The Haves Arm Themselves

Barack Obama's good friends at Goldman Sachs are picking up handguns to "defend themselves if there is a populist uprising against the bank." Evidently, Michael Moore and the public whose views Moore's captures have the US-endorsed robber barons spooked.

Seriously, this extraordinary in a city in which the mayor has repeatedly railed against guns, especially handguns.

Here, the essay from Bloomberg News:

“I just wrote my first reference for a gun permit,” said a friend, who told me of swearing to the good character of a Goldman Sachs Group Inc. banker who applied to the local police for a permit to buy a pistol. The banker had told this friend of mine that senior Goldman people have loaded up on firearms and are now equipped to defend themselves if there is a populist uprising against the bank.

I called Goldman Sachs spokesman Lucas van Praag to ask whether it’s true that Goldman partners feel they need handguns to protect themselves from the angry proletariat. He didn’t call me back. The New York Police Department has told me that “as a preliminary matter” it believes some of the bankers I inquired about do have pistol permits. The NYPD also said it will be a while before it can name names.

While we wait, Goldman has wrapped itself in the flag of Warren Buffett, with whom it will jointly donate $500 million, part of an effort to burnish its image -- and gain new Goldman clients. Goldman Sachs Chief Executive Officer Lloyd Blankfein also reversed himself after having previously called Goldman’s greed “God’s work” and apologized earlier this month for having participated in things that were “clearly wrong.”

Has it really come to this? Imagine what emotions must be billowing through the halls of Goldman Sachs to provoke the firm into an apology. Talk that Goldman bankers might have armed themselves in self-defense would sound ludicrous, were it not so apt a metaphor for the way that the most successful people on Wall Street have become a target for public rage.

Pistol Ready

Common sense tells you a handgun is probably not even all that useful. Suppose an intruder sneaks past the doorman or jumps the security fence at night. By the time you pull the pistol out of your wife’s jewelry safe, find the ammunition, and load your weapon, Fifi the Pomeranian has already been taken hostage and the gun won’t do you any good. As for carrying a loaded pistol when you venture outside, dream on. Concealed gun permits are almost impossible for ordinary citizens to obtain in New York or nearby states.

In other words, a little humility and contrition are probably the better route.

Until a couple of weeks ago, that was obvious to everyone but Goldman, a firm famous for both prescience and arrogance. In a display of both, Blankfein began to raise his personal- security threat level early in the financial crisis. He keeps a summer home near the Hamptons, where unrestricted public access would put him at risk if the angry mobs rose up and marched to the East End of Long Island.

To the Barricades

He tried to buy a house elsewhere without attracting attention as the financial crisis unfolded in 2007, a move that was foiled by the New York Post. Then, Blankfein got permission from the local authorities to install a security gate at his house two months before Bear Stearns Cos. collapsed.

This is the kind of foresight that Goldman Sachs is justly famous for. Blankfein somehow anticipated the persecution complex his fellow bankers would soon suffer. Surely, though, this man who can afford to surround himself with a private army of security guards isn’t sleeping with the key to a gun safe under his pillow. The thought is just too bizarre to be true.

So maybe other senior people at Goldman Sachs have gone out and bought guns, and they know something. But what?

Henry Paulson, U.S. Treasury secretary during the bailout and a former Goldman Sachs CEO, let it slip during testimony to Congress last summer when he explained why it was so critical to bail out Goldman Sachs, and -- oh yes -- the other banks. People “were unhappy with the big discrepancies in wealth, but they at least believed in the system and in some form of market-driven capitalism. But if we had a complete meltdown, it could lead to people questioning the basis of the system.”

Torn Curtain

There you have it. The bailout was meant to keep the curtain drawn on the way the rich make money, not from the free market, but from the lack of one. Goldman Sachs blew its cover when the firm’s revenue from trading reached a record $27 billion in the first nine months of this year, and a public that was writhing in financial agony caught on that the profits earned on taxpayer capital were going to pay employee bonuses.

This slip-up let the other bailed-out banks happily hand off public blame to Goldman, which is unpopular among its peers because it always seems to win at everyone’s expense.

Plenty of Wall Streeters worry about the big discrepancies in wealth, and think the rise of a financial industry-led plutocracy is unjust. That doesn’t mean any of them plan to move into a double-wide mobile home as a show of solidarity with the little people, though.

Cool Hand Lloyd

No, talk of Goldman and guns plays right into the way Wall- Streeters like to think of themselves. Even those who were bailed out believe they are tough, macho Clint Eastwoods of the financial frontier, protecting the fistful of dollars in one hand with the Glock in the other. The last thing they want is to be so reasonably paid that the peasants have no interest in lynching them.

And if the proles really do appear brandishing pitchforks at the doors of Park Avenue and the gates of Round Hill Road, you can be sure that the Goldman guys and their families will be holed up in their safe rooms with their firearms. If nothing else, that pistol permit might go part way toward explaining why they won’t be standing outside with the rest of the crowd, broke and humiliated, saying, “Damn, I was on the wrong side of a trade with Goldman again.”

(Alice Schroeder, author of “The Snowball: Warren Buffett and the Business of Life” and a former managing director at Morgan Stanley, is a Bloomberg News columnist. The opinions expressed are her own.)

To contact the writer of this column: Alice Schroeder at aliceschroeder@ymail.com.

Bloomberg AWOL on NYC Economy

There is one point on which Michael Bloomberg can campaign with a claim that no likely contender can make — economic expertise. This amounts to little more than a rehash of an old American Article of Faith: "Success in Business Denotes Economic Wisdom". Michael Bloomberg has been unambiguously successful in business; therefore, he knows how to manage an economy.

False. We are confronted now with a test of all the Dogmas of the past forty or fifty years, the dogmas of the Chicago School, now the default educational dogma at every major business school and economic department — the orthodoxy, from which an academic strays at risk of his or her academic life. The mere fact that so many Harvard and Chicago and MIT people populate Obama's economic team should set off alarm bells. It isn't because the reporters at The New York Times or NPR or CNN are just indoctrinated in the scheme of intellectual obedience.

There is little if any evidence that Bloomberg is any different. To date he has offered only the mildest departures from the orthodoxy (for example, when he question Governor Paterson's ignorant assertion that imposing a millionaires' tax would drive the rich out of the state).

In the science (if it is a science) of economics, we are approaching a point of punctuation. The equilibrium of orthodoxy is being shaken. All efforts currently are bent towards protecting that orthodoxy. So the same, tired old 'experts' are rallied to protect the private fortunes of their old buddies from Harvard or Chicago or MIT. And the facts are contorted to fit the orthodoxy.

One of the central facts is among the most important to a massive city like New York — unemployment. Since the Reagan years, the calculus of unemployment figures has undergone repeated reconstruction to reduce the numbers of officially unemployed. But the older calculus is still available to us. If we use it to gauge current unemployment numbers, the results are sobering — a real unemployment rate in the neighborhood of 18%, according to statistician John Williams:

How will Bloomberg address this? If the nation is still delusional about the depths of the current decline, New York City is psychotic.

The workforce of New York City numbers about 4 million. A real unemployment rate of 14%, a figure currently widely accepted if under-reported, means well over half a million people out of work in the five boroughs. Twenty percent unemployment would mean 1 million people out of work. And we today live in the post-Reagan, post-Clinton welfare-is-evil society. How are 1 million people with little or no income going to manage?

Likewise, a quick review of New York City's largest businesses show this city is headed for trouble likely to far exceed that of the rest of the country. The city is painfully overdependent on exactly those businesses most hammered by the collapse.