Month: February 2020

There’s an interview in the FT making the rounds on Twitter — Edward Luce went to lunch with Lloyd Blankfein, the once upon a time head of Goldman Sachs, who oversaw those bonuses for executives after GS received bailout funds from the govt. He isn’t there anymore, but he’s a worthy synecdoche for Wall Street bluster and impunity. And the highlights are something else:

1. He implies that it’s more obvious that Donald Trump cares about the economy than Bernie Sanders does.
2. He argues that Wall Street’s lapses that begat the Global Financial Crisis were examples of stupidity, not criminal intent, as though that forgiveness is ever extended to non wealthy ‘victims of circumstance’.
3. He makes a joke that he’s not worried about climate change since he lives on the 16th floor of his midtown apartment building. (Is Columbus Circle really Uptown?)

It’s tempting for me to paint Blankfein as a villainous caricature, but this interview actually arrested my day for a bit on Friday. He claims that he doesn’t consider himself rich (just ‘well-to-do’), owing to his working-class childhood. What he presumably means is that he doesn’t consider himself an ‘elite’; I was not expecting him to argue implicitly that he relates more easily to elevator operators and taxi drivers than fellow high-finance types. If he’s being honest about this, it could explain why it’s so easy for Sanders and Warren to get under his skin by using him as a stand-in for billionaires and corporate elites writ large. But it doesn’t explain a lack of sympathy (let alone empathy) for the positions that Sanders and Warren represent in their primary runs for the Democratic nomination.

He also argues that the only reason social services such as public education in the 1950s were so great was because of explicit sexism, locking smart women in primary school teaching and nursing jobs. Antonin Scalia made this argument, too, some years ago. Never mind that Finland seems to do alright by its student by, ahem, paying teachers more. This blank spot in Blankfein’s thinking expands to include the argument that ‘dopey regulations’ are what really holds corporate progress and economic growth back in ways that inhibit keep all boats from rising. Maybe? He’s light on the details about this, and plenty else in the interview, and the nineties experience with financial deregulation was hardly an unqualified economic success on any number of levels.

I think what keeps me thinking about this is that in some ways it may humanize Blankfein, while in other respects, it illustrates an ideologically driven man, though I suspect he’d disagree. He approached this interview as an adversary, bringing his rhetorical A-game. Luce cites Blankfein’s degree in history as the subject calls up periods of instability in a cycle going back to the Dark Ages in the shadow of the Roman Empire, rather than, say, the emergence of the Gilded Age from the social chaos, innovation, and corporate development of the late 19th century, and how it was a precursor to the various reform and progressive movements of the 20th century. He compares rentiers to antelopes being eaten by lions, though he keeps mum on who, exactly, the lions are. Are they the 99% of Occupy Wall Street? The 47% mooching class Romney disdained? Bernie Bros and Warren Stans? Anyone paying attention to the stream of scandals in which Goldman Sachs has played a major or minor role that wants some semblance of punishment for a very well-off corporation that seems to continue to prevail? And by the end of the piece, there’s a weird digression about Samurai. Where did that come from?

It’s hard to imagine that Blankfein, who has a (perhaps) twisted sense of humor, some critical insight into the events of the past though I disagree with the interpretation, and what I interpreted as a genuine sense of class identity, could fail to see the irony in how he comported himself in the interview or appreciate the apoplexies rising to the surface of his presumably composed interviewer. It may just be a magnificent trolling exercise. (He does make a big deal about being retired.) Bloomberg’s annoyance with Democrats in the recent debate for not appreciating his donations in the past echo throughout this piece; so, too, do references to how Blankfein might serve in a Bloomberg administration. My best interpretation of this interview is as a warning: there are perils inherent to allowing Wall Street to play the tune for the Democratic Party. Centrists take heed.

I was procrastinating by closing some of the open tabs in my browser when I got to Barry Eichengreen’s January 14th piece for Project Syndicate, “Democratizing the ECB” — it’s short, and relevant to some of what I’m working on, so I finally read it.

His key argument (it is a very short piece! I shouldn’t have waited close to a month!) is that the ECB should increase transparency by releasing governing council members’ votes, as central banks like the Fed, the Sveriges Rijksbank, and others, do. The key argument against releasing this data, he argues, is that it could force nationally appointed council members to vote more narrowly on national (contra supranational) interest; he also argues that this worry is overblown, since:

“Such cynicism underestimates Europe’s central bankers. They may have made mistakes, but they have not shown a readiness to bend to popular opinion in order to retain their jobs. As important as their vote, moreover, is their ability to convince their colleagues of the validity and integrity of their arguments. Blindly obedient central bankers who lack this integrity will be unable to persuade their colleagues. They will find themselves isolated and consistently in the minority.” (Eichengreen, 2020)

Is it true that they will find themselves isolated and in the minority? Monetary hawks on the council have tended to come from European countries that suffered least during the Eurozone crisis, and it’s telling that when they no longer prevail in ECB decision-making, they seem to lash out in different ways.

Sabine Lautenschläger, the former German representative on the ECB’s governing council resigned last fall in protest of overly loose monetary policy decisions under Mario Draghi; her action followed her strong vocal opposition, alongside council members from Austra, the Netherlands, and France two weeks prior. Nor was she the first German council member, and monetary official, to resign from either the ECB or the Bundesbank in protest of European decisions (Jürgen Stark and Axel Weber did so in 2011). German newspapers dubbed Draghi ‘Count Draghila’, complete with pictures of the former head sporting fangs and a vampire cape, with splashy headlines about how he wanted to suck German savers’ accounts dry. And Hans-Werner Sinn now gets to complain that the ECB is no-longer independent. (Though he’s been doing so since July, and who didn’t see that coming.)

Time will tell how being in the minority affects core EMU members’ attitudes about policy, and their willingness to tolerate and abide the new ECB head Christine Laguarde’s changes. And it’s far from obvious how loosening monetary policy across the EMU — let along fiscal policy! — is even against German interests vis-à-vis growth. I’m curious about how accurate Eichengreen’s predictions are.