BROOKE GLADSTONE: On Tuesday, executives from Goldman Sachs confronted a gang of angry senators. Lawmakers interrogated the execs for ten televised hours about whether their firm had made bets against the collapsing mortgage industry, while simultaneously convincing their clients to keep investing in it. The truth of whether they swindled their clients or just hedged their bets will take time and expertise to unearth. The Securities and Exchange Commission investigation is currently underway, which makes Tuesday’s hearing a curious affair. Was it a teachable moment for viewers or mere theater? Megan McArdle is the business and economics editor for The Atlantic Magazine. She blogged about the hearing at Theatlantic.com. Megan, welcome to On the Media.
MEGAN McARDLE: Thanks so much for having me.
BROOKE GLADSTONE: So did the senators’ questions elicit any new information?
MEGAN McARDLE: Not really. Mostly this is an opportunity for senators to look very angry at bankers, which is something that they need going into the election. Carl Levin’s eyes practically popped out of his head more than once as he yelled at the bankers and told them that they were bad people. And the bankers sat there and took it, mostly for their own theater. They want the public to think they've been chastened.
BROOKE GLADSTONE: Senator Levin definitely got most of the headlines for one clip that we pulled. He’s berating a Goldman employee about an email, where he describes the mortgage deals as “excremental.”
SENATOR CARL LEVIN: Look what your sales team was saying about Timberwolf. Boy, that Timberwolf was one sh__ [CUT] deal.
GOLDMAN SACHS EMPLOYEE: This was an email to me in late June.
SENATOR CARL LEVIN: Right, you sold Timberwolf after, as well.
GOLDMAN SACHS EMPLOYEE: We, we did trades after.
SENATOR CARL LEVIN: Yeah, okay, and the trades after you –
GOLDMAN SACHS EMPLOYEE: Some context -
SENATOR CARL LEVIN: Yeah.
GOLDMAN SACHS EMPLOYEE: - might be helpful.
SENATOR CARL LEVIN: The context – let me tell you, the context is mighty clear.
MEGAN McARDLE: Carl Levin has found an incredibly incriminating quote. So what the guy he was questioning was arguing was – I don't know whether truthfully or not – they had sold it after the date of the email; they had probably sold it at a discount. So a deal that’s a bad deal can still be sold - take Greek debt. Greek debt is not a good investment. You might even say it’s – excremental.
[BROOKE LAUGHS] But if I could buy Greek debt for 10 cents on every dollar of face value of that debt, that would probably be a good investment, because at some point Greece is going to make good on at least some of the debt, and I will get more than my money back.
BROOKE GLADSTONE: If you didn't learn anything about the actual substance of the matter, did you learn anything about the Goldman execs?
MEGAN McARDLE: What I learned about the Goldman execs is that they are still extremely bad at managing their public image. They would get involved in lengthy arguments that just made them look like they were dodging the question.
BROOKE GLADSTONE: You actually believe that most people would be better off just not watching these hearings.
MEGAN McARDLE: I think so. For the people in the financial press, and to a lesser extent the people in the political press, it’s useful to watch these things because you can kind of see what the players are doing, how they're positioning themselves for their next move. But it doesn't actually pull out that much new information. And when there is information given, it’s actually pretty hard to follow because there’s no one there explaining what a short sale is, what a long position is, what a synthetic CDO is. And if you don't already know those terms pretty well, then you’re basically just going to be left to choose sides based on who seems more personable in front of the camera. And I have to say, after watching this for ten hours, I would have to say none of them. [LAUGHS]
BROOKE GLADSTONE: Well, let's talk about the theater then. Isn't there a role for that in politics? Did it give a viewer a measure of satisfaction just to see these guys squirm?
MEGAN McARDLE: Absolutely. But, that said, I think it’s kind of dangerous in two ways, first of all, because it gives people the illusion of understanding what happened. Because the senators control the questioning, they can craft a sort of narrative that doesn't really have much to do with figuring out what went wrong and has a lot to do with what the senator would like to see playing on his or her local news. They'd probably get more answers if they weren't putting these guys in front of the camera.
BROOKE GLADSTONE: If not these hearings then what? I mean, people care about this. You know, during the Watergate hearings there was, you know, a great deal of theater.
MEGAN McARDLE: But in the Watergate hearings there were matters of fact that were comprehensible to the general public, which these issues just aren't. It gives people, as I say, the illusion that they understand what’s going on, and it gives them a certain amount of Schadenfreude. But I think that there are other ways that that could be achieved, for example, by actually passing some [LAUGHS] financial regulations.
[BROOKE LAUGHS] And it’s not clear to me whether having gotten on television yelling at Goldman bankers doesn't make people a little less interested in doing financial reform, right, because now they don't have to in order to get reelected. They've gotten themselves out there as on record as being really, really mean to bankers.
BROOKE GLADSTONE: The theater could be a substitute for action.
MEGAN McARDLE: Exactly.
BROOKE GLADSTONE: Megan, thank you very much.
MEGAN McARDLE: Thank you.
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BROOKE GLADSTONE: Megan McArdle is the business and economics editor for The Atlantic Magazine.