The Eradication of Trust

Eugene Robinson: 

Trust might as well be a four-letter word. American public opinion seems to have become an unguided Weapon of Mass Suspicion, and it’s not hard to understand why. But those who would exploit distrust, dissatisfaction and anger for political gain had better worry about collateral damage.

The overhyped tea party phenomenon is more about symbolism and screaming than anything else. A “movement” that encompasses gun nuts, tax protesters, devotees of the gold standard, Sarah Palin, insurance company lobbyists, “constitutionalists” who have not read the Constitution, Medicare recipients who oppose government-run health care, crazy “birthers” who claim President Obama was born in another country, a contingent of outright racists (come on, people, let’s be real) and a bunch of fat-cat professional politicians pretending to be “outsiders” is not a coherent intellectual or political force.

But even people who wouldn’t be caught dead at a tea party rally have lost trust in powerful institutions that are supposed to be working in the public’s interest—with considerable reason. Just look at the headlines.

There’s obviously no reason to trust Wall Street. Theoretically, the only reason for the financial system to exist is to service the economy—and the American people—by channeling capital to its highest and best use. The charges filed last week against Goldman Sachs illustrate the extent to which capitalism’s precepts have been turned on their head by financiers who believe the economy exists to service them. 

The allegation, basically, is that John Paulson, a hedge fund mogul who wanted to place a billion-dollar bet that the housing market would deflate, convinced Goldman to round up patsies who would bet the other way. Then the transaction was allegedly rigged so that Paulson would almost surely win his wager, which he did. Goldman denies the allegations of fraud and says that, in any event, it lost money on the deal.

Leave aside for the moment whether Goldman’s action fell just inside or just outside the line demarcating what was legal. What possible socially redeeming value did the transaction have? How did the concoction of a “synthetic collateralized debt obligation” benefit anyone except the lavishly compensated traders at Goldman and the outrageously compensated John Paulson? Is this a system the rest of us could possibly trust?

Posted via email from Jim Nichols