"David Weidner Brings the Crazy"

Somehow I doubt we'll see a post with that headline on Megan McCardle's Atlantic blog in response to Weidner's MarketWatch column today, which questions the influence Goldman Sachs has exerted on the government's response to the financial crisis ("Government Sachs is in control"¹). Last month Megan used a similar headline when a Member of Congress raised similar questions about Goldman Sachs ("Maxine Waters brings the crazy"). In that post, Megan embedded the video below, of Rep. Waters questioning Treasury Secretary Geithner, and opined that,

She seems to get all of her questions off of the fringier conspiracy sites.

Some commenters dismissed Waters because of her previous comments, or because she flubbed some basic terminology in this video (e.g., referring to Geithner's deputy -- a Goldman Sachs alumnus -- as his "CEO"), but as I wrote in the comment thread of Megan's post at the time,

Maxine Waters is neither crazy nor stupid, as some here seem to think. She and her family members seem to have done quite well in business dealings trading off of her position²: she has to have some savvy to have been able to do that and not get in trouble with the law (at least so far). Since her family's success in business seems to have been from rent-seeking, she probably assumes that's how big business works too, which may explain her apparent contempt for corporate CEOs. In the case of Goldman Sachs, she may not be entirely off base. It's certainly not unreasonable to ask questions about the ubiquity of Goldman Sachs alumni in influential positions, and how that may have influenced government policies that, so far, have been very good for Goldman Sachs.

¹In his column, Weidner wrote,

Since the fall of Bear Stearns Cos. a little more than a year ago, Goldman has taken more than $20 billion in taxpayer cash through loans, payments and backstops.

[...]

In the last year, Goldman has benefited from Paulson's selective bailouts, a fortuitously timed ban on short selling, a liberal interpretation of bank holding company rules and soon, an easily gamed auction of distressed securities run by the government.

A conspiracy theorist might think this run of fortune has something to do with the former Goldman executives having influential roles in the Treasury Department.

²See this previous post for some examples, "Peering Under the TARP: Foul Waters"

"Jindal's Missed Opportunity"

Smart piece by Nicole Gelinas of the Manhattan Institute in its magazine City Journal: "Jindal's Missed Opportunity" (Hat Tip: Real Clear Politics). Excerpts:

Jindal noted that Republicans have an “honest and fundamental disagreement” with Democrats about “the proper role of government.” Regarding the public sector’s ability to rescue Americans from the economic storm, he said, “those of us who lived through Hurricane Katrina—we have our doubts.” Jindal told how, in the immediate aftermath of the 2005 storm, he went to visit Sheriff Harry Lee (now deceased) and found him yelling into the phones. Lee had learned that volunteers in boats were ready to go out and help, but that “some bureaucrat” had told them they couldn’t do so without insurance and registration. The sheriff told the boaters to “ignore the bureaucrats and go start rescuing people.” From this tale, Jindal concluded, America should realize that “the strength of America is not found in our government” but in the “enterprising spirit” of regular people.

The problem with Jindal’s story—and one reason why Republicans are in so much trouble now—is that reasonable people don’t consider providing critical, life-saving support for starving and dehydrated people after an unprecedented natural disaster to be an example of scarily big government. That’s just minimally competent government, even in a country far less developed than ours. In fact, Jindal’s story illustrates the opposite of what he intended. Lee, a longtime government¹ official, personified the functional, nimble government that we need. He overrode unnamed bureaucrats and told volunteers that he’d be personally responsible if they ran into any more trouble. Lee made a smart decision on the fly and saved lives. Unfortunately, other officials—at all levels, with only a few exceptions—proved shamefully negligent in their responses. Because they failed at their jobs, people died.

[...]

Americans don’t see abject government incompetence as an argument for no government. They see it as an argument for a government that is at least passably competent at fundamental tasks. Republicans do the country a disservice by not recognizing this truth. And since some Democrats seem to confuse Americans’ desire for a competent government with a desire for a government that does everything—a disastrous misstep in the opposite direction—Republicans need to provide a rational counterweight.

The banner image above comes from the City Journal website.

¹To be fair to Jindal, it seemed clear from the context (a response to a POTUS speech) that by "government" he was implicitly referring to the federal government. There are some things only the Federal government can do, but it's not unreasonable for a conservative (or anyone else, for that matter) to prefer to have more responsibility and resources devolved to the state and local levels (e.g., to men like Sheriff Lee).

"Government Sachs"

In Sunday's New York Times, reporters Julie Creswell and Ben White notice the ubiquity of Goldman Sachs alumni in government ("The Guys from 'Government Sachs'"). Does this represent potential conflicts of interest, or are these just the latest examples of selfless public service by Goldman Sachs alumni? The article is more even-handed than is typical for the Times. On the one hand,

“To the extent that they have a portfolio or blind trust that holds Goldman Sachs stock, they have conflicts,” said James K. Galbraith, a professor of government and business relations at the University of Texas. “To the extent that they have ties and alumni loyalty or friendships with people that are still there, they have potential conflicts.”

On the other hand,

For every naysayer, meanwhile, there is also a Goldman defender who says the bank’s alumni are doing what they have done since the days when Sidney Weinberg ran the bank in the 1930s and urged his bankers to give generously to charities and volunteer for public service.

“I give Hank credit for attracting so many talented people. None of these guys need to do this,” said Barry Volpert, a managing director at Crestview Partners and a former co-chief operating officer of Goldman’s private equity business. “They’re not getting paid. They’re killing themselves. They haven’t seen their families for months. The idea that there’s some sort of cabal or conflict here is nonsense.”

On the first hand again,

THIS summer, as he fought for the survival of Lehman Brothers, Richard S. Fuld Jr., its chief executive, made a final plea to regulators to turn his investment bank into a bank holding company, which would allow it to receive constant access to federal funding.

Timothy F. Geithner, the president of the Federal Reserve Bank of New York, told him no, according to a former Lehman executive who requested anonymity because of continuing investigations of the firm’s demise. Its options exhausted, Lehman filed for bankruptcy in mid-September.

One week later, Goldman and Morgan Stanley were designated bank holding companies.

“That was our idea three months ago, and they wouldn’t let us do it,” said a former senior Lehman executive who requested anonymity because he was not authorized to comment publicly. “But when Goldman got in trouble, they did it right away. No one could believe it.”

The article notes that although NY Fed president Geithner isn't a Goldman Sachs alumnus, "Goldman alumni have figured prominently in his ascent", including former Goldman Sachs chief Robert Rubin, who mentored Geithner when Geithner worked in the Treasury Department and Rubin was Treasury Secretary, during the Clinton Administration.