Goldman Sachs: Orders of Worth Colliding
April 28, 2010
Still with the on-going Goldman Sachs story: yesterday, during one of the hearings of the American Senate Governmental Affairs subcommittee we had one of these rare chances where worldviews collide ‘on air’. In yesterday’s hearing, Senator Carl Levin was questioning former Goldman Sachs Mortgages Department head Daniel Sparks about matters related to selling of structured mortgage-based financial products known as Timberwolf, during 2007. The full transcript is not available (you can see the video here), but a few lines can give us a gist of the dialogue that took place. When Levin asks Sparks why Goldman Sachs hid from the customers their opinion of the value of Timberwolf (a product that an internal GS memo described as a ‘shitty deal’), Sparks answers that ‘there are prices in the market that people want to invest in things’. On another occasion exchange, when asked what volume of the Timberwolf contract was sold, Sparks answered: ‘I don’t know, but the price would have reflected levels that they [buyers] would have wanted to invest at that time’.
This reveals the incompatibility in its naked form. While Levin focused on the discrepancy between the opinions among Goldman Sachs’ employees about the value of the product and between the prices paid for these financial contracts, Sparks placed ‘the market’ as the final arbiter about matters of value. That is, according to this order of worth it does not matter what one thinks or knows about the value of assets, it only matters what price is agreed on in the market. Both Levin and Sparks agree that not all information was available to all market actors. However, while this is a matter for moral concern according to Levin’s order of worth, it is merely a temporary inefficiency according to Sparks’ view.
Moreover, the fact that this dialogue took place in a highly-visible political arena, a televised Congressional hearing, entrenches the ‘ideal type’ roles that Levin and Sparks play. Sparks, no doubt at the advice of his lawyers, played the role of the reflexive Homo economicus, claiming, in effect, that markets are the only device of distributional justice to which he should refer. Levin, in contrast, played the role of the tribune of the people, calling for inter-personal norms and practices of decency. These two ideal type worldviews, as Boltanski and Thevenot show, cannot be reconciled. What we call ‘the economy’, then, is oftentimes the chronology of the struggle between these orders of worth