Deal(ing) with the Devil

Why Be a Goldman Sachs Client?

I'd rather have the SOB in the tent and pissing out, then the other way around.

--Lyndon Baines Johnson

He may be a son of a bitch, but he's our son of a bitch.

--FDR

It's a question that's been gnawing at me since at least last December, when Bernie Madoff was arrested, and has only grown stronger as various and sundry accounts of Goldman Sachs' machinations have come to light.

Namely, if you suspect (or worse) that someone you have business dealings with is "ethically challenged," why hang around? Why not simply run for the exit, like a rational person would?

Background

You'd have to have been in a cave the last six months not to be at least dimly aware of the charges and recriminations hurled at Goldman Sachs.

Namely, that Goldman Sachs wields undue influence over U.S. financial and monetary policy, and benefits mightily from same; that it has inside information that it uses to game the markets; and that the firm, in Matt Taibbi's infamous words, is a "great vampire squid wrapped around the face of humanity."

If you were a Goldman Sachs client, you'd think that all that might at least give you pause.

Unless.

Unless you actually believed the allegations, in which case you might rationally decide that it was better to be on the inside of whatever scam(s) Goldman was running -- presumably benefiting from them -- than being on the outside, victimized like everyone else.

Doing Business with the Devil

Interestingly, a similar theory emerged around the time Bernie Madoff was arrested.

According to some news accounts, at least a few Madoff clients suspected that his returns were too consistent to be legitimate. In fact, they believed Madoff was actually engaged in "front-running," i.e., illegally trading ahead of his (brokerage firm) clients to snag guaranteed profits.

Whether true or a canard, it would explain why at least some putatively sophisticated (but ethically deficient) Madoff clients stuck with him.

At least until it all blew up.

Then, they discovered another lesson: sometimes, even people supposedly "inside the tent" end up getting pissed on, too.