Goldman’s New York Times Wall Street whitewash

Recently, an advertisement called “An Interactive Guide to Capital Markets” showed up on the New York Times website. The ad is clearly labeled as paid for by Goldman (GS). But the content reads more like a pitch for Wall Street as a whole. “Capital markets play an important role in helping drive job creation, innovation and financial security,” so says the first line of the ad.

There are some descriptions of buyers and sellers. And the ad offers a basic, clear, explanation of the difference between primary and secondary capital markets. The former is Facebook’s IPO. The latter is the buying and selling of Facebook shares since then. And there are a bunch of cogs meant, I guess, to show that Wall Street is the essential machinery that enables the economy to go, or something like that. Anyway, they move and look nice.

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Other parts of the ad are odd. For example, point your curser over one cog and a bar chart pops up showing different industries where Wall Street’s help is “funding innovation and growth.” No. 2 on the chart: the finance industry, which seems like a circular argument.

The ad is clearly part of Goldman’s effort in the past year and a half to burnish its reputation. And an effort to combat articles like the one that claimed Goldman manipulated the price of aluminum, costing consumers tens of billions of dollars a year, which also ran in the New York Times.

The ad is kind of like what Kodak used to do when it showed the joy of taking pictures. Or when P&G runs ads about how great moms are. It’s also a subtle way for Goldman to say it’s No. 1, and to imply that all those positive things that Wall Street does — help companies and governments raise money to create jobs and bridges — is the bulk of what Goldman does.

But that’s not really true. It would be one thing for Bank of America to run this sort of ad. In fact, Bank of America (BAC) does make the bulk of its money lending to companies or helping them get financing. But for all of the big Wall Street firms, the picture that Goldman tries to paint of what it does all day is probably the least accurate.

For example, a chart in the ad describes the good things being done with the money that Wall Street helped municipalities raise in 2012. But Goldman did very few of those deals. In 2012, Goldman wasn’t even one of the top five underwriters of municipal debt. It ranked eighth. Something like 3% of the funds that are described in the above chart came from the good folks at Goldman.

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But perhaps the oddest part of the ad is that there is no mention of derivatives. In the past few years, derivatives, like interest rate and credit default swaps, along with commodities futures, have become an increasingly large portion of the U.S. capital markets. The last chart of the ad features bubbles showing the size of different parts of the equity and debt markets. Include derivatives and it would be among the biggest bubbles on the page.

Goldman makes a lot of its money from derivatives. As a percentage of overall profits, derivatives are probably larger at Goldman than any other large Wall Street banks.

There are plenty of Wall Streeters who would defend this work. Derivatives, they say, help companies and municipalities lower their cost of borrowing. The financial contracts helps airlines lock in the price of jet fuel, so they can lower ticket prices. Things like that.

But I understand why Goldman doesn’t want to defend this part of its business. Derivatives, after all, helped caused the financial crisis. And while a portion of derivatives might serve a productive purpose, much of the market is pure financial waste, adding risk to the economy and creating profits for Wall Street.

I wouldn’t defend it either.