The Goldman put

From the NYT on the remarkable profitability of Goldman Sachs

A big reason for Goldman Sachs’s blowout profits this year has been the willingness of its traders to take big risks — they have put more money on the line while other banks that suffered last year have reined in such moves. Executives say there are big strategic gaps opening up between banks on Wall Street that are taking on more risks, and those that are treading a safer path.

Hmm. I’d be willing to take big risks if I knew the Fed and the US Treasury were standing by, ready to pick up all my losing bets. In the circumstances, the guys at GS doubtless stand amazed at their own moderation in creaming off a mere $20 billion for the year.

Looking at this more seriously, the effect of the crisis has been to drastically weaken US financial regulation. In place of the Greenspan put, a generalized commitment to protect the financial sector from the consequences of its own bad behavior, we have the Goldman put, where a single firm runs the show, in the general manner of the United Fruit Company. This kind of situation is ideally suited to the rhetorical and forensic talents of Glenn Greenwald, and he doesn’t disappoint.