Goldman: Consequences of the Senate inquisition

I despair that the letter of the law matters so much in this.

What they have done is clearly and obscenely wrong - this should be sufficient to act.

Fab has written and explained his guilt in emails and yet this is still not enough.

The show goes on but still the audience have no satisfaction.

When do the rotten tomatoes start getting thrown??

"regulators will have to be much more intrusive in vetting the design and purpose of new financial products, even those aimed at banks and professional fund managers"

What I would like to see is a guarantee that my pension fund growth doesn't fall below the rate of inflation, unless I explicitly ask them to gamble with my money.

The people who Goldman's were making markets for were just as 'greedy' and 'amoral'. They were just wrong about what the market would do. It beggars belief that they should be whining about making losses, as if they had no power or responsiblity to vet the investments themselves.

This is just politicians looking for a whipping boy to hide their complicity in creating the bubble through interest rates. Goldmans may be sharks, but no on they were swimming with were innocent little fishies.

Why, I wonder, are Goldman in the dock over this? Whither the legions of allegedly professional, grown-up fund managers, responsible for the financial well-being of millions of pensioners, who bought this "excrement".

Whither, too, the politicians who precipitated this problem? Slackening the criteria for Fanny Mae / Freddy Mac lending for poorly-thought-out political ends, or taxing UK pension fund profits so much that they had no choice but to buy riskier - but higher-yielding - investments?

Goldman are a scapegoat because they are (almost) the last man standing after the bloodletting stops. I hope that they, like Liberaci, cry all the way (back) to the bank.

How long is it going to take for the rest of the world to realise that when any commercial organisation says it is working in the best interests of its customers, they are being economical with the truth. All such organisation especially those in the finance sector are working for themselves (ie senior managers bonuses) followed by the shareholders. Golden Taps has now spelt it out. They are only interested in making money and they don't care how it is done. All investment banks are the same. As are estate agents, used car dealers, supermarkets etc etc. They are right to say that if we deal with them we are accepting the contract and all that it means just as you do when you ask your plumber to fix your heating system.

If we don't like this and I imagine that most people don't like it taken to the excess that investment banks do then we have to stop dealing with them. Perhaps we should have let them go rather than bail them out. As Mr P would say 'we let them trouser the profits' and we then pay for the losses. Maybe we should persuade our respective governments to regulate them to the point where they have to behave reasonably.

In this country we may have a choice next Thursday so exercise it.

So if GS haven't done any thing illegal, simply amoral, maybe we should get that changed. Make it clear to your representative that you no longer wish to pay this type of behaviour. Before anyone says GS didn't get bailed out, I am not sure thats true. This certainly transfered their losses to the customers. We know that because they have now tolds us.

"The 10-hour torture session of Goldman Sachs executives by US senators yesterday"

Stop exaggerating Robert - I saw the coverage - that's not a torture session. Are you trying to whip up sympathy for these criminals?

I noticed the main 'accused' vehemently protested his innocence and forcefully stated that he shall 'fight these untrue allegations' - but didn't say on what basis.

As Greece implodes we must look back and see who profited from their situation - before we criticise the Greek strikers we need to go further back to those who aided and abetted the Greek Government (of that time) in their alleged covering up of Greek debt to ensure acceptance into the Euro.

If these bankers think this is 'torture' - you wait until they see what the public really have lined up for them.

Revolutions never come from the centre - the middle road - they come from the extremes of right and left.

The bankers are going to get their come-uppence - the US revolution has begun.

For the BBC, I found this to be written with quite some bias.

These "investors" as you personify them, are major banks and financial institutions. Goldman provides a forum where they can 'buy' or 'sell' (i.e. go long or go short) on various stocks. This is a contract between 2-4 big banks normally. For the transaction to work there has to be an equal ammount of money shorting the transaction as there is going long.

Goldman, like all market makers (including the stock broking websites you use) offer an execution only service. The big banks and investment institutions say what they want to invest, what direction they want to move, then Goldman goes and finds other people to bring to the table.

Like any execution only service it is not responsible for giving investment advice - nor is any market maker. When you go and buy shares, as an amateur individual, from a stockbroking company or online trading account, the market maker doesn't pass judgement, they merely offer you the thing you want to buy.

I thought that quite a few of the senators were quite frankly ignorant with regard to finance, and this really halted the depth that the proceeding could have got into. Lamens sat passing judgement on one of the top investment banks; just a public puppet show.

I don't think the BBC did very well to cover this either - perhaps trying to make for a more exciting read, but either way, it suggests the blame lie with Goldman, when I really really don't think anything that happened yesterday would suggest that.

"Their view - and it would be the popular view too, I would hazard - is that a bank with Goldman's history and reputation should not be conducting itself as though it was a street trader selling fake Rolexes which it has pretty good reason to believe will stop ticking within a few days".

Robert, this is a good summary of the popular view. And let us be clear that if a street trader was caught selling fake Rolexes, which they had good reason to know would stop working in a few days, they would go to jail for fraud. So why haven't these exceutives been charged? And how can anyone have faith in a financial system that does not take legal action against them?

I agree that there is 'Caveat Emptor' argument in this debate.
The buyer does need to be aware that Investment Banks will try and defraud them.

The problem is that the buyers are using yours and my money with which to speculate. Savings, pension, insurance funds etc.

So many people have said it now. Split up the gambling side of banking from retail and commercial business and let them get on with it

Why is no-one listening ?

Would disclosure help? That is, should the invetment banks be forced to publicise the positions that they hold on their own account so that investors can see whether the advice of their market makers differs from the position the bank is itself adopting?

I'm no friend of the city at the best of times - but I really can't see what Goldman Sachs have done wrong.

For a moment, forget all the complicated financial instrument that are muddying the water - and just think of a individual buying shares in a company.
The buyer believes that the value of the share will increase. Therefore, by definition the seller must be taking a different view.

Should the seller advise the buyer not to buy - as they believe it's a poor investment?
No - because in addition to the buyer rightly having to take the risk of this transaction (they are not investing in a deposit account)- the seller may not be correct.

In the case of the Goldman Sachs transactions - the problem was with the buyer of the dodgy investments - not the seller.
The buyer (based on all the research that so-called sophisticated investors undertake) decided that it was a good investment. Goldman Sachs took the opposite view based on their research.
Goldman Sachs is now being punished for being correct about the US house market- and by managing their investments in a superior way to the rest of the city.

Whilst I don't personally find the culture and greed of Goldman Sachs attractive - the losers in City were cut from the same cloth and should attract no sympathy for making the wrong call.

Get real everyone, this is called 'International Business"

As usual, people are looking at the wrong target.
It really doesn't matter whether or not Goldman thought investments based on subprime were c**p.
What does matter are two things:

One: were Goldman offering "best advice" in selling these, or just putting them on the shelf. When I ask my forex broker to sell me dollars or whatever I don't expect to complain if I buy at the wrong time if it's a JFDI trade. I do ask my IFA's advice on investments, and do expect best advice in that case. No one is really focusing on the nature of the relationship, which should be contractually evident.

Two: If these nonsense mortgages had not existed in the first place there would be no problem. Yet as far as I can see there is nothing to stop it happening all over again, and insufficient focus on the mis-selling that undoubtedly took place.

The arrogance of people like this makes my blood boil. One of your reporters was saying too that we need to realise that these people do not know how to talk to people like us - and how true is that being revealed. Why do not the same rules apply to the sale of a retail money product as apply to a jumper from M&S. Looking at "money products" sold in the past why would a consumer buy a "product" that was not likely to pay off their mortgage (re: endowments). And still they can afford to pay themselves hundreds of thousands of pounds. It's sickening and strikes to the very core of what society is all about. Money is as important as air and water for the survival us all on this planet so if these people can't apply any moral regulations on how they conduct themselves with this vital resource then they should be forcibly removed. I'm appalled and sickened by this event.

what is going on here?

people like those above, real people, who might hide behind a vague term like 'market forces', or 'investors' are
deliberately ruining countries and the lives of millions of people, as now in Greece... for greed.

" the only reason these massive bankers' pay deals are needed is that no single bank or country can refuse them without facing financial disaster. "
BBC Friday 26 February 2010

this is way past rotten, who, what, is running this world?

how about that, as the next BBC blog? for example who cares about our local election, or brussels when all governments don't dare disagree with a few very rotten people? (BBC 26 Feb)

If these guys are worth so much money, how come they perform this badly?

https://cantankerous.co.uk/2010/04/27/goldman-sachs-shitty-deal/

In the case of the money markets, amoral can only be seen as equivalent to immoral. For the majority of us who are not directly connected with or have in-depth knowledge of the money markets, obscene occurs as a more appropriate name for what the speculative aspects of the money markets have been doing. It is an insult to excrement to use the word to describe their activities. At least excrement has an important function in fertilising the soil, an eco-organic function indeed! Seriously, banks when properly regulated can make a positive contribution to our collective wealth and economic wellbeing, but they are so very far from fulfilling this function in their present state. Imagine how much better off we would all be if all the wasted talent that goes into the likes of Lehman Brothers and Goldman Sachs was to be focussed on research, manufacture and marketing of real things! There is a saying - to know the price of everything but the true value of nothing!

> the presumption that the
> purchasers of those products are grown-ups able to make
> rational informed judgements turns out to be naive
> (to put it mildly).

I'm not mild. Our bankers are a bunch of chumps who spout
hogwash about "creating wealth" while dabbling in
dangerous things about which they know nothing.

> regulators will have to be much more intrusive in vetting
> the design and purpose of new financial products

Yes. Here come the "whitelists" that our bonkers-bankers dread
so much, because they cut their bonus streams. In other
words, they save us money.

"The key test is whether any of our election candidates are willing to implement the following clear policies to reign in the shadow banking sector:

1) Tobin style tax on all financial transactions (starting low e.g. 0.001%, then ramping up) to slow down unneccessary activity
2) Simple ban on "naked" short selling, default swaps etc. as this stuff is pure nitro-glycerine!
3) No new "originate-to-distribute" loan creation, with phased restoration of existing arrangements (stop the source of spurious securitisation activities)

All simple, neccessary and most likely sufficient policies to get us out of the stranglehold!

I'd be interested to know what Mervyn's stance is on each of these policies. They have all arisen from the topsy turvy de-regulation that has occurred on his (and his predecessor's) watch, namely:

The shift from regulating banks and financial systems by clearly stating what limited activities they CAN do, to the highly bamboozling situation of banks pretty much able to whatever they want to do, unless a regulator expressly says they CANNOT do it.

They have completely contorted the concept of banking regulation, and well and truly let the "venal but legal" genie out of the bottle!!"

https://www.bbc.co.uk/blogs/newsnight/paulmason/2010/04/goldman_scandal_gatecrashes_uk.html

If banks where it's mortgage lenders or investment banks were liable for the first 75% of losses when selling a product it would help make banking far more fair as banks wouldn't then be able to create situations where excrement is created in the financial system. There is a clear difference between risk for a good gain and risk where the financial products being sold were very likely to go bad.

# 6. At 10:41am on 28 Apr 2010, writingsonthewall wrote:


> The bankers are going to get their come-uppence - the US revolution has begun.

Yes. Our allies are less mild than us. They still put prisoners to death
over there! They won't tolerate much trouble from a bunch of office-bound
computer operators who call themselves "bankers". That's why they brought
in The Prez.

Once they've enslaved Wall Street, we can do the same to "The City". And then
we go for reparations from the perps, who are still living high off the hog.

It does seem as though the GS people live in some exclusive amoral world.
but the rest of us don't.
I guess the issue is that they see a simple transaction - buy / sell and price setting by dealing. Fair enough. But, for selling new products thru the investment bank - that is not on. I assume and expect my bank by implication to support and believe in the products I buy from it. Maybe i need to re evaluate that now.
Perhaps the solution is to separate out the investment bank element and remove banking status from trading. And send the message - no lender of last resort.
But the ultimate sanction is for clients to seek other suppliers - shun GS for a while.
Our own govt could start this process - surely it cannot dealing with an organisation where you might need to count your fingers after shaking hands!

IT'S ALL JUST A SHOW...THEY MAY AS WELL BE STAGING IT ON BROADWAY!

"The IMF and World Bank, like the UN is an American creation to further the USA's interests globally. The USA does very well out of the IMF, which is more than can be said of the recipients of its 'help'.

People have got to stop seeing the USA as a great benefactor. With all the evidence to date (the alleged con by Goldman Sachs and Paulson is classic), why do so few see through all the spin? Is it fear of what they will see?"

https://www.bbc.co.uk/blogs/newsnight/paulmason/2010/04/imf_bank_tax_plan_the_parties.html

10. At 10:48am on 28 Apr 2010, Chris wrote:

"Would disclosure help? That is, should the invetment banks be forced to publicise the positions that they hold on their own account so that investors can see whether the advice of their market makers differs from the position the bank is itself adopting?"

...and their response? - would be move everything into opaque hedge funds.
The sad thing is this is news to the world, but it's old news in the city.
Look up what a CLN (Credit Linked note) is and how you think fund managers might use them to 'bend the rules' on their mandate for gaining exposure to emerging market debt.

All 'within the rules and the law' - but destined to blow up one day...and I'm sure the media, banks and regulators will all be "in complete surprise" when these little fellows are discovered.

Whatever the legal rights and wrongs surely the point is that the system is not working in the way that society wants it to work. Profits and bonuses on a scale that most of us find hard to comprehend and in my view have reached immoral levels. Something has to change and I wish the clever people in Governments across the world could focus on what needs to change. Surely there is no argument to justify the taxpayers ever having to be exposed to such risks again. Surely it cannot be right that a small group of bankers can share a bonus fund which is greater in size than the amount of aid America can afford for a country like Haiti? Can it also be right that individuals can amass wealth that far exceeds the wealth available to whole countries in which people starve?

I am not nor have I ever been any where near to being a supporter of enforced redistribution of wealth but the whole episode with the Banks demonsrates that something is badly wrong with the capitalist system in its present form. The rich have got very much richer at the expense of everyone else beneath them.

So attacks on Goldmans might well satisfy some sort of need for revenge but please politicians spend your time agreeing how things must change to prevent outcomes that most people would find morally wrong

Goldman are like a shopping mall.

The mall brings togeher buyers and sellers

The mall do not care about the quality of goods the shops sell, they just care about getting their rent from the shops

It is up to buyers to decide if they want to buy something from a mall.

If the buyer is sold shoddy goods, they do not ask for refunds from the mall.

12 arthurmiastein wrote:

Get real everyone, this is called 'International Business"

-----------------------

You left off a bit!

.....on America's terms and conditions!

So in summary:
Goldman provide a product to grown-up investors
"there's a price for excrement; our clients are quite capable of working out what the right price might be"

But Goldman have no problem that its taxpayers who pay to clean-up their mess.

Putting 2+2 together, I'd say Goldman and similar institutions, are "grown-up enough" so let them clean their own mess with no help from tax payers, OK?

'Because, as we've learned at some cost, when banks and other investors purchase excrement from the likes of Goldman, its taxpayers - all of us - who pay to clean the mess up.'

Yes, exactly. This is what the likes of Goldman forget. Banks and other businesses are protected and privileged by society because we expect them to provide us with social benefit. If they don't, they forfeit their right to exist.

> Many of their answers can be paraphrased as follows: "there's a price
> for excrement; our clients are quite capable of working out what the
> right price might be".

Yup, and we found out what that price was, which is exactly what caused the problem. As the poo was priced appropriately (eventually, when they did realise what they had), the market collapsed. That's pretty obvious to everyone.

to robrob 2010 comment 11

You are right. In a pure marker with buyers and sellers the price defines everything. and this can include the price of excrement.
But let's move over to the investment bank. It designs a product for a pension fund and says it could yield, say 10% - but value can go up and down etc bla bla. That is also fair enough.
But, now let's add teh alleged missing ingredient. The firm had designed that product with another party with the intention of selling it and then buying it back cheaper - ie shorting it. The expectation was it would fail and it was structured to more than likely do so.
Should this have been stated by the sellers to the pension fund? I think so - as the pension fund, for example, would not enter into a transaction that was designed not to yield what it wanted.
This is completely different to the product being on the open market with price set by competitive bids.
GS cannot sit both sides and plead innocence.
GS should decide - trader or investment bank - but not both. This, i hope, would have been obvious during my life as a banker - GS is clearly in conflict here and the sooner it owns up to it the better. Meantime the whole banking industry will be tarred by it.

So, in essence, Goldman Sach are amoral as opposed to immoral, they act as brokers only and their services come with an unwritten codicil that "Buyer beware" and they act for both buyers and sellers on principle that the Buyer or Seller are grown up people or organisations that know 'value' when they see it and, thus conversely, should be adult enough to know when something is excrement.

So, how is that different an attitude to anyone who buys and sells anything anywhere in the world - whether it is of real or virtual value or excrement or the dog's dinner?

Where is the criminal offence? Amoral behaviour, yes, but criminal?

Is this legilature vitriol aimed at Goldman Sachs merely sour grapes on the part of legislatures and their executive bodies to try to prevent any criticism falling upon them for not legislating against buying and selling amorally ... not that that would be right as that would prevent second-hand car salespeople, street marketeers and many of the BOGOF advertisers doing business one sees on television as they all work to the principle of "Buyer beware" too and which has been legitimised in goodness only knows how many civil court proceedings in the past.

It is all "I am holier than thou stuff and nonsense" even though the enormity of the value of transactions are in billions instead of hundreds or thousands of whatever currency you'd like to think for cars, junk, food, machinery, or even the proverbial horse where the buyer has to take the trouble to look at the mouth and teeth to make sure they are getting what they are paying for .... if they don't get what they wanted then tough - live with it and be grownups instead of wheedling children.

Who said 'you can't polish a turd'?...it would appear that GS can...and then sell it on! (...and then bet that someone else will step on it!)

Its just a giant money making machine!

Ever heard of the GS 'great bubble making machine' anyone?

https://www.telegraph.co.uk/finance/5837373/Just-how-did-Goldman-Sachs-manage-that.html

As I understand it:

(1) the rating agencies (Moody, S&P et al) incorrectly marked the CDOs as being sound investments

(2) the rating agencies were paid by the *seller* for the CDO rating

(3) the purchasers were able to cover their backsides by saying "we relied on the expert judgments of the ratings agencies, so it isn't our personal fault"

(4) the ratings agencies aren't liable for any poor quality ratings

So, why hasn't more attention been paid to the role of
the ratings agencies?

IMO , this form of gambling should be outlawed these people only create wealth for themselves and their selected friends, if it was stopped tomorrow we the tax payer would be no worse off, the whole monetary system is rotten to the core, and its unfair to single out goldman.

This has all come about by lax regulation, that has to change ,but who is going to stand up to the wealth and power these people have accrued, far too many world politicians are involved in the plot, and at present i am seeing absolutely nothing but hot air and bluster about how , regulation is going to prevent this happening again.

The key point here is not the amorality of market-making, but the immorality of offering an item for sale that you believe to be bad for the buyer.

When you offer an item for sale that you also wish to offload as being not worth the sale price then you immediately have a fundamental conflict of interest.

There is no real way that you can prevent your people deceiving the customer to some extent, probably a large extent, given that they know that you want to offload.

The analogy of a car dealer finding that a batch of cars are defective and that they have no recourse to recoup their own money. They may "create a market" for those items but there is no doubt that it would be seen as immoral and so it must be in the banking sector.

At the very least there needs to be regulation to prevent a bank trading in assets that it also sells. But the real answer is to stop retail banks trading at all - they should be limited to the time-honoured investment of lending to customers and not at any rate they like - it must be at rates that are close to the rate they are prepared to pay on deposits.

At present we have banks paying depositors close to 0.5% and raking in 5-8% from borrowers. THAT is immoral - the banks' customers are being asked to foot the bill for their problems. We lend them money as taxpayers and then are making the repayments for them. Truly ridiculous and yet... nobody even seems to have noticed this.

In addition to bank base rate we need to separate retail and investment banking AND have a Bank of England defined retail bank differential rate... the allowed difference between a bank's lending and deposit rates.

That said... fund managers. Sigh. Just exactly what do they get paid for. A load of rubbish the lot of them, asleep on the job as usual. What has crippled pension is poor investment returns and no wonder with that lot at the helm.

This comment was removed because the moderators found it broke the house rules. Explain.

21. At 11:04am on 28 Apr 2010, Jacques Cartier wrote:
# 6. At 10:41am on 28 Apr 2010, writingsonthewall wrote:


> The bankers are going to get their come-uppence - the US revolution has begun.

Yes. Our allies are less mild than us. They still put prisoners to death
over there! They won't tolerate much trouble from a bunch of office-bound
computer operators who call themselves "bankers". That's why they brought
in The Prez.

Once they've enslaved Wall Street, we can do the same to "The City". And then we go for reparations from the perps, who are still living high off the hog.

---------------------------

I think you are both being just a tad naive.

GS were only implementing US foreign policy...trust me!

See how GS were implicated in Greece's dubious financial arrangements for entry into the EU.

Perhaps another perspective on the effects those sharp, though currently legal, business practices as epitomised by GS have is to look beyond the next banking bail-out and the indirect consequences.

We thus have inept, though highly paid, fund managers "managing" and investing our pensions and funds in different types of excrement either directly or indirectly for short term gain = their bonus. We have banks who engage in global ambitions (see RBS) and forgetting their primary purpose. We have hedge funds that rather than expose and exploit weaknesses or faults in the systems actually exacerbate them further, to the detriment of all parties.

What this crisis has clearly exposed is that financial institutions, in their current guise, are inherently incapable of self regulation. This is due to powerful conflicts of interest within the system that no Chinese walls or other artificial structures will ever resolve.

Splitting the banking from gambling activities is just the first obvious solution many politicians eschew (due to their own conflicts of interest perhaps?). Encouraging greater competition and transparency in the sector should be the next logical step. Establishing sensible lending guidelines for the "pure" banks - something that they seem incapable of doing themselves as proven time and time again - next. Protection of small investors and greater accountability and regulation of the funds managing the billions involved should naturally follow. Only then we will have a healthy financial sector that serves the country and its productive industries as was its original role.

IT’S ALL ABOUT THE ECONOMY...STUPID!

The timing of this senate hearing wrt our forthcoming GE is very interesting indeed. Especially with the final debate on Thursday being focussed on the economy.

It serves as a useful reminder as to why the state has been lumbered with such a huge budget deficit.

Nick Clegg is the only leader that is talking aggressively about wholesale banking/financial reform. He has managed to put clear blue water between himself and his rivals on this issue. Nick is the only one who gets it. This will win him votes.

# 7. At 10:42am on 28 Apr 2010, Stephen wrote:
> the market maker doesn't pass judgement, they merely offer you the thing
> you want to buy.

If it were a deal on porn, fake goods, or drugs, WMD, or toxic poison and other harmful stuff, then judgement is made by us. We pass judgement on market makers all the time. There's nothing new in this. The goods were toxic, end of story. There is no “amoral” defence in the real world. You have to reap what you sow – Merv calls it “moral hazard”. I call it “punishment”.

Goldman has to pay its reparations before it can move on. We might break it up. But we'll be “amoral” while we do it, be assured.

And just to make sure we all understand that the SEC action against Goldman Sachs for fraud, which cannot actually succeed in law, is not in anyway political, Team Obama bought an advertisement on the Google page that pops up in the States when you type in 'Goldman Sachs SEC" which invites people to make donations for campaign costs in the forthcoming mid term elections! Those guy's from Chicago sure know how to clean up politics...

What did it say on the label, the receipt. Did it say 'excrement'. Yes or no. End of.

If they do not provide any kind of assessment, then just what are they paid for, telephone calls? The most expensive telephone calls in the entire universe!

I know US consumer laws are so weak that mere Europeans would fall over in horror, but surely, surely there has to be something about labels, about misleading purchasers - no wait, the rich bankers ie Goldman's mande sure their lobbyists prevented such laws, right?

6. At 10:41am on 28 Apr 2010, writingsonthewall

So not a good show then? Wasn't it as entertaining as 'George Galloway/Scottish Terrier meets the Americans'?

If it wasn't much of a kicking I don't think I'll hunt it down on youtube.

Latin America is beginning to fight back - really interesting people down at Cochabamba last week.

Under current law, I would think that Goldman's are correct in asserting that they have done nothing wrong.

Surely, the question that should be asked is whether they should be doing this in the first place. The bankers like to state that they are creating wealth, but I cannot see that this is so, since, as the man himself said, in every trade there are winners and losers. In other words, it is a zero sum game and all they are doing is indulging in wealth transference, not wealth creation.

If these trades take place, it must be because the money generated by economic activity in the world has to be recycled and invested. If people are desperate enough to invest in obscure and esoteric products such as derivitives, collateral debt obligations etc, the problem would appear to be that there are too few assets to invest in and too much money chasing them.

why not concentrate instead on increasing the real stock of wealth in the world by creating some useful assets to invest in. For example, issue green bonds which are used to make climate affecting goods such as carbon scrubbers, cleaner energy etc, and peg the return to the carbon removed from the biosphere, using some formula based on the projected costs of clean up in the future. The return could be paid for by governments, who after all will be forced to pay for this at some time, so why not now when it is potentially more manageable? The money for this could come from imposing a standard global tax on carbon production, such as a transport tax levied at the destination, well head taxes on scarce resources etc.

Otherwise, if the sort of trades that goldmans have been forced to defend are to continue, I would suggest that it would be useful if one of the theoretical underpinnings of the market system, ie perfect knowledge, be put into practice and full disclosure of any relevant information is made available with the product. It might then help people to make more informed decisions, but I doubt it.

The deregulation of banks has been a disaster.
That and so called 'Globalisation', we were told would provide the liquidity that would free up world trade and increase living standards.

The result for the UK has been cheap clothes, an almighty amount of cak, annoying call centres, young people who start their working lives in debt, half the nation dependent on the state for their livelihood and further erosion of our manufacturing base.

Worse of all it has encouraged the greedy to get greedier and given the politicians a get out clause by being able to blame the rest of the world for this country's inadequacies.

I would vote for any party who advocates reducing the size of the state and reforming the welfare state along with, it goes without saying banking and politics.

It's time to deglobalise, unwind the financial timebombs that threaten us and see if there is anything left for us to work with or if it is finally time to replace the 'Great' in Great Britain with 'Little'

# 9 Devil in the detail
i listen, the issue for me is also the "innocent people" who believe that their pensions / investments are being invested by experts on sound judgment rather than trying to see and follow somebody else’s betting patterns and seeing it wrong
having said this I can see Goldman Sachs point here. Every betting institution lays off bets. It’s like moaning at football teams who play to what they can get away with rather than the spirit of the game.
Without enforced regulation it will happen.

32. At 11:24am on 28 Apr 2010, Menedemus wrote:

> Where is the criminal offence? Amoral behaviour, yes, but criminal?

Mere legality is not sufficient for any act. It must be right. And no-one
would accuse bankers of being "right" in recent history. Only bonkers-bankers
would would mix up these things. They are so dim.

So now they have to pay. And if it's not illegal to break them up, then
(according to their own rules) we can do it, can't we? And it is is illegal,
then we can change the law. And make it right.

@ GVS - Comment 31.

Yes, you make a fair comment, particularly with respect to the 'Abacus 2007-ACI' deal - as the role of GS appears to have been very murky.

However - my points were about GS generally - in terms of the legitimacy of make money by taking a contrary view to other sophisticated investors.

After all - doesn't the pension fund in your example have a duty to it's stakeholders - to carefully research it's investments as diligently as GS?

Glad we've managed to shake off the "another banking story" brigade. I hope Robert will get the recognition he deserves for this fine journalism.

So GS are going for the standard insane psychopath defence.

Doesn't work for me. It just emphasises that these people are incurable. Needs sorting.

A well-known UK bookmaker offers a “daily treble”. The bookmaker picks three horses in three races and gives single odds on all three winning. The bookmaker chooses the horses but does not own or control them and makes no recommendation regarding their performance. All the bookmaker promises is to pay out your winnings if all three horses come in (and to keep your money if they don’t).

Third parties publish information about the horses, which may or may not be useful, independent or correct.

You can take the bet or not. If you bet, you must place your stake with the bookmaker. If you win, the bookmaker loses. If you lose, the bookmaker wins. Your interests are directly opposed to the bookmaker. This isn’t a surprise – it’s a natural feature of betting.

The bookmaker chooses the horses, and does not reveal why those horses were selected. Given that your interests are directly opposed to the bookmaker’s, you would be naïve not to wonder why those particular horses were chosen and you should only bet if you think the prices are reasonable.

The bookmaker may think that the horses in questions aren’t very likely to win. The bookmaker certainly runs the business with the aim of making a profit, so in the medium term the bookmaker must set odds with the aim of winning more than they lose. This isn’t a surprise – the bookmaker is running a business, not a charity.

The bookmaker may take on the risk of your bet. The bookmaker might pay someone else to take some or all of the risk. Either way, the bookmaker doesn’t tell you about it – it’s none of your business.

If the horses lose, you lose your money. This may be very bad for you, depending on how much you have bet and how much you can afford to lose.

If the horses in question are consistent losers, this may be very bad for other people too (like their owners, trainers etc). It may also mean that the horses are given a new life as glue.

In the UK, subject to certain regulatory requirements, this is undoubtedly legal.

Is it moral, immoral or amoral?

"...to provide a product to grown-up investors"?

This is the nub of the argument Robert.

Is it OK to set out to deliberately deceive market participants?

GS = Yes

The sane World = No.

Historically the insurance industry used to live by the same argument but many many years ago the legal position of the market was changed so that the insured had to deal in the 'utmost good faith' with the insurer or the policy is null and void. This is what is needed in the over the counter financial derivatives markets - or disaster will follow (as we have seen!)

44. At 12:18pm on 28 Apr 2010, copperDolomite wrote:

"6. At 10:41am on 28 Apr 2010, writingsonthewall

So not a good show then? Wasn't it as entertaining as 'George Galloway/Scottish Terrier meets the Americans'?"

If you tune in to the show expecting 'torture' then you will be sorely disappointed.

It seems the classification of 'torture' is one from the perspective of Government.
Waterboarding 'enemy combatants' who you have no legal evidence for holding is not torture - but a few tough questions (which you can choose not to answer) - is.

It's a bit like beating an activist to death for using his 'right to protest' is not murder, but defending yourself against burglars in your own home can be.

Blair Peach - RIP - not forgotten and not yet settled.
Ian Tomlinson - RIP - 30 years later and nothing has changed.

38. At 11:44am on 28 Apr 2010, DebtJuggler wrote:

"I think you are both being just a tad naive.

GS were only implementing US foreign policy...trust me!

See how GS were implicated in Greece's dubious financial arrangements for entry into the EU."

...that was the previous administration - the most unpopular ever!

Don't worry everyone knows about that little scam - and it's consequences. Greece are going to drop the bomb when they lay the cause of their crisis at Goldman's door.

If I were a banker reading this - I would be purchasing that plane ticket today.

Time is running out and this bubble is going to burst - and you will be directly in the firing line.

Your paper money cannot save you now - it's all but worthless....

.....and in case anyone is still wondering...

No, the revolution will not be televised - you will have to get off your backside to see it.

Revolutionary Britain - has a good ring to it doesn't it?

Roll on May 7th when we can get this party started and oust the rich from their stolen thrones and dispatch them from our country - naked and without our wealth in tow.

Robert:

Note to self - don't make predictions about Government investments turning profits as the uncertainty of markets is always....uncertain?

We're currently 4p off 'banking apologists idea of profit' - that's nearly 6%.

Maybe try again next week.

#26 - Comparing Goldman-Sachs to a mall is all fine, except that I have just copied this from their website (under "Our Firm"):

"We have a responsibility to our clients, our shareholders, our employees and our communities to support and fund ideas and facilitate growth. We do so by investing in people, businesses and our communities around the world."

Have you ever seen this announced by a mall? References to excrement are harder to find on their corporate website than in their internal emails.

I don't think that anybody cares very much about their dealing with the stuff. The problem is that, after taking suitable protective measures, they drop it on the fan so that everybody but them benefits.

Why would the system want to punish its best player?

Goldmann Sachs are the masters of the monetary system, the same system which encourages money accumulation via selfishness, deceipt and back-stabbing. The Goldmanites have mastered its ins and outs to a perfection. Perfection which ought to be admired by the supporters of the system.

But I think this whole "trial" is just a charade. The system tries to save itself by pointing a finger at ... itself, actually. Slapping itself on wrist of one hand so that it can keep taking with the other one.

I wish the Goldmanites many more successful years to allow them to do what they ate best at - eroding the system from within!

So what's surprising here?

The deregulation of our own markets in the Big Bang of 1986, allowed firms to act in "dual capacity" - as principals for their own interests and as agents on behalf of clients. Conflict of interest was inevitable, and anyone who put their trust in "Chinese Walls" was likely to be as vulnerable as the Athenians with their Wooden Walls at Salamis.

There's nothing new, in one sense, certainly from a UK perspective. Stories abound of how the market was tweaked so that "unpopular" launches were fully subscribed. In the eighteenth century, even the respected Quaker houses weren't above off-loading worthless South American railway stocks onto their clients.

What is new in this story is the products themselves. Designed and refined to such a degree of opacity that the expert investors they were designed for were unable to assess intrinsic value and risk, the investors relied on inaccurate guidance by GSAM. That they entered into such trades without fully understanding the products is another triumph for greed over reality.

So GSAM misled their clients and those clients did not carry out the diligence checks that ought to be expected of expert investors. But once again it was the taxpayer who was handed the Herculean task of cleaning the Augean Stables.

This is pointless. Goldman, the sellers and the buyers all knew that the underlying mortgages in this investment were very poor quality. What was at stake was just how much future money they would generate. People had different views on this and so valued these products differently. It's only history can definitatively say who was right. If the buyers had held these investments for 6 months, made 50% profit and then sold them on just days before the crash started, would it be Goldman that is blamed? or would the original buyers be the acused because "they must have known"

Gordon has just blown it. Big time

Pimps being questioned by prostitutes. I do wish they would have worn their gold chains. When people swindle at that level telling a lie or two is of no consequence. The US Congress is discussing a small matter in the chain of events because they do not want to deal with the real issues of their own complicity and failure to make corrections when this was forecast in meetings in previous years. No better event could show who really runs the nations and it is not the governments. The banks must be down-sized or they will be able to extort any national economy at any time they feel threatened. The US was once a democratic country that happened to have a capitalistic economy and now it is a capitalistic system that happens to be democratic.

Goldman's are basically guilty of what the old cockney spivs of my youth used to call 'toe dropping' selling goods that are rubbish.
Where as the old 'flash Harry's' used to sell watches with no innards or rolls of carpet with the middles cut out, Goldmans seem to have done the same with these investments. They dropped their own tat on other peoples toes.... Is it legal ? that's up to the beak to decide me 'old china's'

I have a simple question is that screaming out for an answer every time I read this website or hear a politician speaking about the world financial crisis.

Of the board members from the chairman down of all the major banks and financial institutions both in America and in England, how many have been banned from being directors of any company in the future by the DTI and their American equivalent? Given the scale of losses incurred to their respective firms and eventually to the entire world, I have to wonder what a director of a company would have to do to be struck off if their actions don’t merit this.

So a simple question for Robert or anyone to ask our politicians or regulators is, how many have been struck off?

The silence I suspect will be deafening!

#61 Exactly!

Haven't seen much mention of the fact that the buyer even chose the securities that made up the CDO!

62. At 1:45pm on 28 Apr 2010, DevilsintheDetail wrote:

"Gordon has just blown it. Big time"

I am sure that Gordon didn't mean to cause any offence by describing someone as a "bigotted woman".

61. At 1:39pm on 28 Apr 2010, topnutter
'would it be Goldman that is blamed?'

Yes. These organisations should be required to operate in a socially responsible manner. GS should have (and very likely did) understood the scope for the damage these instruments could cause. If they are the 'best' people we have and weren’t able to understand the scope then clearly this class of financial instrument should be prevented.

Goldman already destroyed its own argument of "caveat emptor" when it lobbied the US Treasury to bail out AIG and pay off the billions in credit default swaps they were owed in 2008. If its own argument now is applied to those events, then Goldman should have known that AIG was a sh**ty company that could never afford to pay those CDSs and it should have swallowed its multi-billion loss like a man, not gone running to the taxpayer for salvation.

This is classic oligarchical thinking: The cut throat free market only applies to the other guy.

I want to complain about all the bigots on this blog.

Goldmans are clearly honest brokers just trying to make a decent living.

Firms like Goldmans are the salt of the earth and deserve as much taxpayers money as they need to continue operations.

You know it makes sense.

31. At 11:22am on 28 Apr 2010, GVS wrote:
to robrob 2010 comment 11

You are right. In a pure marker with buyers and sellers the price defines everything. and this can include the price of excrement.
But let's move over to the investment bank. It designs a product for a pension fund and says it could yield, say 10% - but value can go up and down etc bla bla. That is also fair enough.
But, now let's add teh alleged missing ingredient. The firm had designed that product with another party with the intention of selling it and then buying it back cheaper - ie shorting it. The expectation was it would fail and it was structured to more than likely do so.
Should this have been stated by the sellers to the pension fund? I think so - as the pension fund, for example, would not enter into a transaction that was designed not to yield what it wanted."

Oh PLEASE. If the pension fund is not sophisticated enough to undertand the product it should not be buying it. If it goes ahead and buys it anyway it is idiotic - CHOSE A DIFFERENT PENSION FUND.

Extreme right, extreme left, extreme greed. Self regulation is an oxymoron. The pigs with thier snouts in the Animal Farm trough are no different to those individuals and corporations who simply broke the financial system at the tax payers cost.

They are simply an embarrassment to decent capitalism (I hope that is not an oxymoron).

writingsonthewall wrote "Revolutions never come from the centre - the middle road - they come from the extremes of right and left. The bankers are going to get their come-uppence - the US revolution has begun."

Ever heard of the French Revolution? That certainly came from the middle class centre!

For once Peston has avoided major inaccuracies, torture accepting as an exaggeration, but what he fails to see is that market making by definition and chinese walls MUST be separate from clients and that SEC rules set out how GS and other 'professionals' treat each other - basically caveat emptor - buyer beware - and that has been the market since conception.

How will you change that?

This is all going the same way as food labelling, yet instead of a compulsory description for all so we can what's bad for us we have different supermarkets with different explanations, so we are even more confused.

Given 99.5% of bank staff canot explain an exotic derivative (I know I project manage these products)you have not a cat in hells chance of producing a descriptive method that would allow buyers to be able to understand the product let alone compare the risk to other products through valuation over return.

The outcome will be GS make a non-liability payment to regulators to get rid of their complaint by allowing it was a one off 'bad act' by Fab alone, then probably sacking Fab as the scape goat and doing a washington two step in the process.

In summary for those of you who like a punt: go long GS and hedge by shorting FT for a three month view to his arse on the street

Some revolution...

Last paragraph is spot-on Robert.
And that is exactly why we need heavy regulation, and the banks need splitting-up.
In future, if the investment arm of any bank goes bust, then so-be-it.
No country can afford to bail them out again.

Is this a form of insider trading?

Reasonable analysis Robert. But the way Goldman described market making implies that there was an active market of several firms quoting prices for these products. In case of these CDO products you called "excrement", I don't think that there would be a market. I would have liked to have learned how many market makers were actually quoting prices on this stuff and where were these being quoted. I bet there weren't many if any at all.

It is typical with product like these that the firm would not be able to flog all the stock following issue of the securitisation. The firm usually offers to put them on their books but there are usually time limits on how long these can be held there. The firm usually offers incentives to the sales teams to help flog this stuff. Market makers do not necessarily directly deal with the customer.

I think Goldman was obfuscating and sadly the Senators are not clued on enough to catch them at it. However, what I don't understand is why is the Senate Committee bothering when there is already a fraud case pending against them. I am sure the lawyers have a better handle on this particularly when we look at the reputation of the prosecutor involved.

If we buy Goldman's defense, then heroine and cocaine dealers should be left alone too.
Compulsive gamblers should not pose as regular businesspeople.
Goldman Sachs has had to be saved by taxpayers. It should have been beheaded, instead.

I see the good old Capitalist arguments are coming round again.

"The explosion of personal debt was the fault of the borrower for accepting the debt they could not pay"

"The losses incured on the Abacus deal were the fault of the buyer who did not do his due dilligence properly and ask the right questions"

"The losses that would have been incurred from the failure of Northern Rock customers would have been their fault for not reading the terms and conditions of banking and realising that the entire system could potentially fail"

"The Government is at fault for spending beyond it's means - which is the prime cause of our deficit. If they cannot pay it back then they should not have borrowed it"

...on the other side of hypocrisy we have.....

"Lloyds were pushed into the deal, it wasn't their fault they weren't allowed to complete due dilligence - they were clearly misled"

"The Airlines shoud have to pay out for the volcanic disruption because it wasn't their fault they didn't see what the EU regulation included in the reasons for delays"

"It wasn't the banks fault they got into trouble - the regulator, BoE or Government should have stepped in to show them where it was going wrong"

"The banking crash was caused by the mis-management of central bank interest rates - it wasn't the banks fault"

Oh how difficult life as a Capitalist is becoming - don't know which side of hypocrisy you're on each day!

69. At 2:20pm on 28 Apr 2010, James Herron wrote:

"This is classic oligarchical thinking: The cut throat free market only applies to the other guy."

I agree 100%. Any way you look at it the market for Financial Services is broken and it needs to be fixed, presumably by much, much more competition.

Another thing we, as a society, have a right to ask is do we get value from having a market in synthetic financial products and derivatives? Is it sufficiently important to the operation of society that we'll risk a meltdown of the financial system to maintain it? I'd wager that it isn't that important, therefore it ought not to be supported by taxpayer guarantees. Removing those guarantees may or may not require seperation of these activities from the form of Banking we do need, but IMO the guarantees have to be removed. While we're about it, why not make this like the insurance underwriters of old - no limited liability, you risk everything if you take a punt on derivatives, futures etc.

Now, so far a "Investment Banks" are concerned, we need them, but Goldman Sachs doesn't appear to be one any longer. We need Banks to borrow from savers and make loans / buy equity in businesses that increase our productivity if we're to have any hope whatsoever that the baby boomers can be supported by the next generation.

The answer then seems simple - any Financial Services business that does not actively participate in the form of lending we need should be stripped of both the name "Bank" and the implicit or explicit taxpayer guarantees that go with it. If they want to make markets, hedge positions etc. let it be totally on their own dollar.

In the UK we have the Sale of Goods Act and I have had to sit in front of worthy people from the Trading Standards Department or whatever it is called these days and demonstrate how my products conform to the required standard. I don't consider this unreasonable as I am also a consumer of other goods.

So why can't this simple piece of legislation be applied to large banks? Why should they be immune from laws about the viability of their merchandise?

Then there is the Theft Act which is quite deligthfully simple in that if you seek a pecuniary advantage through misrepresentation you are nicked!

I cannot see why we can't let Mr. Plod and the guys from the Town Hall loose on The City. I mean I had to listen to that fellow who raided Parliament looking for the former contents of the safe of a former Home Secretary on the radio this morning. We should get him out of retirement to feel a few collars under the Theft Act.

Those of you asking how anyone could put a price on the CDO's that were so obviously toxic from the day they were cobbled together might be surprised to know that the institutions who bought them wouldn't have had a clue what they were actually buying. However, they were all rated AAA investment grade by the ratings agencies and THAT is how the whole rotten process came into being. Frankly, the amount of wasted intellectual effort that goes into all aspects of finance, from trading currencies and commodities options to creating ever more arcane derivatives products is more obscene than the amount of money these people get paid for squandering their brilliance (and make no mistake, the people who invent these financial instruments ARE geniuses in their own way) on the sheer unbridled pursuit of more amd more wealth..That they actually don't even spend in most cases - its how you 'keep score' as they would put it..

In this financial debacle, nobody including wall street, the congress, the executive branch, the ordinary investor,the home buyers and the regulators is a saint. We are all guilty of collective greed. What good are rules, regulations and mandates when they are not regorously enforced? It's useless.

For those of Goldman’s clients that just want a market trader - ‘a street trader selling fake Rolexes which it has pretty good reason to believe will stop ticking within a few days’, as Robert put it – there are presumably no issues. It will sell them pearls and it will sell them excrement and it is up to its clients to sort out one from the other.

But what of the clients who look to it for advice? Can they trust Goldmans to give advice that it is in their interests to follow (rather than Goldman’s)? Or what about those clients that simply expect a firm with such a high previous reputation to deal only in products that will not diminish that reputation by association?

Many business people have viewed the television reports of the hearings before the Senators. Many have read the reported emails. Some commentators have seen an underlying contempt for the people with whom the bank does business. What will its clients see?

Two of Goldman’s major asset were said to have been its people and its reputation.

Its people are still there.

But what of its reputation? Reputation is built up over many years by providing good quality products or advice. It can fall in matter of days simply by association. I would have thought that it has fallen considerably these past few weeks. I doubt that it will be rebuilt much before the decade is over. But of course, a seller of fake Rolexes (or excrement)– if that is how its sees its business - does not need much of a reputation.

57. At 1:15pm on 28 Apr 2010, writingsonthewall wrote:
Robert:

Note to self - don't make predictions about Government investments turning profits as the uncertainty of markets is always....uncertain?

We're currently 4p off 'banking apologists idea of profit' - that's nearly 6%.

Maybe try again next week.

Perhaps this should have been more apt on the Lloys Back to Black Blog. No wait, you can't go on there because your Fact 'Most of the down days have been off high volume in the last 3 months with the exception of March 19th....'have been shown to be anything but!

This comment was removed because the moderators found it broke the house rules. Explain.

https://www.rollingstone.com/politics/news/;kw=%5B3351,11459]

"The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money."

A must read for all those who think Goldman Sachs have done nothing wrong....

To coin a phrase: We reap what we sow.

And boy have we sown. Goldman is just one fairly blatant example of human greed. There are many many other examples to choose from. From the sub prime market to the MPs expenses. From regional development managers ripping grants off to carbon trading. Fiddling stationery cupboard accounts to dodgy planning permission on public land.

Where actually do you draw the line?
And of course who do you complain to?
And will it do any good anyway?

Face it: We all live by fiddling.
Some are better at it than others.
Some folk's pension funds are unknowingly invested in scams.
Some sleep at night.
Some dread the knock on the door from the benefit checkers.
Obviously someone did not aim high enough.

Fiddle or be fiddled.

"8. At 10:44am on 28 Apr 2010, busby2 wrote:
"Their view - and it would be the popular view too, I would hazard - is that a bank with Goldman's history and reputation should not be conducting itself as though it was a street trader selling fake Rolexes which it has pretty good reason to believe will stop ticking within a few days".

Robert, this is a good summary of the popular view. And let us be clear that if a street trader was caught selling fake Rolexes, which they had good reason to know would stop working in a few days, they would go to jail for fraud. So why haven't these exceutives been charged? And how can anyone have faith in a financial system that does not take legal action against them?"

Have got to disagree with the analogy.

Goldman never badged the watches as Rolex. A more correct analogy would be that they sold these dodgy watches to expert watch dealers who thought, using their "own expertise", that they were Rolex.
if anyone badged them Rolex it was the ratings agencies and if anyone failed to do their job correctly, it was the ratings agencies.

NO BANK and indeed no publicly traded company could have done anything else other than to try to dump the dodgy assets. I believe that the board and the management are legally obliged to (try to) maximise shareholder value. Getting rid of a junk asset for a good price (without lying about it, or deceiving (see above)) would seem to fit the letter of the law perfectly.
Not dumping the assets and waiting for them to turn toxic, when they knew/suspected that they would, would have been highly ILLEGAL.

As far as I can see Goldman did nothing more than the law required them to do.

The overwhelming majority of businesses bankers, bakers candlestick makers would find it reasonable to have some aspects of its business to be secret or confidential within house.Markets change and businesses will change their postiions in the market.
the idea forinstance that shareholders should be long only is not on...

https://news.bbc.co.uk/1/hi/business/10089550.stm

So to buy a house with a mortgage some weazle has come up with the brainstorming idea of making the purchaser take a test.

Soooo
does that mean
1. the courses and exams will be a profitable social enterprise ala Cameron and his Big Society?
2. the mortgage dealers won't get paid anything now since we will have paid dearly in order to understand the products ourselves?
3. Which industry is a major funder of the proposing charity, it just couldn't be a bank looking to plump up the capital it has, looking for new products to sell to the unsuspecting muppets walking up and down on the high street could it?

Sorry Mr Charity-got-to-blame-the-punter, but we tax payers pay for a school eduction for every single child in this country. If that education isn't good enough for you then nothing will be. We pay the banks a lot of money, the mortgage dealers for a lot of money. We expect them to be professional and do the job we pay them to do. Stop behaving like Goldman and blaming everyone else.

We ain't playing them games no more with you!

I've seen such courses. £1000 for a little course that tells you no more than what is available in a Dummies book for a ten or twnety quid. Get real.

In so far as you detail the events surrounding the SEC fraud allegation I would agree with you Goldman has done no wrong ... however you fail to mention that these products unlike the dodgy rolexes sold in pubs ...go out the door with a stamp of quality. A rating. In the case of these products they were AAA rated. That is to say that Moody's, S&P or whoever judged them not to be "crappy" "excrement" or "shitty" to quote Goldman's sales force's opinion of the products. Further having received the rating Goldman said nothing to correct the judgement of their worth. The product went out the door with the AAA stamp while Goldman knew them not to be of that quality. What needs to be examined is how these AAA ratings are arrived at. Does Goldman tell S&P that in its opinion the products are of that quality? is the process independent of Goldman? Does Goldman have a duty to inform the ratings agency of Goldman's view of the products? This is where the chink in the wall is ...

GS charged a premium to customers. What was it for.

For those who say "I don't see what goldman has done wrong", you never will.

We may project childish covering up of guilt on the words and body language of Lloyd and his colleagues. But it isn't that, it is simple confusion. They genuinely do not understand what is wrong in what they did.

Evil is lonely and small minded. Read Fab's emails. Listen to the semantic justifications of Lloyd. These things took lumps from the pensions and savings of hard working modest people, they rolled local banks starving small business' of working capital that gave employment to their neighbours, put food in the mouths of nearby children, sent those children to college.

It wasn't capitalism that drove investment bankers to continue creating RMBSs and CDOs when they knew that the multiples on those mortgages were going beyond sustainable back in 2002. It was their perception of themselves as superior beings, as forces of nature, divorced from the impact of their actions.

Had GS shouted a loud "no", the market would have calmed. But they didn't. Because in truth they were and are consumed by the lonliness and smallness of mind that is evil.

This is not the Goldman Sachs of old. That was a creator. This creature is another thing. We have seen it before and defeated it but now it's back.

For the one fifth with honour, the one fifth who will stand. We must win the debate. All are worthy, no one is left behind, health for all, the "rule of law", compassion, everyone is our neighbour.

It's interesting to compare their statements today with how they have presented their proposition to clients. On values they state on their website;

"1. Our clients’ interests always come first. Our experience shows
that if we serve our clients well, our own success will follow."

In their 2007 report and accounts they say;

"Clients turn to the people of Goldman Sachs for
advice on a range of strategic, financial and business
issues. Integrity, expertise and an ability to deliver
the entire intellectual capital of our global firm are
attributes that make people successful within the
Goldman Sachs culture while making them trusted
advisors to our clients.
We maintain decades-long advisory relationships
with some of the most important corporations and
governments around the world. Our Investment
Banking teams provide insight across products,
industries and regions. Clients may turn to us to
structure effective hedging strategies, orchestrate a
cross-border merger or handle the sale of a subsidiary.
Regardless of assignment, clients can expect the
same level of expert advice and commitment to their
needs that have made us the leading merger advisor
globally every year since 1997.
Our global Investment Strategy Group (ISG) is an
excellent example of our approach to advising
investing clients. Serving many of the world’s largest
and most sophisticated investors, ISG professionals
offer global expertise in areas such as strategic asset
allocation, tactical asset allocation and active risk
budgeting. Clients have turned to us with issues
related to investment policy, economic and financial
forecasting and alpha-focused investment portfolios.
Advice is at the core of our interaction with every
client, every day around the world."

It's reasonable to assume that many big corporate clients might have expected their interests to be part of GS consideration.

I believe the worst thing a government can do is meddle with economics. In Adam Smith’s The Wealth of Nations, he writes of the “invisible hand,” the idea that an economy will fix itself through the workings of economic tendencies. That is, every time a government or power steps in to save a failing business, they are just prolonging the inevitable. Sooner or later, if the economy demands it, those banks will fail. All the government is doing, is prolonging what must be. All the government is doing is pumping money into a paper lion that will get wet sooner or later.
Also, I feel Lloyd Blankfein did a great job defending Goldman Sachs’ actions. He explained to the senators that business is not responsible for the actions of individuals. If the government steps in and over-regulates the market, I’m sure we will see that there will be stagnation, as it will become imposable for anyone to make a profit at the cost of someone’s loss.

WOTW wrote
"The explosion of personal debt was the fault of the borrower for accepting the debt they could not pay"
I AGREE
"The losses incured on the Abacus deal were the fault of the buyer who did not do his due dilligence properly and ask the right questions"
I AGREE
"The losses that would have been incurred from the failure of Northern Rock customers would have been their fault for not reading the terms and conditions of banking and realising that the entire system could potentially fail"
MOSTLY RIGHT customers are entitled to assume that govt will honour their guarantee for first £50K after that they are at risk
"The Government is at fault for spending beyond it's means - which is the prime cause of our deficit. If they cannot pay it back then they should not have borrowed it"
I AGREE
...on the other side of hypocrisy we have.....

"Lloyds were pushed into the deal, it wasn't their fault they weren't allowed to complete due dilligence - they were clearly misled"
PARTLY RIGHT there is a definite smell of shotgun marriage brokered by Gordon but ultimately Lloyds shoudl have done the DD
"The Airlines should have to pay out for the volcanic disruption because it wasn't their fault they didn't see what the EU regulation included in the reasons for delays"
I AGREE: airlines may not like the law but it is clear
"It wasn't the banks fault they got into trouble - the regulator, BoE or Government should have stepped in to show them where it was going wrong"
PARTLY RIGHT there is some aspects of govt policy that were clearly wrong; mark to mark accounting, BASEL II, or in US community reinvestment law
"The banking crash was caused by the mis-management of central bank interest rates - it wasn't the banks fault"
RUBBISH (as I think we both agree) the banks crashed because they mismanaged.

Not sure if this proves hypocracy

94. At 8:47pm on 28 Apr 2010, Chris wrote:

"I’m sure we will see that there will be stagnation, as it will become imposable for anyone to make a profit at the cost of someone’s loss"


Therein lies the problem. All trading tends to be a zero-sum game. All we managed to do over the last couple of decades is to talk-up real estate values, and all the "Banks" have done is increasingly switch their activities towards lending against said real estate.

When are we going to learn that real wealth creation only comes when we become more productive? It's the ability to achieve more in less time that's essential, and unless we start thinking about how were going to accomplish that we're fated to the next, and all the subsequent asset price bubbles. It doesn't matter how much we legislate, it won't fix anything - we've got to change attitudes and expectations, both of which are INCREDIBLY tough - lets face it, we'd all like to get rich the easy way but sadly that isn't going to happen for most of us.

Above all we need to elect political leadership that will help us understand and focus on REAL wealth creation.

94. At 8:47pm on 28 Apr 2010, Chris wrote:

I believe the worst thing a government can do is meddle with economics. In Adam Smith’s The Wealth of Nations... If the government steps in and over-regulates the market, I’m sure we will see that there will be stagnation, as it will become imposable for anyone to make a profit at the cost of someone's loss

Adam Smith's observation was that wealth is created at the point of a free, fair and informed transaction. The loaf of bread is more valuable to me than the money, the money is more valuable to the baker than the loaf of bread. We are both better off. The Invisible Hand that creates the Wealth of Nations is no more than the sum of all us decent citizens going about our ordinary business in our ordinary decent way.

Prudeboy #87 says "Fiddle or be fiddled". Is it an attempt at humour or sarcasm? The core activity in fiddling, or (deliberately) profiting at someone else's expense is simply theft. We are right, as a society, to legislate against such activities, investigate offenders and punish them.

I watched as much of the hearings as I could, before the repetition and obfuscation put me to sleep.

The four weak men from Goldman, briefed up to the eyeballs by Sullivan & Cromwell to patiently refuse to understand any question, apologise for poor memories and just focus on running the clock down was a huge indictment on the poor calibre of people in this industry. (Mind you -apart from Carl Levin- the senators didn't come it of it too well either)

Blankfein stuck doggedly to explaining one type of trade -the one where he is selling a second-hand clunker to an unsuspecting motorist- where he owes no loyalty whatsoever to the ('expert') customer; the problem was Levin was asking about another type of trade -where the customer is trusting Goldmans' expertise and probity when offered an investment opportunity, and expects Goldman to be looking after their client's interests. (Goldman shafted that customer as well, without compunction)

Blankfein tried at one point to explain an IPO for an oil company; an example where Goldman got everyone together, did due diligence, and set the price. (All as an honourable investment banker).

What he forgot to admit was that -allegedly- the price could be set subjectively way too high, customers could be sweet-talked into buying at the offer price, the directors and insiders could sell their stakeholdings immediately at a high price, and the share price having plummeted very quickly thereafter (at which point they could buy back).

Goldman are institutionally rapacious; they have to be culled and the regulations tightened enormously. In any other walk of life there would be no argument, this is fraud.

Don't moderate this out, this is just my opinion.
Free speech and all that.......

Regards,

96. At 10:31pm on 28 Apr 2010, Bernard wrote:

Above all we need to elect political leadership that will help us understand and focus on REAL wealth creation.

Quite so. It isn't rocket science. A cure for some disease, better formulation for ships' antifouling, reduced carbon emissions, fair and efficient banking services(!), warmer winter clothing, clean windows, comfort for the elderly - we do this stuff all day every day both at work as producers and at home as consumers. What's with all these people who think personal gain has to be at someone else's expense? It's puerile.

Why do we bother buying any financial investment?, they are a bunch of crooks and thats being kind. Much more prudent to keep the cash in our pocket or under the mattress.
Certainly not in a bank account where these villains can use it to generate them more wealth and then turn round to us when it goes pear shaped and say the gamble did not pay off!
Did we ever have a choice to say no?, not interested in the gamble!