Messy Discourse

The aftermath of the Financial Crisis is finally beginning to take shape. The populist anger aimed at Wall Street and Washington has not not gone away. So with the SEC's lawsuit and the proposed Financial Reform Bill in the news, people are following stories that include terms like "collateralized debt obligation."

I am very interested in what it takes for a person to follow a debate when that debate involves unfamiliar subject matter. As a composition instructor, one of my goals is to teach students how to join a new and unfamiliar discussion. After all, most freshmen cannot tell you what professional community they plan to join when they finish college. So part of my job is to teach them how to evaluate the discussions of a community all by themselves - how to evaluate and then join those discussions.

The continued development of the debate about Wall Street and Washington has had my attention for a while. I've leaned heavily on two NPR outlets in order to stay informed. This American Life has done a bunch of shows on the subject, and they turned me on to the podcast, Planet Money - a bi-weekly show that explains economic issues in everyday language. I accept that NPR has a reputation for being left-of-center, but even the National Review has stepped in to praise the reporting coming from these shows. Anyway, they're the reason I don't click away when a news stroy mentions CDOs.

Now that CDOs are at the center of the Goldman Sachs lawsuit, however, it seems that a larger audience is going to have to come to grips with the term. That's no easy task. Jon Stewart had some fun on Monday showing pundits trying (and failing) to explain what Goldman is accused of. But all kidding aside, if the American public is going to try and follow this story, then the media has a hell of a job ahead. The story is bound to get political. The information involved is difficult to understand. The solutions are going to conflict with the interests of some powerful people. In other words, there is going to be a lot of mindless shouting and ranting. It's what they call a noisy channel in information theory.

The noise is already out there. In an effort to discredit the President, the Washington Examiner and bloggers have put together a lazy analogy comparing the Goldman suit to the Enron crisis.

Note to the Examiner: Trying to compare Goldman to Enron in order to score political points is not a good idea... unless your readers will believe a poorly constructed argument that omits relevant details.

The campaign donations from Goldman are there, true. But the SEC vote to sue Goldman was down party lines - 2 Dems voting to sue, 2 Republicans dissenting, & the Obama-appointed independent siding with the Dems.
The Examiner suggests that Goldman's connections/donations should get them preferential treatment, but it's fairly well-known that the practices at Goldman were happening elsewhere on Wall Street. Why is the SEC going after Goldman first? That does not strike me as preferential treatment.

Beyond that, the Enron analogy has other holes:
1) Enron's rise and its push for deregulation were both aided primarily by Republican administrations. Goldman's rise, by comparison, has utilized political connections from both sides of the aisle.

2) Back in 2001 - the year the Enron scandal took shape and unfolded - Enron representatives consulted with the Bush Administrations' Energy Task Force on multiple occasions at the White House. Compare that to the new scandal - Goldman (et al.) assembled the high-risk CDOs, mislabeled those investments, and sold them to unwitting investors somewhere between 2005 and 2007. The President, while not shrinking from the politically difficult task of cleaning up the mess today, didn't serve on any Senate committees that oversaw financial regulation, nor did he preside over any regulatory bodies while Goldman (et al.) assembled those high-risk CDOs.

3) Finally, the Examiner seems to have forgotten an important detail in its update that connects key people at Goldman to key people in the Obama administration. Hank Paulson was Bush 43's pick for Secretary of the Treasury AND a one-time partner at Goldman.

I am all for a vigorous investigation into what happened on Wall Street leading up to the Financial Crisis, but I don't want to see that investigation get mucked up by cheap shots out of the blogosphere or a free Daily with a narrative to sell.

I don't suppose I'll have much of a choice though. Here's to hoping.