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Goldman's Gains Are America's Losses

Record earnings show Wall Street behavior hasn't changed

By Jason Farago, Newser Staff

Posted Jul 17, 2009 10:01 AM CDT

(Newser) – Goldman Sachs’ record profits are good for the firm and “bad for America,” writes an irate Paul Krugman in the New York Times. With unemployment soaring, we’re seeing that “Wall Street’s bad habits” haven’t changed, and the government has actually made another crisis more likely by bailing out the system “without reforming it.” Wall Street has cashed in on “playing us for suckers,” and it has “every incentive to keep” doing so.

For Wall Street, it’s “heads we win, tails other people lose,” Bankers who can create profits in the short run get big rewards, even if the money is “a mirage.” They thus “have every reason to steer investors into taking risks they don’t understand.” Now, the bankers have the added assurance that if they do mess up, the government will see them through, putting taxpayers "on the hook" for banks' fumbles—thus far with hardly any regulation.

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In this Sept. 16, 2008 file photo, a man walks out of Goldman Sachs headquarters in New York. (AP Photo/Mark Lennihan)

In this Feb. 11, 2009 file photo, Goldman Sachs & Co. Chief Executive Officer and Chairman Lloyd C. Blankfein, left, testifies on Capitol Hill. (AP Photo/Manuel Balce Ceneta)

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You can argue that such rescues are necessary if we’re to avoid a replay of the Great Depression. In fact, I agree. But the result is that the financial system’s liabilities are now backed by an implicit government guarantee. - Paul Krugman

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Goldman's Gains Are America's Losses