Goldman Sachs, I wish I had your chutzpah!
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i don’t envy you your money — if I had your nerve I could make every bit as much myself. Particularly if a boneheaded government kept passing rules that I could legally finesse. (yep, folks, in that sense I’m still on Goldman’s side — when a system is easily gamed, don’t blame the smart guys who game it, reform the system)
But what’s leading to my current diatribe is this news, via the NYTimes:
Treasury officials confirmed on Monday that Goldman Sachs, which reported record quarterly profits last month, has proposed buying or at least borrowing tens of millions of dollars worth of unused tax credits from Fannie Mae, the mortgage finance company that is now owned by the government.
Fannie, of course, doesn’t need the credits — it’s lost so much money that it is unlikely to owe much taxes for a while. It does need money — which is Goldman’s selling point. We’ll give it cash, Goldman says, in return for a tax bill that has been lowered by an amount significantly greater than the money we’re paying Fannie.
To its credit, Treasury is looking askance at the deal, and hopefully will scuttle it. Otherwise, we’ve got a situation where Goldman is putting money into one government pocket (remember, the taxpayers have taken Fannie over) and taking more money out of the other (Treasury).
Now, buying tax credits is generally legal. I oppose the practice, for the same reason I oppose cap and trade legislation for regulating carbon (I want a carbon tax instead). I don’t think people should be able to pay for the right to pollute, I think they should spend whatever it takes to stop polluting. I also don’t think that anyone should be allowed to pay for the right to artificially lower their taxes.
But that’s not what’s triggering my chutzpah-envy. By now I’m so used to hearing financiers justify their huge salaries and risk-free (to them) deals and such, I barely react. But this rationale is a new low, or a new high, depending on whether you’re scoring morality or creativity:
But Goldman executives and some housing experts said the plan also offered a broader advantage by reviving the market for subsidized affordable housing.
Analysts said the market for deals involving the low-income housing tax credit had been frozen since the financial crisis began. Fannie Mae and Freddie Mac, the two biggest investors in affordable housing, stopped financing such deals even before they were put into a government conservatorship just over a year ago.
Benson Roberts, senior vice president for policy at the Local Initiatives Support Corporation, said letting Fannie Mae sell its tax credits could indirectly revive the market by attracting fresh money.
“That would be good for the government and the rest of us taxpayers,” Mr. Roberts said. “The idea is not to keep markets frozen, but to get them moving again more efficiently.”
Excuse me? If Goldman wants to help revive low-income housing, how about investing in it, or loaning money to it, or otherwise operating as a finance company is supposed to? If you had to make book, would you bet that the tax money Goldman would save by this deal will somehow find its way into the low income housing market in any way, shape or form? Can you spot anything — anything at all — about this deal that would attract a different source of “fresh money” to low-income housing?
Here’s hoping that Treasury stands its ground and nixes this deal.
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It is interesting to consider whether the government could be guilty of collusion in some of these transactions. Now that the government is both a regulator and major stock holder the capitalist standard of separation of commerce and state is broken. Now the may face multifaceted legal complications especially in the area of conflict of interest. Thus the government could at this moment be the ultimate gamer.
Somehow, I doubt it. You speak of the “government” as a unified entity, when in fact there are huge rivalries between the FBI and CIA, between the Fed and Treasury and SEC, between the house and the senate. No way the Treasury and specifically, the IRS, would collude in a situation that lowers tax revenue so that some other part of the government can enrich its coffers…
Ms. Deutsch,
It is easy to have chutzpah when you are rich but it is hard to be a mench rich or poor.
How right you are.
In response to another comment. See in context »Claudia,
To answer your questions:
You’re excused
But that would mean assuming actual risk
No
No
Oh, those were rhetorical questions? Never mind …
How did Fannie Mae get the credits? Were they a special deal specifically to encourage low cost housing? If these credits were supposed to incent some behavior which Goldman never intends to honor, then the Treasury should terminate this deal with extreme prejudice.
So I’m curious — do you agree with me about carbon credits too, that companies should not be able to buy the right to pollute from others?
In response to another comment. See in context »No, but thanks for asking. There are definitely problems with cap-and-trade: we would expect it to mean that the cap will be exhausted every year. With a straight tax, the pollution would vary more with the economy. But that means that when times are good, and I expect that sometime in my life they will be good again, the pollution will exceed the cap levels. And the eco-system is better equipped to handle a steady level of irritants than a huge shock to the system.
In response to another comment. See in context »I think you’re in the majority, I’m an increasingly ineffectual minority. But I think the ecosystem could easily handle a drastic drop in pollution levels. And once it’s gone, I don’t think economic swings will cause it to creep back in. If the economy again goes south, manufacturing and other carbon-generating activities will be diminished as well, sending far less carbon into the atmosphere.
In response to another comment. See in context »Yes we can. BUT – Guts needed …
ooops..
cheers
Olga Lednichenko
guts AND chutzpah
In response to another comment. See in context »guts and חֻצְפָּה ?
In response to another comment. See in context »yep, if I had your computer keyboard, that’s how I’d probably spell it.
In response to another comment. See in context »Hello Olgalednichenko,
Chutzpah, as spelled in Yiddish, as opposed to Hebrew, would be spelled without the nikkudot. Yiddish uses a vowel system similar to English or German with Hebrew letters. So instead of the Qubuts under khez (as would be done in Hebrew) you would put a vov after the khez to make the “oo” sound. The same with the Qamats under pei, it would be a separte alef. It would be khez-vov-tsadek-pei-alef-hey.
In response to another comment. See in context »i love it — my blog turns out to compete with Rosetta Stone. Who knew??!! Makes me realize how much I’ve forgotten — I actually used to win prizes in Hebrew School! I now can’t get beyond eemah and yaldah and yeled and abbah — and I have zero recollection of how to write even those words in Hebrew!
In response to another comment. See in context »i just got blinded by too much light. Someone said long while ago: whats good for GM = whats good for America. And that was like so long ago, that dad heard on radio and I heard it from him. He was some important guy who said that : Claudia: was it the big kahuna at the white house who said that?
and now, we – the lost generation { i am 22 or maybe 23.. i forgot, i am weak in math} – the one thats being asked to carry the tent and the TARP – we are being told that :
good for people = good for gov = good for business -
aint possible? – or ooops.. i am too stupid and too young to know the ways-of-the-mature…
but let me get this one straight: are we telling the future generation { like me and the ones in the line – behind} – that -> just stare at the wall and be happy – sort of ?
no really, my name is Olga i am stupid, blind, childhish and i am being told.. no-mo-dreams ? i need to know that, because i was just gonna buy a ticket to the disney and read that book – that invisible-hand thing..
Claudia tell me now – because i dont want to have post-consumption-dissonance …
and one more thing Claudia:
do you think I am cute? -= i mean like half way cute?
and if I were your daughter – will you be – like Ok with that ?
seriously..
ps: adopt me claudia – I am potty trained, can do excel, and powerpoint and you never know, maybe when i get into the mood, i can even spell idealism and some other isms
should i end this with cheers or with sincerely?or like this
Olga Shulman Lednichenko
Lednichenko = Russian = communism + socialism
Shulman = Matzo ball = Middle East = neither West not East
22 or 23 -> means – have paper – need ink -can fill – the CV – IF – …..
adopt me Claudia
and i even have a nice keyboard as you said
Shulman = teacher or scholar, depending who you ask. Or, if shul is interpreted as temple rather than school, it means pious member of the synogogue. All my way of saying, names are destiny, so you don’t have the option of being stupid.
Consider yourself adopted. And as my child, you are now responsible for ministering to me when I get old and senile.
In response to another comment. See in context »well, thanks a lot, and you get 5 stars from your daughter* – mom..
you will soon be receiving post cards from Tel Aviv, thats the least I can do on thanks giving. Perhaps, if i knew what you would like from this part of the world?- it would help..
Of course, i will be a good daughter, i know what responsibility equals to..
thanks for the kind words and for everything.. actually words wont cut it.. i have to think about something a lil cute – cuter than words for sure
regards
Olga Shulman Lednichenko
{ dont have an option to be stupid]
In response to another comment. See in context »travel safe, my child, and may mazel follow you
In response to another comment. See in context »[...] This post was mentioned on Twitter by Goldman Sachs Watch and Tweets Tube, Jim. Jim said: Claudia Deutsch – The Bottom Line – Goldman Sachs, I wish I had … http://bit.ly/Kkba8 [...]
[...] Goldman Sachs, I wish I had your chutzpah! – Claudia Deutsch – The … 3 Nov 2009 … Olga Shulman Lednichenko. { dont have an option to be stupid] … This post was mentioned on Twitter by Goldman Sachs Watch and Tweets Tube, … trueslant.com/…/2009/…/goldman-sachs-i-wish-i-had-your-chutzpah/ – Cached [...]