Goldman Sachs and the Cerberus Within (Greed, Envy, Pragmatism)

Goldman Sachs and the Cerberus Within (Greed, Envy, Pragmatism)

Go to http://en.wikipedia.org/wiki/Cerberus to see a watercolor by William Blake of Cerberus
Cerberus, watercolour by William Blake
On April 16th, 2010 Goldman Sachs was charged with fraud for betting against the very investments they were selling to others.  Upon reading the news I immediately felt a sense satisfaction that the firm that is alleged to have contributed to the debacle of housing crisis was getting what was coming to it.
It seems that Goldman Sachs was allowing an advisor, John Paulson to purchase investments that would appreciate in value when the housing market collapsed and also allowing him to choose the mortgages that would be bundled into an investment called collataeralized debt obligations. These were sold to other investors, mostly banks.  Read more about the details at http://www.nytimes.com/2010/04/17/business/17goldman.html?th&emc=th .    There was no regulation of this fledgling realm and as we eventually discovered there simply wasn’t enough actual cash to pay the insurance against the bad loans.
Imagine selling cars that you thought had reasonable prospects of exploding and killing their occupants and simultaneously purchasing life insurance on the driver because you foresee a reasonable prospect of collecting.  I had three reactions to the fraud charges and they arose in quick succession.
First, I felt my vengeful spirit satisfied.  These fat cats deserve to be charged (and potentially be fined $1 bn). They are partly responsible for the loss of enormous sums that caused some companies to fail and others to nearly fail.   Government intervention, designed to keep complete economic collapse from overtaking the US and other economies seemed necessary.  I am indignant, righteously indignant concerning the unprecedented transfer of wealth from average individuals to wealthy individuals and corporations (through taxes, bailouts, stimulus funds, and eventually long-term national debt).  All this leads me to want to see swift justice executed without mercy.
But soon I felt deep envy.  There is still a cesspool of envy in my spirit about Goldman Sachs and other firms like it.  I resent those who made obscene amounts of money through the early part of the decade primarily because I didn’t.  If I had been one of the traffickers in these investments or one of those receiving spectacular compensation, my righteous indignation would have given way to complicit silence.  At the first sign of trouble I would have wanted to be among those who were savvy to hedge their bets like Goldman Sachs did to extend the party a little longer.  The promise of glory and wealth would have enchanted me, and before long I would have been certain to feel entitled to it all.  My second reaction was to acknowledge that the vengeful side of me sometimes serves as a thin, but comforting, disguise for envy and sense of entitlement.  I met the enemy and it is me.
Then, a third perspective emerged.  It is a more sober one, a sort of amalgam or marriage of the two earlier ones.  I may be a modest transcendence of opposites.  Let’s face facts, the employees at Goldman Sachs are adepts.  They may be more adept at garnering wealth than any group of individuals in recent American history.  Therefore, I can’t imagine they didn’t have an idea that fraud charges might be handed down.  While the public has oscillated between vilifying Goldman Sachs and glorifying the company and its employees, they may have seen either situation as an opportunity to make money.    These are folks who know about mitigating risk (and apparently also how to create risk); in fact, that is part of what they are charged with.  They covered a bet they knew was likely to be a bad one while encouraging others to stay at the table and continue gambling.  My third reaction led me to pick up the phone and call my broker and ask if she thought now might be a good time to buy some Goldman Sachs.  I figure these are smart people who will find the angle that will let them earn profits, record profits, again.
Whether Goldman Sucks or not is not clear yet.  However, I appear to be a three headed beast, a Cerberus (see link above).  I stand in harsh judgment of the scoundrels who exploit the capitalist system better than I do, I envy the spoils they enjoy, and it turns out that when the psychological dust settles I am a pragmatist.  I don’t know if I will get in bed with Goldman Sachs since I still maintain Goldman Sucks but if I buy Goldman Sachs low and sell high I will be reconciled to the fact that Goldman Sucks no more than I do.
Len Cruz, M.D.