As Goldman Gloats, What Does It Matter For Us?

This is by Russ Roberts, a libertarian U of Chicago economist who sounds like a populist here.

NPR: "Should we care about Goldman's profits and compensation? It's pretty gauche when your take-home pay is millions of dollars while some of your neighbors can't find work. But is it wrong? Is it something those of us on the outside should care about?

Normally, I'd say it's nobody's business. What people get paid is best left to the marketplace.

But Goldman Sachs is different because those of us on the outside are really on the inside. Goldman Sachs was propped up with our money. Not the money it took directly from the government and paid back. The money that AIG gave it that really came from the taxpayer.

Goldman Sachs being proud of its performance this year is like the Harlem Globetrotters bragging that they went undefeated. It's not really a normal competition.

Goldman Sachs played the same game as Bear Stearns and Lehman Brothers — they made lousy investments financed with borrowed money. When the assets fell in value, Bear and Lehman died. They were reckless with other people's money.

But Goldman Sachs is still here, Why?

Part of the reason is that maybe it took a little less risk and maybe hedged against that risk a little better. But part of the reason Goldman lives and thrives is that the government bailed out AIG. Almost 13 billion dollars of the money the government sent to AIG went out the door and over to Goldman Sachs. This money included loans and insurance Goldman bought on its bad bets. Some of that insurance turned out to be a bad bet, too. But Goldman didn't bear the cost. The taxpayers did."