07/03/2010 05:12 am ET Updated May 25, 2011

No Goldman at the End of the Rainbow?

In olden times (circa 2000), Goldman Sachs and other Wall Street bankers borrowed heavily to buy Village Voice Media, the alternative newspaper chain where I was an executive VP and publisher of the company's LA Weekly. When it turned out that content wasn't king any more than housing prices would rise ad infinitum, heads rolled and a takeover ensued. (The nation's second-largest alt-weekly chain, Creative Loafing, lived up to its name by also going bankrupt in 2008, another victim of poor management, over-leveraging and under-performance.)

When they took over, the uber-capitalist Goldman guys asked us VVMers to keep their participation on the QT, lest they become associated with our papers' lefty -- some would say socialist! -- politics and "adult" ads.

But even if it was a "shitty deal," to paraphrase a Goldman exec's description of their more recent shenanigans, at least they purchased an actual business that produced tangible things -- in this case, newspapers. They didn't want to produce them for long, of course. From the git-go, the mandate was extraordinary EBITDA to execute the "exit strategy." Translation: Make a ton of money and flip the company.

The VVM deal didn't amount to a rounding error of a rounding error for Goldman and company. We now know that Goldman and other huge banks made multiple billions by financing financing -- as opposed to financing companies -- and played a key role in disasters far and wide, from the banking crisis here to the Greek crisis abroad.

Joseph Schumpeter might have called Goldman Sachs an engine of "creative destruction." But Schumpeter thought this process was inevitable--even good. Time will tell. We may look back and agree that the destruction of old journalism freed up great talent to produce new media and that Greece's collapse produced a more unified Europe. The banking crisis unquestionably propelled Obama into office.

Marxist socialism may be dead, but perhaps what Marx called capital's internal contradictions, illustrated beautifully by the desperation of Goldman and other mega-corporations for short-term profits may, by strengthening the case for fundamental financial reform, bring us closer to a more livable world.

Predictably, the titans of capitalism whom Tom Wolfe called "Masters of the Universe" recognize that their world may be crumbling and have begun to close ranks. Warren Buffett, who's cultivated a reputation as a homespun investor whose Nebraska base of operations puts him far from Wall Street's ruthlessness, shocked observers by defending Goldman to the hilt. And former President Clinton, whose administration deregulated the arcane derivative transactions responsible for so much grief, minimized the SEC's lawsuit against Goldman, saying, "I'm not at all sure [Goldman] violated the law."

Power elites may succeed in watering down financial reform to the point where, in the words of progressive activist/commentator Jim Hightower, it's "weaker than Canadian hot sauce." But it may be too late in the game for them to rewrite the narrative. One piece of evidence: the SEC action and rumors suggesting a criminal investigation of its trading practices have caused Goldman Sachs stock to plunge a staggering 20 percent in the last couple of weeks, including a 9.4 percent drop -- representing $8 billion -- on Friday alone.