Pushing toxic pieces of paper around is not our idea of innovation and progress.
It's easy to despise Goldman Sachs these days. Rolling Stone commentator Matt Taibbi famously described the many-armed megabroker as a massive "vampire squid." Now, revelations about Goldman's role in Greece's ongoing financial collapse have added even more fuel to the conspiratorial fire. Stock up on your garlic -- and, uh, whatever keeps squid away.
The wrong kind of Greek mythology
We've learned in recent weeks that Greece essentially cooked its national books, covering up its debts so it could remain in compliance with the European Union's financial requirements. Goldman Sachs and other banks allegedly helped Greece mask those shortfalls. At the same time, a company backed by Goldman and its cohorts facilitated credit default swaps as hedges in case Greece defaulted -- in essence, setting itself up to profit if and when Greece's house of cards collapsed. That strategy bears a striking resemblance to the disaster that befell AIG.
To put it another way: Suppose you have a friend with a risky and dangerous secret -- say, a heroin addiction. But instead of urging that friend to clean up and get treatment, you're vouching for him to everyone else, insisting he's holding down a job and doing fine, even as he's borrowing money from you to get his fix. Worse yet, you're quietly placing bets around town that your junkie friend will eventually O.D., knowing that sooner or later, the truth will come out. Is it us, or does that behaviour sound downright sociopathic?
Force for good?
Heated criticisms like Taibbi's have moved some financial columnists to defend Goldman. They argue that Goldman's behaviour doesn't exactly set it apart from the rest of Wall Street, and that financial bubbles, busts, and other disasters always require a whole herd of dummies and suckers to buy into money masterminds' delusional thinking in the first place.
That may be true, but it doesn't make Goldman and its ilk look any less irresponsible. They seem hellbent on masking or downplaying risk -- at least as it pertains to their own interests. And when the you-know-what finally starts hitting the fan, they inflict the painful results of their reckless behaviour on shareholders and taxpayers, then waltz away with fat pay cheques and fatter bonuses.
We can't blame Goldman for every financial disaster under the sun, but we wouldn't trust them as far as we could throw them. We still don't think that banks like Bank of America, Citigroup and Royal Bank of Scotland (LSE: RBS) are truly out of the woods. In the still-shaky US economy, more housing defaults and foreclosures could be just around the next corner, even as piles of toxic debt from the last mess remain on these companies' books.
The vampire squid reaches far and wide
I'm also suspicious of Goldman Sachs' widespread influence. Its veterans have a curious habit of ending up in powerful positions within the US government, especially in the Federal Reserve. In addition, the company seems to have a puffed-up opinion of itself, between its infamous remark about "doing God's work" and its huffy response to Taibbi's Rolling Stone piece: "We reject the assertion that we are inflators of bubbles and profiteers in busts, and we are painfully conscious of the importance in being a force for good." The company's got a funny definition of "good," if you ask us.
We're pretty sure that real forces for good make great, innovative products and services -- think Autonomy (LSE: AU), Tesco (LSE: TSCO), or Vodafone (LSE: VOD). They're not arrogant investment banking firms that push pieces of paper around and try to pass it off as "innovation." A credit default swap ain't fire or the light bulb, folks. That sort of invention may change the world -- but only for the worse.
If you want to be a force for good, Fools, take your business -- and investing dollars -- to forward-thinking, transparent companies, rather than blame-shifting, well-connected behemoths. Whether we're pointing the finger at Goldman or one of its competitors, the City and Wall Street's heavy hitters have proved their own irresponsibility time after time after time. Greece wasn't the first example, and unfortunately, it won't be the last.
Should we blame Goldman for everything? Does the fault lie with Wall Street, politicians, or all of us? Sound off in the comment box below.
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> A version of this article, written by Alyce Lomax, was originally published on Fool.com. It has been updated by Bruce Jackson.
