God's Gold on Wall St.: A Vaunted Self-Assessment of God's Work

A year after the financial crisis of 2008, Lloyd Blankfein, the CEO of Goldman Sachs,  found himself vilified for his firm’s quick return to risky trading in spite of its new bank holding company status. Populist resentment at the time was especially pitted against the hefty bonuses from the trades. Also, people were upset about the benefits that the bank had obtained from the decisions of its alums in the U.S. Government—specifically, in the U.S. Department of the Treatury. For instance, Goldman Sachs and other AIG counterparties got a the dollar-for-dollar payout from AIG thanks to an infusion of funds for that specific purpose by Treasury. Regardless, in an interview with the London Times, the highest-paid CEO (at least in the financial sector) dismissed such talk and defended his money-making machine and its compensation.  In addition to being the engine of economic recovery, according to Blankfein, Goldman Sachs provides a social function in making capital available to companies so they can expand. Stunningly, he adds, “I’m doing God’s work.”[1]  Such a claim is a far cry indeed from Thomas Jefferson’s warning that banking institutions are more dangerous to our liberties than standing armies.[2]  Perhaps God intends to undo our liberties by bailing out the banks.

Besides these rather obvious problems with Blankfein's religious claim is his presumption to know what God's work is, and, furthermore, that he is doing it.   Even though a feckless system of corporate governance can enable a CEO to essentially function as his or her own boss, including doing the board's job of evaluating his or her own performance, it is a tall order for a human being to be able to evaluate his performance as God's work.   To be sure, it is possible that God is an intelligent being that bestows favor on his golden stewards for doing His work.

Lloyd Blankfein may have been involved in two conflicts of interest: 1) that of having excessive power over the board whose principal task it is to oversee him, 2) having communicated with GS alums in high posts in the U.S. Government (e.g., Hank Paulson) and perhaps having them enact policies on GS's behalf.   It may be that institutional and personal conflicts of interests can become so ubiquitous that they are simply not seen by the culprits. Furthermore, it could be that the denial enabled by a tacit presumptuousness is like a white movie screen on which even doing God's work can be projected. How ironic it is, that sordid proprietary interest could operate not merely under the subterfuge of being a neutral "market-maker," but also as God's work. Such work is two degrees of freedom away from squalid greed. So it is remarkable that the two could become conflated in a mind.

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[1] John Arlidge, I’m doing ‘God’s work. Meet Mr. Goldman Sachs, The Sunday Times, 11/9/09.

[2] Thomas Jefferson to John Taylor, Monticello, May 28, 1816, in Paul L. Ford, ed., The Writings of Thomas Jefferson (New York: G.P. Putnam’s Sons, 1892-99),  XI, 533.

See related book: God's Gold and Essays on the Financial Crisis

Bad Boy Banks Enabling Inversion: Can a Firm Be Patriotic?

The “corporate citizenship” literature has it that companies in the private sector can indeed be “good citizens.” Even though a company cannot vote or be drafted, citizenship is said to fit as an apt description of what is organizationally speaking a profit-seeking machine. To say that a company is a good or bad citizen is, moreover, to anthropomorphise (i.e., apply human characteristics to a non-human). Furthermore, in their managerial capacities, the people who run companies are duty-bound to act in the financial interest of the stockholders, and only then in the broader societal interest. Even so, an ethical basis does exist on which some of the banks can be viewed as culpable.

Between 2011 and 2014 when Goldman Sachs made nearly $210 million in “inversion fees” for helping companies based in the U.S. shift their headquarters overseas to obviate a relatively high U.S. corporate tax, asking whether the executives at the bank were patriotic is tantamount to making a category mistake. A person can without contradiction be patriotic away from work while focusing on increasing inversion fees in his or her managerial role. Hence, Jamie Dimon could sincerely look at those fees earned by JPMorgan Chase and claim, “I’m just as patriotic as anyone.”[1] Were he to have put his personal patriotism into force at the bank at the expense of the stockholders’ financial interests and the chartered function of the bank, he would have been unethically disregarding his fiduciary duty. From a Kantian standpoint, we can ask what would happen if every manager at every bank had as his or her own “personal project” as a patriotic U.S. citizen trump the duty. Patriotism, after all, is hardly monolithic, but involves interpretation in discerning the applications and the proper choices therein. Banks could hardly function that way, so to say every manager should put patriotism first would not make sense (for the banks would fail under such a mandate). This, by the way, is the first formulation of Kant’s categorical imperative. If universalizing your maxim doesn’t work because of a contradiction in the reasoning or logic, the maxim is unethical.

The argument that banks that had been in trouble in 2008 and subsequently received loaned funds from the U.S. Government are obliged ethically not to turn around and profit by depriving that government of corporate tax revenue presents us with a stronger case, for it rests on an implicit contract, or quid pro quo, rather than patriotism. Social contract theory, of which Kant was an advocate, includes implicit contracts, rather than being limited to the ones where both parties sign on the dotted line. In fact, as regards any historical agreement establishing government and citizens, Kant idealizes the notion to say that such an agreement would be what people would agree to in a state of nature—not that such an agreement was literally made as man first stepped into complex living arrangements. From this interpretation of the theory, it makes sense to say that in return for being bailed out—even from the tailwind of irrational exuberance aided and abetted by a “big short”—a person naturally would expect an obligation not to double-cross the hand that had helped at the time of crisis.

This ethical argument applies to Goldman Sachs, Morgan Stanley, and Citigroup, each of which made sizeable profits from inversion fees and had needed the government bailout. JPMorgan Chase, on the other hand, avoided the greedy temptation to get into mortgage-based derivatives and insurance swaps based on the securities, and thus that bank did not face the implicit obligation. Jamie Dimon need not have jumped to defend his patriotism after all, or even an implicit obligation that his bank put the revenue of the U.S. Government before stockholder profits.

Regarding Goldman Sachs and Citigroup, dismissing the implicit obligation was, say we say, par for the course (i.e., in keeping with the banks’ respective cultures), for in both banks clients were lied to regarding what the traders knew were “crap.” I’m referring of course to the bonds based on sub-prime mortgages. Such fraud is also a disregard for an implicit social contract (as well as a very public legal one). Societally, people have a general expectation that people working at a bank will not exploit them through dishonest means. That’s not how business is done, the average Joe would rightly say. So perhaps the utility of this case of inversion fees lies in what it says about the intractability of a mentality in a corporate culture: the dysfunction is very difficult to remove, and thus it is likely to perpetuate itself in a pattern.

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1. Mark Gongloff, “’Patriotic’ Big Banks Profit Helping U.S. Companies Dodge Taxes,” The Huffington Post, July 29, 2014.

Wall Street Banks: Price-Making and Law-Breaking?

The U.S. Senate Permanent Subcommittee on Investigations found in 2011 that “two Goldman employees, Deeb Salem and David Swenson, tried to manipulate prices of securities used to bet against mortgages. Both tried to help Goldman pile on larger bets against the mortgage market, and they wanted to be able to buy such negative bets more cheaply, the report said. Goldman, as a broker, was able to affect prices in the market through the bids and offers it gave out. Mr. Swenson wrote in May 2007 that the bank should try to ‘start killing’ prices on certain positions so that Goldman would be able to ‘pick some high quality stuff,’ according to the Senate report. The strategy, Mr. Swenson wrote, would ‘have people totally demoralized.’ The pair were unsuccessful in their attempt, and both denied making it to the Senate committee. Mr. van Praag said last week that the report had no evidence of manipulation. Still, the Senate report said that ‘trading with the intent to manipulate market prices, even if unsuccessful, is a violation of the federal securities laws.’”[1] I submit that it was also unethical. 


The full essay is in Cases of Unethical Business: A Malignant Mentality of Mendacity, available at Amazon.com.

1. Louise Story and Gretchen Morgenson, “S.E.C. Case Stands Out Because It Stands Alone,” The New York Times, May 31, 2011.

Business Ethics in the Business World: A Glimpse from Goldman Sachs

Goldman Sachs’ ethics code reads in part, “[We] expect our people to maintain high ethical standards in everything they do. . . . From time to time, the firm may waive certain provisions of this Code.”[1]  The explicit conditionality is notable and significant. I contend that among other reasons, a negative impact on the bank’s financial position and/or profits is apt to trigger such a waiver not only at Goldman Sachs, but from the business standpoint more generally.


The full essay is in Cases of Unethical Business, available at Amazon.com.

1. William D. Cohan, Money and Power: How Goldman Sachs Came toRule the World (NY: Doubleday, 2011).