Goldman Sachs director Stephen Friedman recently defended his purchase of Goldman shares while he was serving as chairman of the New York Federal Reserve. Oh, no, there's no conflict of interest there, right?
You'll recall Goldman Sachs, of course. That's the former "investment bank" that was converted during late last year's financial crisis to the status of a traditional bank holding company.
Maybe somewhere along the line we'll get an answer to that question about potential conflict of interest, as well as to scores of other unanswered questions about a financial meltdown that happened at a critical moment in the presidential race, and that seemed to catch financial wizards completely off guard.
Of course Friedman was not alone in having both a major federal position and a past tie to Goldman Sachs. During the great financial swoon, both Secretary of the Treasury Henry Paulson and White House Chief of Staff Josh Bolton had prior ties with Goldman. Heck, it seems like half of the financial leaders in America have been involved with Goldman in some form or fashion over the years.
Let me be clear: There is no evidence to support any claim that Goldman Sachs is culpable in any manner for the collapse of the economy, or that anyone in the company has done anything illegal. That said, New York's Attorney General Andrew Cuomo announced in recent months that he wants to know why Goldman Sachs was one of the biggest beneficiaries of the bailout money that was provided to the insurance disaster AIG during the peak of the meltdown crisis.
To me the question is simple: How could Goldman Sachs allegedly produce the greatest minds in the world of finance and investment, and yet have allowed not only their own company to get into such a pickle, but also to produce high-level authorities from the Federal Reserve, the Treasury Department and the White House, all of whom clearly slapped together what some would say was a wink-and-a-nod, loosey-goosey bailout plan? Aren't these guys supposed to be smart?Maybe at least some of them are smarter than we think. Although Friedman insists that his investment in new shares of Goldman in the middle of a financial crisis was legal and proper -- even as the New York Fed of which he was head was playing a critical role -- it just doesn't look right. Note that he followed up his declarations with none other than a prompt resignation from his government position.
Whether it was a good-old-boy system, sloppy work or risk-taking to the extreme, we all know that something about this financial crisis just never seemed to meet the smell test. It all happened so fast and was so clearly a genuine emergency that one has to wonder who knew the financial implosion was coming and who, if anyone, profited -- either on the front or the back end.
Fortunately, if it receives proper follow-up, a bill proposed by Sens. Johnny Isakson, R-Ga., and Kent Conrad, D-N.D., could help untangle this sticky web. They've proposed a commission to investigate the events surrounding the meltdown of our economy last year. And they want a complete investigation as to just what actions and parties were responsible for what might as well be called an economic Pearl Harbor; an event that not only blew up our financial institutions, but that played a critical role in the mindset of the public in the elections that followed only a month or so later.
To suggest that one company such as Goldman played some nefarious role in this situation would be unfair. What is fair to say is that there obviously are plenty of folks at many financial and other related companies that were either nowhere near as smart as we thought, or, just possibly, were outsmarting us all. Maybe someday we'll get the answers we deserve.