With all that has been written and said lately, you’d think Wall Street was a hotbed of organized crime.
Goldman Sachs CEO Lloyd Blankfein has been painted as the Michael Corleone of finance. With his deadpan delivery, shaved head and smartly tailored Armani suit, he looks like more like a hit man than a business leader.
Even as Blankfein testified stone-faced before the Senate’s Permanent Committee on Investigations (SPCI) – the same panel that investigated Jimmy Hoffa and reputed mobster Joseph Valachi – you had the impression that his henchmen were busily rubbing out key prosecution witnesses.
Now, in addition to the civil action that has been filed against Goldman by the Securities and Exchange Commission, rumors are swirling that Wall Street’s most profitable firm may be facing criminal charges for fraud and misleading federal regulators.
They Do Fit the Stereotype
According to the scuttle on the street, prosecutors at the Manhattan office of the U.S. Attorney are equating Blankfein to a Harvard-educated version of infamous crime bosses like Carmine (The Cigar) Galante, Jimmy the Weasel Fratianno and John Gotti all rolled into one. So far, the only thing missing from this plot is a Rudy Guiliani press conference and a severed horse head.
Although the likelihood of Blankfein or Goldman actually being charged, let alone convicted of any crime, is slim, the real question is whether Wall Street is truly a breeding ground for crime?
In my view, the answer is no.
Wall Street is no more crooked now than it’s ever been. In fact, there may be nowhere in America more highly regulated or scrutinized. It’s no accident that there are more lawyers per square foot of high rise on Wall Street than anywhere else on the planet.
Wall Street also is no more greedy and avaricious now than in recent years. Greed has and always will be an essential element of Wall Street. Without greed, Wall Street would be just another stretch of pavement.
Time to Be Realistic
Whenever risky bets fail, we start looking for a fall guy. Someone has to pay the price. Someone has to stand in the docket. Goldman Sachs and Blankfein are perfect foils.
From the outside looking in, Goldman and Blankfein may look like Crime, Inc. The plain truth is that they were only doing what they were trained to … manage risk for their investors.
Congress and the Feds are wasting a lot of effort focusing on the alleged nefarious misdeeds of a few big players. Instead, they need to turn their attention to reforming the way in which Wall Street bets are managed, and the level of risk we will let banks take before fitting them for cement galoshes.
What’s galling regulators and Congress is that Goldman and Blankfein were so expert at gaming the system. When everyone else was in crapper, they were making money hand over fist.
Instead of hanging these guys in effigy, Congress ought to hire them as consultants. Who better than the Wall Street wise guys who seem to understand every angle and have consistently managed to stay ahead of the wolf pack?
Leave the CDO’s – take the cannoli.
John Cohn is a senior partner in the Globe West Financial Group based in West Los Angeles. He may be contacted at www.globewestfinancial.com
