_{(Let those who can swim, swim, and whoever is too weak sinks) Georg Grosz : "Greed"}

````````````````````````````````````````````````````````````

Sophistry always fascinated me.   Here is a definition of sophistry from the  Internet Encyclopedia of Philosophy : 

By Aristotle’s time, the name bore a contemptuous meaning, as he defines “sophist” as one who reasons falsely for the sake of gain.

Sophists were paid to argue anything and to create artificial virtue. Almost 2,500 years later our sophists work for Wall Street.  We are awed by "the smart guys", somehow being "smart" has become a virtue in itself.  Being just, prudent, kind, wise or generous are not the human virtues that we strive for-- "smart and rich" are the gold standards of human behavior.  

The Wall Street Journal reports today of   the Goldman Sachs third quarter profits:

The nimble investment banking giant parlayed increased risk taking to cash in on trading and investments with its own money. Results, while not record-setting, demonstrate how the firm continues to distance itself from still-weakened competitors.

Profit ballooned to $3.19 billion, or $5.25 a share - more than triple what Goldman earned during the year-ago period when banks were pummeled by the credit tumult. Goldman also plans to reward its employees well: It set aside $5.35 billion for benefits and compensation during the period.

For instance, Goldman contributed $200 million to its own charitable foundation during the quarter.

The$ 5.3 billion from this quarter is in addition to 16.71 billion, we are now in the 20 plus billion territory and we still have the fourth quarter.  Remember HUD's budget is $35 billion, that is the entire US housing policy for the United States.  So, what these guys get could practically double housing assistance in America.  

The article goes on:  

That effort comes as the New York-based company set aside $16.71 billion for compensation and benefits during the first nine months of 2009, which is enough to pay $568,367 to each of its employees.

Where does the sophistry come in? Well in simple ways. Banks  got Congress to change the accounting laws, they  re-defined profit and hide losses.

With these kind of rewards, do tell me, why should the sophists of finance, not feed themselves off the backs of the American Treasury and the American people?  How clever these guys are.  When will we get mad, really mad?  What will our leadership do? 

In a marvelous piece yesterday Calvin Trillin explained how these "smart guys" that took over are working the system: 

"When the smart guys started this business of securitizing things that didn’t even exist in the first place, who was running the firms they worked for? Our guys! The lower third of the class! Guys who didn’t have the foggiest notion of what a credit default swap was. All our guys knew was that they were getting disgustingly rich, and they had gotten to like that. All of that easy money had eaten away at their sense of enoughness.”

You see, none of this is new, it even happened last year and we forgot already. Our leaders forgot and they still diddle with regulating the compensation of the financial industry.  Oh, I can just see the apologists who will argue, what is wrong with profit?  They are supposed to make profit.  

Profit yes, but not an illusion of profit by changing the rules on what is booked as an asset, what is a loss, what is deferred, etc.  etc.  Tricks and sophistry, not profits.  

From today's Democracy Now, William Black, ex regulator from the Savings and Loan years. :  

There’s no palpable outrage, certainly not in Congress. The reform efforts on derivatives, for example, are a scandal. They exempt virtually all of the problem derivatives, and they’re designed to exempt it. And that’s the bill that’s introduced, and of course it’s likely to get worse with additional lobbying from the special interests.
Link the things that you’ve just been talking about. You talked about foreclosures reaching record highs. But in fact, foreclosures, relative to delinquencies, are quite low compared to historical ratios. In other words, banks have tons of folks who are not paying their mortgages on time, and they’re not foreclosing. And the reason they’re not foreclosing is, once you foreclose, you have to recognize losses under the accounting rules. And the banks gimmicked the accounting rules. They put pressure on Congress, and Congress put pressure on the accounting profession to gimmick the accounting rules now about a year ago. Now, these bonuses, of course, are paid compared to alleged profits. What happens if you understate your losses dramatically? You report much higher profits and much higher bonuses. So this is a web of fraud, in which they are getting as much as they can before the place goes to hell in a handbasket again.

UPDATED: October 16, 2009, a complicated read on how Goldman creates the "profit" , from Numerian.