’s still wrong. An article I read included a laundry list of questionable activities and deals carried out by Goldman over the past few years, none of which were illegal but all of which were damaging to honest people like investors and homeowners. One has to wonder what kind of person finds excitement in betting that others will fail. What next? Shall we start wagering on people’s jobs, and whether or not they will be able to continue to put food on their families’ tables? The example is extreme, of course, but not totally out of line.
Hopefully the Federal Government can find ways to protect investors, either through existing laws or through new laws drafted to address the problems caused by derivative securities. Since the 1930’s, in the wake of the Great Depression, our government has been a champion of homeownership. As we emerge from our latest recession, let’s see if modern leaders can live up to (or exceed) the legacy of the those who went before them.
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