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Goldman Sachs’ Greed?

Mar 16, 2012 at 05:46:30 AM

In the seminal film Wall Street, Gordon Gekko declared: "Greed is good. Greed is right. Greed works. Greed… has marked the upward surge of mankind."

This week in a New York Times op-ed, an "anti-greed" crusader by the name of Greg Smith announced his resignation from the financial giant Goldman Sachs. Smith, whose clients had a total asset base of more than a trillion dollars, describes the firm's practice of "persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit." In other words, Goldman Sachs cares more about making money from its clients than making it for them.

Irrespective of whether the allegations are true or not, I don't know why we should find this surprising. When I hire a lawyer to represent me in a damage lawsuit, I am aware that he is primarily representing his own interests (profit, professional reputation, time constraints) than he is representing mine. In politics, too, the vast majority of elected officials are "looking out for number one," often at the expense of their constituencies.

Back to the financial sector. Capitalism is a wonderful institution. It improves the quality of life by fostering competition and yielding advances in many fields. Without competition we would be at the mercy of monopolists that would stifle progress and incentive for personal reward.

Yet let's be clear: The goal of capitalism is to make money. Period. Of course, many "capitalists" are caring, ethical human beings. But those values are distinct from the pure pursuit of wealth. And in a myriad of cases, the two goals will conflict.

That is why, if left unrestrained, many will choose the route of pure profit. The result, as we have tragically witnessed, is greed, corruption, and an erosion of trust that prevents the building of a fair and harmonious society.

The Jewish ideal ― built-in to Jewish law ― is that commerce must be balanced with genuine care for others. For example, the Torah (Deuteronomy 19:14) forbids a merchant from lowering his prices to the extent that it is not feasible for the competition to remain in business.

The Torah's goal is to create a just and compassionate society. Economic progress? Yes. Cutthroat competition and working against the interest of your own clients? No.

Maybe it's time to launch a Torah study revolution over on Wall Street.

March 16, 2012

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Visitor Comments: 15

(11) Anonymous, March 21, 2012 1:28 PM

Attorney Bashing

Contrary to your comments, lawyers are NOT primarily interested in their own interests. When an attorney's fee is tied to a percentage of his/her client's recovery, that does not make the attorney's interest primarily their own. It allows for a client to be represented without having to pay an attorney unless the case yields damages. This is a fee schedule that greatly benefits those who could not otherwise pay an attorney to represent them. It should be noted that this fee arrangement is limited in many states to certain types of cases, and is not allowed usually in family law or criminal matters. Attorneys always have their clients' interests at the forefront, both by law, and by most states' Code of Professional Responsibility. Don't irresponsibly jump on the pop culture bandwagon of lawyer bashing.

Ron Kall, March 29, 2012 12:01 AM

Lawyer bashing

Saying good things about lawyers is the same as being a Muslim apologist. Both are so obviously wrong. The main use of contingent fee agreements is by people who are looking for a case, but wouldn't if they had to pay up front. Law suit abuse anyone!

(10) Anonymous, March 20, 2012 4:14 PM

If you light a candle in a dark, crowded room, who benefits?

Forbidding "a merchant from lowering his prices to the extent that it is not feasible for the competition to remain in business" is not "just and compassionate." This means that consumers, particularly the poor who would benefit most from lower prices, are forced to pay higher prices to keep uncompetitive merchants in business. While we should foster principled individuals whose actions are in concert with their values, the fact is a completely selfish person who lights a candle in a dark and crowded room for herself is still brightening the room for everyone else. This is the essence of free-market capitalism, in which the individual, by realizing their own potential, cannot help but benefit society.

astute reader, March 21, 2012 2:42 AM

It's not just the Torah that forbids it

Google search "predatory pricing". It is illegal in most civilized countries.

For an Organic Economy, August 8, 2012 1:07 PM

"Predatory" to whom... the poor consumer who can get more for less?

Devarim 19:14 (or anywhere else in the Torah) does not require a business to gouge its customers in order to prop-up uncompetitive competition. Any country that construes "predatory pricing" to mean proving your customers with the best market price (i.e., the highest value at the least cost) is not civilized, just, or compassionate, and is already or will very soon not be prosperous. Over-charging customers hurts everyone, disproportionately the poorest amongst us.

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