GS invests in protection

by Russ Roberts on September 7, 2011

in Crony Capitalism

When I think of Goldman Sachs, I think of its former chairman, Hank Paulson, calling its current chairman, Lloyd Blankfein a few dozen times the week before the AIG bailout, a bailout that helped GS collect billions of dollars it might have lost. GS would like you to think of something else.

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Russ Wood September 7, 2011 at 12:53 pm

The leader(s) who can credibly promise a way to get us out of the privatizing profits and socializing losses arrangement that we’re in will go down in history as among the greats.

The transfer of wealth from average taxpayers (more accurately, from taxpayers of the future) to wealthy investment bankers is an affront to decency. More important, though, is the cynicism that it generates in average voters: the government works for the rich, not for people like us. Attitudes like that take generations to change.

However, September 8, 2011 at 7:21 pm

I would like to think that the people in this country would become cynical. However, I think that we are very docile. What else can explain our tolerance of the injustices that exist in this country. What explains the tolerance for the decimation of the middle class. I personally think that we are satisfied as long as we have our football games and other sports. As long as we have money for beer. Why have we come to this state? Were we this docile in the early 1900′s? I don’t think so. Then there was an acute sense of justice and a willingness to fight for it.

Manfred September 7, 2011 at 2:56 pm

Russ (Wood),
you are an optimist in thinking that this will change.
I do not think so. Once the bailout culture and mindset and psyche is established, it is incredibly difficult to root out, practically impossible.
Even the Wall Street Journal supported TARP when it was first proposed in Congress back then three years ago.
Bailout mindsets are like “Gresham’s Laws” of culture; these mindsets slowly replace “good mindsets” (where businesses strive or fall on their own merits). Once the ‘bad mindset” is there, it is here….forever.

vikingvista September 7, 2011 at 4:47 pm

Lipstick on a pig.

Chucklehead September 8, 2011 at 1:11 am

If you want to know what goes on during these bailouts, behind closed doors at the NY Fed, the guy to ask is James Rickards, He was the principle negotiator for the LTCM bailout. It is a interesting story and might make a good Econtalk episode.

Methinks1776 September 8, 2011 at 7:54 am

Diffrence there was that LTCM was not really bailed out and what was done was done privately. LTCM ceased to exist and taxpayers were not roped into paying for it. LTCM was “bailed out” by the investment banks that foolishly gave the fund 70:1 leverage for spread trading (who does that?) and their counterparties.

What Paulson and co. did was orders of magnitude worse.

Dan J September 8, 2011 at 2:07 am

So what consequence did these firms suffer? Public scorn? I don’t care if people like me, now. For millions of dollars, I won’t blink a lash.
And what consequence for politicians, Fan/Fred and those who ran it during the great scam? Not even scorn. They go unnoticed.

Greg Webb September 8, 2011 at 3:46 pm

Goldman Sachs is the typical crony capitalist. And, a well-known supporter of big-government politicians on both sides of the aisle, but mostly of the Democrat Party and so-called progressives.

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