The Goldman Sachs Witch-Hunt

It is no shock that Goldman Sachs’s hearing before a Senate subcommittee yesterday was an episode in subterfuge and political posturing. However, the level of bipartisan vitriol and populist grandstanding was inexcusable.

The subcommittee, chaired by Senator Carl Levin (D-MI), hounded a number of Goldman Sachs executives for the better part of the day. This was no exercise in fact finding, but a brutal cross-examination by a biased plaintiff. Nearly every Senator (except at rare moments Tom Coburn (R-OK)) came with a pre-planned agenda to portray Goldman Sachs as an epitome of a rampant Wall Street-gone-bad that wrecked havoc on the poor innocent investor and America’s economy. The Senators repeatedly waved sensational, but otherwise meaningless, documents in the air, simplifying the extremely complex issues until they were a digestible, but un-nutritious mush ready to be consumed by the populist masses.

These politicians are not stupid. While their understanding of the financial markets is clearly limited, they obviously comprehend the intellectual dishonesty that they exhibited. It is hard to believe that such a display, coupled with the recent bogus charges brought against Goldman Sachs by the SEC (a decision which in relatively rare form was controversially split), was anything but motivated by the desire to force through a regulatory reform package. Even the Republicans, such as John McCain (R-AZ), who is in a tough reelection battle, walked to the ‘bash Wall Street’ drumbeat.

The fact of the matter is that there is little evidence that Goldman did anything wrong. While to the uninitiated it may be difficult to understand the market and readily easy to misconstrue it as misguided, this does not stand as evidence of wrongdoing.

To begin, Senator Levin attempted to cast Goldman as the bad guy for making a profit. It is ironic that those that realized the housing bubble was inflated (and thus helped to mitigate its wanton expansion), are now being chastised for being ahead of the curve. The Washington Post says it best,

[If Goldman did not bet against the market as early as it did t]he firm would have lost billions, and it might have wound up needing an even bigger bailout by U.S. taxpayers than it actually got. It could have ended up like Citigroup, which tried to ride the bubble until it was too late and had to be propped up with hundreds of billions of dollars in federal cash and credit guarantees.

There is nothing wrong with this behavior. It is done all the time and is, in fact, what keeps the markets going. Short sales are necessary and proper in markets – even if against a long-position controlled by the same entity. This sort of hedging protects institutions and the economy in the long-run. If the world of finance is too complicated in this regard, one only needs to look to that of farming or commodities to see the same practice. Farmers, for instance, will bet against agriculture to insure against the risk of crop failure.

Besides the criticism of profit-via-short, the committee also bashed Goldman for selling, what was termed in one of the infamous documents, a “shitty” product. Needless to say, the definition of “shitty” is subjective and quite unscientific, but even if a product could be objectively proven to be “shitty” is it wrong for a company to sell it? How many less-than-stellar consumer products are sold on a daily basis? It is up to the consumer – and in this case they were quite sophisticated investors – to evaluate their purchases. Ultimately, Goldman’s knowledge about how the product was constructed has no bearing on the ability of an individual investor to assess its quality.

Now to be clear, there were a myriad of mistakes made at all levels of the economy; however, the targeted witch-hunt is unfair. It misguides popular attention from the real issues. As a result simplistic solutions are proposed to solve non-existent problems, while the real issues are ignored. The characteristic problem is the desire to find the causation of bad outcomes in practices which only look odious with hindsight. This is poor logic. Fraud must be distinguished from both bad business and good business that had bad luck. Every decision relies upon an analysis of the probability of certain outcomes. Even if the analysis is done correctly sometimes that low-probability outcome will occur. Politicians inability to address this non-sound-bit ready fact and instead chose to bash Goldman Sachs is quite unfortunate.

The Religious Assault on Liberty: When Religion Coerces the Individual

Secularism-as-a-religion is by far not the only threat to liberty. Religion too can mount insidious molestations on freedom. In the newest incarnation of the Muhammad cartoon uproar, Comedy Central’s South Park, which offers puerile but wickedly intelligent social commentary on a ‘nothing is sacred’ basis, has been under attack. Creators, Matt Stone and Trey Parker, have received loosely worded death threats for their portrayal of Muhammad – a sacrilege for many Muslims.

The threats have prompted increase police security and an unfortunate back-down by Comedy Central, which censored the cartoon. As has been discussed on ANR before, such kowtowing to radical demands is foolhardy.

At the base of the debate comes the value of the individual’s or the group’s rights. Like the radical secularists in France who are attempting to ban the burqa, the radical Muslim’s here are drastically encroaching on the right of the individual to behave as they see fit. The claims of sacrilege and a religion’s right to not be insulted are a group’s claim that attempts to subordinate the individual to the power of a few elite. In this case, the elite is the fundamentalist Islamist leadership which has determined what constitutes ‘correct’ in the eyes of their creed.

The desire to oppress the individual in the name of religion is a pernicious aim that has far too often claimed victims over the course of history. Religion, like any other influential grouping of people, should have no special rights over the individual. Each man or woman should be free to choose how to associate with others, as long as such associations do not have destructive effects on third-parties. However, such associations should have no rights to force others to adhere to their voluntarily agreed upon memes.

As offensive as South Park may or may not be, groups do not have any special privilege to not be offended. By calling for such special treatment, fundamentalist Muslims are only deepening the cultural divide and severely trampling on the fundamental rights of man. They should accept the fact that coercive force will never convince the alleged offenders to toe the line. Instead, they should work to educate others about their beliefs and affirm their own convictions regardless of what occurs in the ‘outside’ world.

The Secular Assault on Liberty: When Secularism Becomes a Religion

Secularism can sometimes go too far and, in contrast to the notion of separation of church and state, become a ‘religion’ unto itself. French President Nicolas Sarkozy has recently crossed this line by deciding to submit a bill to parliament that would completely ban religious dress, particularly the Muslim burqa, in public. The expressed reasoning behind the ban is that such clothing is oppressive to women, and therefore unwelcome in France.

This is not the first time Europe’s intense secularism has come into conflict with the religious immigrants who have yet to fully integrate into Western society. Much of Europe has attempted to browbeat the newcomers into the European mold. France’s newest proposed ban follows a similar restriction, enacted in 2004, on religious symbols in the classroom. While ostensibly targeted at all – Jewish, Muslim, and Christian – symbols, it has predominantly been used to target minority symbols. Likewise, Switzerland recently voted in a popular referendum to outlaw the construction of minarets on mosques.

At the base of all these policies is a deep fear about the changes to European society that may result from the rapid growth of the Muslim population. Not only are waves of immigrants reaching Europe’s shores, but the current Muslim population is growing at a brisk rate while the ‘native,’ Christian European population is ageing. While Europe may have much to fear in the changing demographics, the attempt at forced conversion to the secular religion is a miserable policy.

On the surface, it simply makes Europe look bad. Foreigners correctly perceive these supposed bastions of freedom as intolerant. These policies anger the populations of Muslim-majority countries and create diplomatic stresses with their leaders. Domestically, minorities become alienated, causing them to turn to the very religious institutions that European seculars are trying to eradicate. Rather than drawing isolated Muslim immigrants into the European fold, such policies lead to divisiveness. In response, many find strength in identities that may have meant little to them before their government defined them as ‘the other’.

The fact of the matter is that forced assimilation is rarely, if ever, successful. Individuals do not want to be told what they can or cannot do. This is particularly true when such commands are arbitrary and have little bearing on the well-being of other individuals or society.

However, aside from being poor policy, the ban is a gross encroachment on the principles of freedom. Every individual should have the right to choose his own ways of expression – be it religious or secular. This is true regardless of whether it offends anyone else’s sensibilities. The burqa may be oppressive to women – or it may not. While ANR, as well as nearly anyone else, has its opinions regarding the vestment, it is not anyone’s place to tell another what they can or cannot do. One may attempt to persuade someone through discourse, but never through coercion. [As a point of clarity, the government should not interfere if an individual decides to wear this clothing; however, it should interfere if another (such as a husband) forces one (such as a wife) to wear this clothing against one’s will.]

Instead, Europe should attempt to bridge the gap between cultural differences by opening channels for dialogue. These immigrants should be incorporated into society by being offered the freedoms that presumably brought them to Europe – the freedoms that are not present in home countries. The separation of church and state should be encouraged whether the “church’s” doctrine is the secular, Islamic, Christian, or other. Religious minorities should be brought into mainstream, while allowing their religions to thrive in private. They should be encouraged to have multiple identities, not pushed into choosing between a secular European and an Islamist Muslim. Such a polar choice will inevitably lead some to eschew what Europe has to offer in favor of a dangerous radicalization.

The Weaponization of Free Speech

The Westboro Baptist Church (“WBC”) has a date with the Supreme Court. The Church – better identified as a hate group – is known for its vitriolic protests at funerals of US servicemen and various institutions across the country. The small group, mostly relatives of its founder and pastor, Fred Phelps, preaches a vicious anti-homosexual message. They claim that America’s supposed depravity is continually punished by an angry god – hence their frequent presence at the funerals of servicemen killed in action. They applaud these deaths as evidence of America’s wayward nature.

In the past, the majority of their targets have chosen to ignore the protestors, who have always been in compliance with the proper regulations for assembling. Even so, a few years ago a group of bikers, The Patriot Guard Riders,  – many of whom were veterans themselves – coalesced and began showing up at protests to drown out the hatred with their motorcycle engines.

But one father, Albert Snyder has fought back. After the WBC picketed outside of his son’s, Marine Lance Cpl. Matthew Snyder, funeral in 2006, Snyder launched a lawsuit against the Church. The case is now on the docket to be heard before the Supreme Court this fall.

The case, which Snyder originally won before it was overturned by a Federal Appeals Court, pits Snyder’s privacy against WBC’s claim to First Amendment freedoms. Some legal scholars argue, that as heinous as WBC’s behavior is it nevertheless should be protected as free speech.

This argument, however, is rife with flaws. The right of free speech is predominantly to prevent oppression by the government. It is necessary not to allow sounds to come from individuals’ mouths, but to allow ideas to flourish and prevent those with power from silencing the minority. As has been argued on ANR before, free speech is not a concept that is synonymous with talking but one of expression of ideas.

In this regard, every spoken word is not deemed allowable. Certain speech, such as the classic “fire in a movie theater,” is deemed harmful and thus prevented. The logic behind such restrictions is that by yelling “fire” in a public place physical harm may be caused. However, harm need not be limited to the physical. WBC’s actions indubitably create harm, albeit often of the emotional kind.

The proper role of the government, when overseeing the interactions between individuals, is to serve as a referee to prevent unjust harm, or encroachment by one party on another. Whenever the desires of individuals come into inevitable conflict, the government should have well defined rules as to whose actions have un-righteously harmed the other. In all other instances, individuals should be left to their own devices. American’s possess the right to free speech to limit the government’s ability to encroach on their private domain – to prevent tyranny of the government. But that does not mean the concept of free speech should be weaponized to inflict harm on others. The WBC should be entitled to preach their dastardly views to those who wish to be party. They should not be prevented from having or expressing their opinions. But there is a time and place for any act. When such expression moves into the public sphere and causes intolerable harm, it has crossed a line. Free speech must be coupled with freedom to avoid speech.

If the Supreme Court allows WBC’s actions to stand, it will greatly miss the mark on how America should be structured. To disavow the direct harm that comes from a misappropriation of this right in no way diminishes the concept of free speech, but rather strengthens it. This is not an issue of establishing a slippery slope, as some claim, but one of clearly defining the concept. Without such definition, the concept of free speech becomes a mockery, where any individual can cloak himself in its guise – not to speak but to cause damage. If preventing such damage is not the responsibility of government, then there is little for it to do.