Ayn Rand’s most famous acolyte in US public life is Alan Greenspan, the former chairman of the Federal Reserve, but I am beginning to think she must have a lot of readers at 85 Broad Street, the headquarters of Goldman Sachs. That is the best explanation I have hit on for why the leaders of the smartest investment bank on Wall Street– they were not only better positioned than anyone else before the crash, they have made the most spectacular recovery in its aftermath – are taking such a beating in the court of public opinion.
You cannot accuse Goldman of not trying to improve its image. Or, if you happen to work there, you cannot brush off the bank’s poor reputation among the public by pretending Goldman does not care. Lloyd Blankfein, the chief executive, and other Goldman executives, submitted to lengthy questioning by Britain’s Sunday Times and talked to Vanity Fair for a piece that will appear in next month’s issue.
Goldman has been giving away money in cleverly conceived ways, designed for maximum effect: both the 10,000 women programme, launched last year, and this month’s 10,000 small businesses initiative. And Mr Blankfein has gone further than most of his Wall Street brethren in taking responsibility for the financial crisis, including his mea culpa last week.
Yet none of it seems to stick. Instead of remembering Mr Blankfein’s admission that Goldman had “participated in things that were clearly wrong and have reason to regret”, the only line anyone seems to recall is Mr Blankfein’s unfortunate jest about doing “God’s work”.
The apologies, the donations, the new enthusiasm for the word “humble” in Goldman’s communications with the outside world – none of them is working because they cannot disguise the implicitly Randian world view of today’s Goldman Sachs.
A former partner summed up this philosophy to me by recounting a conversation with a young executive whose job it is to manage his personal account with the firm.
“It turns out we didn’t really need the government’s money after all!” the young Goldman Sachs enthusiast told his older client.
In this version of history, the patriots at Goldman Sachs accepted the money thrust upon them by Hank Paulson, their own former chief executive, only to provide cover for the weaker Wall Street firms, which would have been stigmatised had the bail-out been more selective.
The same sentiment lurked behind the assertions of Gary Cohn, Goldman’s president, who this summer insisted “we did not have a near-death experience”.
The view that Goldman did not really need Uncle Sam’s billions last year is echoed today by the conviction that Goldman’s swift return to hyper-profitability is due entirely to the genius of its traders, risk-managers and risk-management culture.
If you buy this vision of Goldman as a meritocratic tribe of Randian supermen, you can understand the frustration at 85 Broad: they have apologised for participating in the subprime madness and given away hundreds of millions of dollars of their own money.
The rest of America should actually be delighted by the size of Goldman’s bonus pool, one partner told me – after all, some of it will flow back to the Treasury in taxes.
The problem with the Atlas Shrugged version of Goldman’s success is that it ignores the ways in which Goldman depended – and continues to depend – on the state’s largesse.
Goldman would not exist without Washington’s rescue of Wall Street. No matter how brilliantly hedged it might have been, it could not have survived a systemic collapse.
Today, Goldman continues to benefit from government support: both from the explicit state-backed financial safety net all the Wall Street firms can rely on, and from access to state-underwritten funding.
In Atlas Shrugged, the supermen, led by John Galt, tired of supporting the parasitic underclass, retreat to Galt’s Gulch, their free-market nirvana – and the rest of the country collapses once their efforts are withdrawn.
But there is no Galt’s Gulch for Goldman: it is critically dependent on the US and global financial systems for its prosperity. Until the American people are convinced Goldman Sachs understands that, the John Galts of 85 Broad Street will be in for a rough ride.
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