Who Are You Calling unAmerican, Comrade?

One of my favorite Proverbs is Proverbs 20:14 which says, “It’s no good, it’s no good, says the buyer; then off he goes and boasts about his purchase.” The fact that buyers and sellers participate in gamesmanship is as old as King Solomon. I have had the misfortune of listening to this despicable Senate committee this morning in which some of the most ignorant and immoral people on the planet (United States Senators) grill various financial executives from Goldman Sachs about their participation in the mortgage-backed securities marketplace. I think politicians saying stupid things and being clueless about the subject matter they speak of is a basic part of being a politician. Susan Collins, who is still allowed to defraud the American people on a daily basis by calling herself a Republican, has been as guilty of utter idiocy this morning as Sen. Carl Levin, who has made a career out of being embarrassingly misinformed. I would be happy to dismiss my feelings about these hearings as the rank grand-standing of immoral and unimpressive people, for they surely are. BUT, there is one element that is downright frightening, and that is the horrific demonizing of a financial institution for daring to “short” the housing market.

I can respect that there are legitimate questions about disclosure and representation, but the hearings this morning are not addressing that. The chairman of this committee, Carl Levin, said in clear English that 25% of our economy is connected to housing, and that it was essentially “unAmerican” to make a bet that housing prices were going to fall. I will suggest to you that the only thing unAmerican going on is an elected official of our Constitutional republic even opening his big fat mouth about what kind of outlook on a given transaction people ought to have.

The reality of what Goldman Sachs did is not understandable to regular people, as they are sincerely complicated transactions. The reality of what long and short exposure to complex financial securities Goldman had is not understood by Congress because they are, well, Congressmen. But I am not writing this particular piece to necessarily defend or criticize Goldman Sachs. I am writing for the deeply moral good, though, of defending the right of private parties to take whatever positions they want to have in a free and open marketplace. Employees of McDonalds are not obligated to avoid Burger King. And I am very free to write a mystery novel even if I hate the idea of reading fiction. Financial institutions enable the entire financial system to operate when they generate products and strategies that other private financial institutions desire to have. If the richest, smartest people at a German bank’s pension fund want a piece of garbage mortgage-backed security, and Goldman wants to bet against that same security for whatever reason they please, it is perfectly “American”. They did a service on both sides of the trade – they met a market demand by creating a product that demand clearly (if not erroneously) existed for, and they protected their own trading positions by insuring against the loss of such a position. The rhetoric being thrown around today by these economic ignoramuses is not geared towards demonizing whatever fraud or illegality Goldman may or may not have committed (again, I am not touching that one here). Rather, the rhetoric being thrown around suggests that economic transactions ought to always cooperate with what these statists determine (in hindsight) is part of the greater social good. THAT, is the end of the republic. And I am deeply afraid.

Fortunately, these toothless talking-suits are interested in sound bytes, and nothing more. But we have a responsibility as citizens to hold them accountable for the ideas they suggest would make good policy. At the heart of collectivism is the belief that some central authority can dictate what transactions should and should not take place in an open marketplace better than millions of people who are touching those transactions and affected by them directly on a daily basis can. It is patently absurd. “Shorting” the housing market was not unAmerican. It was brilliant. Betting against people making their house payments did not guarantee they would not make their house payments. The day we confuse this issue we go down to a slippery slope that is indescribable in what it will mean for our society.