Cross of Gold

How the rush to crucify Goldman Sachs is clouding our judgment and distorting public policy.

By Fareed Zakaria
NEWSWEEK
Published Apr 23, 2010
From the magazine issue dated May 3, 2010

Imagine that you want to make a bet against a sports team, say the New York Yankees. The Yankees have had a strong run, but, poring over the data, you have come to the conclusion that they're going to start losing. So you go to a bookmaker (in a district where bookmaking is legal, of course) to place a bet. The bookmaker now looks for someone to take the other side of this bet. Once the other party is found, the deal is made. That, in essence, is the transaction that took place in 2007 regarding the future direction of the American residential-housing market, in which Goldman Sachs acted as the bookie, and which the Securities and Exchange Commission now charges was "fraud."

There's so much anger and resentment toward banks these days—some of it quite justified—that anything resembling a defense of them is bound to make people angry. But the rage surrounding the Goldman case can cloud our perspective and distort public policy. We're going through a familiar part of America's boom-and-bust cycle. Having been mesmerized during the go-go years, having unduly lionized and feted industries, firms, and people as they rode the wave, we now want to throw these people to the wolves. We need to step back for a moment and try to understand what happened and learn the right lessons.

Let's be clear: all the facts are not publicly available, and evidence may be presented in court that documents specific misrepresentations and false claims, proving Goldman Sachs's guilt. But much of the public debate has struck me as guided more by emotion than careful analysis. Even if some Wall Street practices strike many people as dodgy, even unethical, that's not the same as illegal. I want financial reform, but I also want our system of government to be characterized by fair play and equal justice—even for people making $10 million bonuses.

(More here.)

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