Goldman's (and America's) Bleak House

Goldman creates a fog, with its complex transactions and massive data dumps, and we live in one, not understanding enough about what the bank does to be able to say what exactly it did wrong.
Publish date:



) --

Goldman Sachs

(GS) - Get Report

is rightly described as a firm run by traders, but lately it is Goldman's lawyers who are doing most of the heavy lifting and they are not nearly as creative.

Rob, cheat, steal and then hide behind your lawyer. It has been the American way for a disturbingly long time now, but there are signs the tide may be turning.

Nowhere is this turning of the tide against lawyers more evident than in the case of Goldman Sachs vs. America.

The first example came in the

civil fraud case

announced by the

Securities and Exchange Commission

against Goldman April 16. The case was absurd, most commentators seemed to think. Those underpaid lackeys at the SEC had loused up again. Maybe they were Obama's lackeys now rather than those of the big banks, but what they were above all was incompetent, inexperienced, or both. Otherwise, why wouldn't they be working for Goldman?

But suddenly, instead of packing up and going home, the government lackeys leaked that they had a criminal investigation under way, and not just of Goldman, but of

Morgan Stanley

(MS) - Get Report



(C) - Get Report


JPMorgan Chase

(JPM) - Get Report


Deutsche Bank

(DB) - Get Report



(UBS) - Get Report

. The leaks were artfully dispensed to the Wall

Street Journal

, a drop at a time, to keep Goldman's sins fresh in the public's mind while tougher-than-expected financial reform legislation worked its way through Congress.

One thing that was impressive about the Obama administration's leaks was how they made legal arguments irrelevant. The


was reporting a criminal investigation was underway, but the government was officially saying nothing; therefore, it didn't have to explain itself. Did it have the goods on Goldman? Probably not, but who could say? Meanwhile, some tough new rules it was looking to pass seemed suddenly to gain support from many quarters. Politics, not law, was the new battleground.

The lawyers are again on the defensive in the latest volley at Goldman, this time from the bipartisan Financial Crisis Inquiry Commission. The FCIC has struggled to be taken seriously, and when the news first broke that it had subpoenaed Goldman, accusing it of first dragging its feet and then dumping an impossibly large amount of information (some 2.5 billion pages!) on the commission, I wondered if Goldman might end up essentially

killing off the commission


Berkshire Hathaway

(BRK.B) - Get Report

Chairman Warren Buffett had just forced the commission to subpoena him, and I thought maybe the FCIC subpoena might become a sort of badge of honor.

But, to their credit, my colleagues in the press have taken the subpoena seriously. The


gave it front-page treatment, and (maybe less surprisingly) the

New York Times

applauded the move in an editorial Tuesday.

Also Tuesday,


said 61% of 1,001 investors and analysts it polled believed Goldman was being "legitimately scrutinized" by regulators, while only 29% felt it was being "unfairly vilified." If 61% of investors and analysts think the pressure on Goldman is legitimate, imagine how many more barbers and plumbers must think so.

The deluge of bad press no doubt helped in causing Goldman's stock to lag the rest of financials all day, nearly sending it below the 52 week low of $134.20 set May 25.

The message sent by the FCIC's subpoena and the strong language from its Chairman Phil Angelides and Vice Chairman Bill Thomas in

follow-up interviews

boils down to this: stop lawyering us, Goldman.

Because that is exactly what lawyers do. They delay, delay, delay, and then -- you want the information? - here's 5 terabytes worth!

"Fog everywhere," wrote Charles Dickens in the opening passage of "Bleak House," his famous indictment of the British judicial system, and the fog was densest at the court building.

Fog may be more easily used as a metaphor in London than New York, but it seems well-suited to Goldman and America in many ways. The fog may be densest at Goldman's new headquarters, but the fog is everywhere. Goldman leader Lloyd Blankfein was trained as a lawyer, but so was Barack Obama. Goldman creates a fog, with its complex transactions and massive data dumps, and we live in one, with our inability to understand enough about what Goldman actually does to be able to say what exactly it did wrong.

The commission has proven it knows how to deliver a subpoena, but does it even know what it is looking for? Would it know it if it saw it?

American ignorance about its own financial system is on proud display in this video clip from the upcoming TV series,

"The Last Days of Lehman Brothers"

. The clip is shockingly bad, because it almost has to be. The actor playing Hank Paulson talks about cars and hula hoops and "you want your children speaking Chinese?" because he cannot possibly talk about credit default swaps. The largest financial catastrophe in 70-plus years does not lend itself well to drama because it is too damned complicated.

Bringing charges against Goldman will be even more difficult than turning the fall of Lehman into decent drama, but what if the government does it anyway? What if punishing Goldman means turning a blind eye to certain aspects of the law? Would that be a victory or a loss for our nation of lawyers?

--Written by Dan Freed in New York