Ghouls of Wall Street

Every time we lift up a rock on Wall Street something unappealing scampers out. Will Goldman's reputation survive?

Lloyd Blankfein (Jemal Countess / Getty Images)

It looks like the American epidemic of testosterone poisoning is in the process of claiming yet another victim: the reputation of Goldman Sachs.

Your normal Wall Street big swinging Richard has enough of a lingering moral compass to at least tell himself that his wizardry benefits somebody or something besides himself. You know, his cleverness makes capital markets more efficient. It provides credit to productive enterprise. Whatever.

Not these guys. No pretense of any kind of social usefulness from the likes of hedge-fund manager John Paulson, who sat glued to a computer screen making billion-dollar bets on everyone else’s future calamity. No such fig leaf for Goldman vice president Fabrice Tourre, the baitfish chosen by the SEC to lead them to the big sharks, a guy who spent his life’s precious hours devising ways to stuff his own clients’ loans with Paulson’s handpicked securities dross. A bunch of digital Dombeys in an iPad Dickens novel.

The need to guillotine Blankfein and send his billiard-ball head tumbling into the wicker basket may be irresistible in this political climate, but rivals won’t have long to gloat.

And it’s always guys, isn’t it? Periodically The New York Times runs a business news story lamenting how few women still make it to the top in the Wall Street boys’ club. Could it be that women are choosing to be conscientious objectors in these wars of one against all?

Gregory Zuckerman: Inside Paulson’s Deal with Goldman Tunku Varadarajan: The Irrefutable Moral Case Against Goldman Gregory Zuckerman’s The Greatest Trade Ever is an unsettling glimpse into the world in which Paulson plotted his score. Paulson’s chum and fellow renegade investor Jeffrey Greene, for instance, feels mounting panic when he reads about Hope Now, a new government-run program dedicated to helping struggling homeowners stay in their homes. After all, if the program were to help borrowers, there was a horrible chance it might stabilize the housing market.

Who are these ghouls? Beautiful women are only too happy to marry them, unfortunately, because of all the goodies they can buy them. One of the more repellent moments in Zuckerman’s book is the scene in the summer of 2007 where the wife of Paulson’s partner Paolo Pellegrini turns to her husband after reading about troubles in the subprime market and asks casually, “This is really good for us, isn’t it?”

You bet it was.

During Paulson’s celebration at Manhattan’s Metropolitan Club of his firm’s $15 billion windfall, Zuckerman tells us, the host served up $500 bottles of Château Haut-Brion, Château Margaux, and Château Lafite-Rothschild. Jumbo crabmeat and avocado, Colorado rack of lamb with tarragon jus, and Parmesan polenta cake was eaten by candlelight. Meanwhile, outside those walls, it was the dark days of November 2008, and the financial crisis had become so grave it was clear the country—his country—was on the verge of another Great Depression.

What a way to be proved right. I guess you have to admire Paulson’s due diligence in keeping off his BlackBerry long enough to sift through thousands of mortgage deals. Everywhere else the housing balloon was being filled to bursting with hot air from congressmen taking money from Fannie and Freddie to avoid regulation, and the corrupt ratings agencies were busy selling triple-A ratings to firms bound to go bust. It’s enough to make you miss the simple malevolence of old-time bankers like Mr. Potter in It’s a Wonderful Life.

In Warren Buffett’s great metaphor, the tide has gone out and it’s the turn of Goldman’s CEO, Lloyd Blankfein, to be seen as wearing no pants. The once ebullient master of the universe finds himself in an almost comical perfect storm. Besides the Democrats’ push for banking regulation in Washington, there are supercharged election races in Britain (“morally bankrupt!” expostulated Gordon Brown of Goldman Sachs, in a frantic move to curry populist favor) and trouble in Germany, too. (Blankfein’s name is mud even in North Rhine-Westphalia, for God’s sake.)

Everywhere you look there’s a hunger to put the ethos by which Wall Street thrives on trial. Each new detail shows how these guys seem to live in a moral bubble so coldly detached from human repercussions, so isolated from how their “bets” land on the lives of ordinary people, they have even lost the sense of how it will look if it’s ever revealed.

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The need to guillotine Blankfein and send his billiard-ball head tumbling into the wicker basket may be irresistible in this political climate, but rivals won’t have long to gloat. I suspect the widening net of the SEC to Citigroup and Merrill Lynch is likely to turn up just as many “not fit to be seen” transactions as Goldman’s.

Imagine what all the ingenuity and money that went into creating these demonic derivatives might have wrought for a better America. It’s worse than a mistake, worse even than a crime. It’s a waste.

Tina Brown is the founder and editor-in-chief of The Daily Beast. She is the author of the 2007 New York Times best seller The Diana Chronicles. Brown is the former editor of Tatler, Vanity Fair, The New Yorker, and Talk magazines and host of CNBC's Topic A with Tina Brown.