The titans of Wall St.—those fearless risk-takers who keep our economy going with their steely determination, grit, and superior intelligence—are once again making money hand over fist.
The recent share market rally on Wall Street has most economists tipping the worst of the global financial crisis might be over.
That optimism was underscored today when the big investment bank Goldman Sachs reported a surge in its third quarter profit to more than $US3 billion.
We should all bow to them as exemplars of the true American enterprising spirit while reverently thumbing the dog-eared pages of Atlas Shrugged.
I guess Rand is proven right once again.
But as this article in the NY Times makes clear, these profits have little to do with courage, enterprise, or intelligence:
It may come as a surprise that one of the most powerful forces driving the resurgence on Wall Street is not the banks but Washington. Many of the steps that policy makers took last year to stabilize the financial system — reducing interest rates to near zero, bolstering big banks with taxpayer money, guaranteeing billions of dollars of financial institutions’ debts — helped set the stage for this new era of Wall Street wealth.
The recent success of some banks is a case study in the degree to which economic success in this country is never the product of individual genius or initiative alone. People who make a lot of money do so because social and political arrangements enable them to make it.
But even in an article that makes this transparently clear, the language of individual initiative is still dominant.
A big reason for Goldman Sachs’s blowout profits this year has been the willingness of its traders to take big risks — they have put more money on the line while other banks that suffered last year have reined in such moves. Executives say there are big strategic gaps opening up between banks on Wall Street that are taking on more risks, and those that are treading a safer path.
But it is not a risk if the government is guaranteeing you will not fail.
“All of this is facilitated by the Federal Reserve and the government, who really want financial institutions to get back to lending,” said Gary Richardson, a research fellow at the National Bureau of Economic Research. “But we have just shown them that they can have the most frightening things happen to them, and we will throw trillions of dollars to protect them. I have big concerns about that.”
If anyone is taking risks it is the American taxpayer.
The very language the media uses to describe an ordinary news event presupposes an utterly misleading explanation of what is happening that reinforces the patently ridiculous notion of big business bureaucrats as cultural heroes.
That is part (but only part) of the reason why Rand’s books still sell.
