Wall Street v. Washington

Hi!

I heard a story on NPR's Fresh Air warning of an impending showdown between Wall Street and Washington. The first battle is likely between Goldman Sachs and the White House. Goldman accepted $10B in TARP funds and wants to return it. Their reasoning is that they believe returning the money will free them from the restrictions the government has placed in recipients of TARP funds. Here's the rub:

What Goldman wants to do is use this (basically) as a recruiting and marketing tool. They want to be able to claim "Hey, we don't need TARP funds, so come invest with us since we're obviously stronger than our competitors...we're also unbound by compensation restrictions, so we can hire all the best talent!" This fails to acknowledge that it was this "talent" that got us into this mess in the first place, of course...

What makes the rub raw, though, is that Goldman received $13B from AIG as part of AIG's bailout. Will it be returning that money? Of course not! The claim that Goldman doesn't have any bailout money is not just misleading, it's a lie! The White House, of course, is not concerned just with Goldman, but the entire financial system. The showdown is whether Goldman will still be bound by the restrictions even if they give back the money. I think they should be.

Of course, Goldman's case is really a form of blackmail. They want to be ready to blame the government if things don't improve quickly. The White House needs to stand its ground. Giving in to Goldman will undermine the recovery efforts of other financial institutions in order to give Goldman a competitive advantage. In the future, any institution that is "too big to fail" should be prepared to be "too big to be independent" of additional government regulation.

Wall Street wants to own the upside while ensuring that the taxpayers own the downside. This isn't right and the White House needs to ensure that the system doesn't work this way in the future...

Thanks,
Matt