In the aftermath of all that has happened, Goldman Sachs’ “apology” offer of $500 million to America’s small businesses is too small to qualify as even a waiter’s tip.

In response to last Friday’s piece, Is the United States Playing Games with Oil Market Data?, a reader writes:

It is interesting that you should note this at this time. But you were awfully quiet when the Bush admin was playing all the tricks with oil, Iraq, etc. I can go on but just wanted to make sure that I have noted your bias and treat your future mail accordingly.

– Chet

“Awfully quiet?” Really?

I was only here for Bush’s final year in office (2008), but I don’t recall Taipan Daily pulling any punches. If anything, we gave “W” his fair share of just desserts. (President Bush’s contribution to the financial crisis: “This sucker could go down.”)

You can be assured, too, Chet, that if IEA insiders had come forth with major whistle-blowing allegations under W, we would have reported it just as swiftly. If anything the backlash would have been worse, given the previous administration’s ties to oil.

Believe me, what is happening now has little to do with “Democrat” versus “Republican.” I am reminded of a debate I had with a libertarian friend, many long years ago.

I was in college and a lot more idealistic at the time. The debate was over presidential elections, and whether the vote actually mattered. My stance was that a vote for the president did matter, even if you had to hold your nose; picking the lesser of the two evils was the more important thing.

His stance was that a vote didn’t matter because “there isn’t a dime’s worth of difference between the parties.” In spite of surface level differences, he saw the donkeys and the elephants as exactly the same.

I disagreed with my friend back then. I would have a much harder time disagreeing with him now.

Not What’s Changed... But What’s Stayed the Same

When it comes to America, the economy, the dominance of a small and powerful oligarchy, and so on, here is what gets me. Nothing has really changed.

“Hope” and “change” were the glowing mantras of the 2008 presidential campaign. And yet, for the current White House, what is remarkable is just how little has actually changed.

The connection between Washington and Wall Street brings to mind the T-shirt image of a dark Uncle Sam, manipulating two hand puppets – a donkey and an elephant – with his face wreathed in shadows. The text below reads, “I want YOU... to believe in the illusion of political choice while I secretly maintain complete control.”

Complete control is what the megabanks, the top-of-the-food-chain corporate interests, now seem to have. America is transforming into a system of oligarchy and patronage that apparatchiks in the Kremlin would bemusedly recognize.

That is perhaps the most infuriating thing about the current White House – its utter lack of moral courage. Not the political leanings of the occupant, but the visible puppeteer strings that make that occupant dance.

Another Train Wreck in the Making

Earlier this week, my friend and colleague Kent Lucas expressed his view that America’s worst days are behind it. I honestly and truly hope to God he is right – because I quietly fear that he might not be.

If we avoid a repeat of the 2008 financial crisis, it will have been with no help from Washington. Though a hundred times more eloquent, President Obama has contributed nothing more substantial to the problem than his predecessor’s deer in the headlights, “This sucker could go down.”

Our response to the crisis thus far has been the old “hair of the dog” medicine. To cure our national hangover, the government encourages us to drink more of what gave us a splitting headache in the first place. Savers are punished. Reckless borrowers are coddled. Dysfunctional markets are propped up, in such a manner that pricing mechanisms get distorted and the free market fails. And meanwhile the government slaps a bunch of phony stats on top of it all, that Wall Street might cheer and call it good.

Winners and Losers

Meanwhile the American public may be short-sighted, but they are not blind. They can see the results of our post-financial crisis efforts, and they can see that a clear set of winners have risen from the wreckage.

Trouble being, the “winners” turn out to be winners for all the wrong reasons. The paper economy has been propped up at the direct and deliberate expense of the real economy. Trillions of dollars’ worth of notional taxpayer funds are channeled and funneled into the hands of J.P. Morgan and Goldman Sachs. The rich banks get richer, the sick banks stay poor. Wall Street cheers as big corporations hoard cash like misers and jobs disappear.

As the president’s approval ratings show, this White House has a significant public relations problem. And that problem makes its home on Wall Street at 85 Broad.

Goldman Sachs, the most profitable banking and trading house of all time, has become to the Obama administration what Halliburton was to the Bush administration. Except when it comes to high-level connections and ill-gotten gains, the Halliburton boys look like pikers next to the true Goldman pros.

Free Market Capitalism Versus Crony Capitalism

Some don’t understand what all the fuss is all about. Why begrudge the boys their outsized profits? Why should we care if the Goldmans and the Morgans of the world make a mint? Isn’t that what capitalism is all about?

Oligarchic crony capitalism maybe. Free market capitalism is a different beast, at least in theory.

In a free market system, it is all well and good for the winner to get the spoils. If you are smart and work hard and have a little bit of luck, no one should begrudge you your right to get rich.

In a non-free market system, however, who you know becomes more important than what you know. What you negotiate in smoky backroom deals becomes more important than what you produce. Under a system such as this, the production of excess profits is a travesty, not a triumph... a mockery of the free market ideal.

This is why libertarian types can rage at the visible excesses of a supposed “free market” that has actually twisted and mutated itself into anything but.

God’s Workman Apologizes

The truly twisted thing is that the cronies and the oligarchs know all this. There’s no possible way the reality of the situation has escaped them. They may go to great lengths to rationalize, to convince themselves otherwise, but deep down, they know.

That’s what made it such a travesty when Lloyd Blankfein, the CEO of Goldman Sachs, spoke of “Doing God’s Work” in a recent interview. The ultimate sarcastic remark, perhaps?

At any rate, it was a strategic blunder that Goldman quickly regretted. Not long on the heels of “doing God’s work” came a blanket Blankfein apology.

“We [Goldman Sachs] participated in things that were clearly wrong and have reason to regret,” God’s erstwhile workman said at a conference in New York. “We apologize.”

Normally an apology comes with an admission of guilt, i.e., some sense of recognition as to what exactly was done wrong. A decent apology also comes, most of the time, with some form of moral restitution... a commitment to make things right.

Not in this case. Blankfein’s non-admitting, non-repenting apology is akin to Wall Street’s attitude towards Main Street in general. “We blew up the global economy... used our connections to pillage the spoils in the rough economic equivalent of war profiteering... and now we are happily bleeding you dry. Sorry.”

A 500-Million-Dollar Bribe

All the above made the following more than a little grating, as reported by The New York Times:

How much good will can an apology — and half a billion dollars — buy? A lot, Goldman Sachs is hoping...

A little more than a week after Goldman’s chairman and chief executive drew fire for saying the Wall Street giant was “doing God’s work,” the bank said Tuesday that it would spend $500 million — or about 3 percent of the $16.7 billion it has so far set aside to pay its employees this year — to help thousands of small businesses recover from the recession.

The sheer gall of it – the blatant chutzpah – leaves your editor grudgingly impressed.

After contributing to the global financial meltdown through the creation of super-toxic products that made a handful of Wall Street players rich – even the disgraced CEOs exited stage right with hundreds of millions, remember – Goldman Sachs then manages to 1) extricate itself from any and all culpability... 2) rob the taxpayer coming and going by way of high-level arm twisting and backroom double-dealing... 3) make a further killing on reams of taxpayer-funded government bailout cash... 4) and, finally, merrily bleed the real economy dry as a by-product of all the above.

All that, and the “make it right” effort is a whopping three percent set-aside of the employee compensation pool.

That isn’t an apology, it’s a country song: “Here’s a quarter, call someone who cares.” Goldman would have to pony up five times as much, i.e. 15% of the pool, for the gesture to even reach the level of a waiter’s tip.

Sadly, Warren Buffett also got in on the act. Per The New York Times,

...a few hours later, as if to underscore that apology, the bank said that it was working with its largest shareholder, the billionaire investor Warren E. Buffett, to help 10,000 small businesses. The bank will offer them business and management education, mentoring and access to capital.

Across Wall Street, banks have regained their profitability — but not their public standing...

One can imagine the reaction of the Goldman Sachs P.R. department. “$500 million, are you kidding! Our trading desk makes that in a week! We’ve got to get a bigger number on that release... hmm, maybe ‘ten thousand’ would sound impressive...”

But why did Buffett let his name be attached to the release too? Perhaps because the Oracle of Omaha is feeling a little uncomfortable with just how much the folksy, down-home Buffett image has mutated these past few years. Berkshire Hathaway, via its various businesses, is one of the single largest benefactors of government bailout funds. Buffett himself has inked incredible sweetheart deals in both Goldman Sachs and General Electric shares – two major benefactors of the state.

Buffett knows that, to a significant degree, his legacy hinges on being seen as an honest, dependable value investor... a sort of investor’s everyman writ large. Now the sage wrings his hands as the scope of his public trough gluttony is revealed.

Will the $500 million help anything? Who knows. In fact sure, why not. For all your editor knows, Al Capone may well have donated to children’s orphanages. God knows that small businesses – the dying backbone of this country – need all the help they can get.

At the end of the day, though, it may not be enough. As Napoleon reportedly once said of China, the wrath of the American people is like a sleeping giant. Heaven help the banksters who wake it up.

Other Related Topics: Banks , Barack Obama , Economic Crisis , Justice Litle , Macro Trader

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