Wednesday, April 28, 2010

Goldman Sachs and Greed

Those who want to be rich fall into temptation and are trapped by many senseless and harmful desires that plunge people into ruin and destruction. For the love of money is the root of all kinds of evil, and in their eagerness to be rich some have lost their way and pierced themselves with many pains.
I Timothy 6:9-10

Commentators like to point out that the passage doesn’t say that “money is the root of all evil.” The problem is not money, but the love of money. In that line of thought one can have money, even lots of money, and pursue more money, without running afoul of the biblical injunction.

John Wesley saw that as a distinction without a difference. Wesley made a lot of money with his writing, but he gave it all away. His position was that people never have more money than they want to have, because they can always give it away. Our love of money may exceed what we have, but it can never be less.

Yesterday a Senate Committee interviewed executives from Goldman Sachs about the money they made in the financial collapse of 2008. Senators focused on a scheme Goldman used to market derivatives to clients while investing in the failure of those very same loans. Although the loans were highly rated, internal Goldman memos labeled them as “sh—ty.” And a highlight of the hearings was the spectacle of each senator repeating the naughty word as he or she posed questions to the utterly unrepentant executives who insisted they had done nothing wrong.

This is a story about money and the love of money. It is about the consequences of greed and what Wesley called "The Danger of Riches" (for more on Wesley's view, see the sermon by that title). It is a story with many villains and almost no heroes.

Over a decade ago, Brooksley Born, the woman who headed the Commodity Futures Trading Commission called for more oversight of derivative trading, but she was vigorously opposed (and silenced, for all practical purposes) by Alan Greenspan, Larry Summers, Robert Rubin, and a cast of thousands. Democrats and Republicans joined together in deregulation, the Federal Reserve cheered them on, and we won’t even talk about what the SEC was doing. As long as there was money to be made, no one wanted to worry about potential consequences.

Washington Gladden, the father of the Social Gospel, was concerned about the stock speculation in the late nineteenth and early twentieth century. The growing gap between the rich and poor in “the gilded age” was an issue. He wanted the rights of workers protected, and he wanted them to have fair wages and safe working conditions. He held industrialists accountable for acting justly.

Gladden was against stock speculation for the same reason he was against gambling in general. He was convinced that it was not good for people to get something for nothing. And he worried that the prospect of getting something for nothing led many into “temptation” and “trapped” them in “many senseless and harmful desires that plunge people into ruin and destruction.”

He could not have imagined the Goldman Sachs scenario, in which they found a way to get something for less than nothing. They bet against their own product and made money when it failed.

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