OT: Why I am Leaving Goldman Sachs

[samsays]

http://www.nytimes.com/2012/03/14/opinion/why-i-am-leaving-goldman-sachs.html?_r=1&hp


Whether Greg Smith is bitter, honest - both or neither - culture has meant everything in terms of my happiness at work and our overall success in business (consulting industry)...important to remember...even as competition grows in all that we do

:beer:

[Louis]

Unfortunately, I doubt this will have any impact. There's too much money to be made. (short term)

[firerescuefin]

My undergrad is in finance...spent 2 years in Investment Banking, and decided after about 6 months much of the same, but my belief was that the problem was systemic, not company specific. Money and power corrupt....there really hasn't been much new under the sun for thousands of years.

This article was aimed at a couple of specific people, and they know who they are.

I wouldn't want to be a high net-worth advisor at Goldman this morning...especially if your clients already had a few questions.

[fiamme red]

So he's just discovered in 2012 that Goldman Sachs is morally bankrupt. Better late than never, I guess.

When is his book going to be published? :rolleyes:

[54ny77]

Wow.

Right on point.

My old firm blown up by same leadership strategy.

Hey, F U Stan O' Neal.

[Jaq]

Me no care! Me just want 12% average annual return paid out in COOKIES!!!!!

[William]

While I commend the man for leaving and voicing his knowledgeable experience on the current state of affairs at GS, this certainly didn't happen overnight. And, I'm sure he's walking away well padded from earnings gleaned from said practices in the latter years.






William

PS: Where is Teddy when you need him.

[goonster]

So he's just discovered in 2012 that Goldman Sachs is morally bankrupt.
I'm as eager to heap scorn on today's Wall Street as most.

However, a healthy, ethical financial industry that promotes efficient allocation of capital and supports steady long-term growth would actually benefit all of us.

This is a discussion very much worth having in the public sphere, imho, and the OWS populist clamoring from below, and gov't regulation (Dodd-Frank, lolz) are no substitute for some real soul-searching within the system.

[thenewguy11]

All the things he rings his hands over about taking advantage of customers, etc. were described by Michael Lewis in Liar's Poker way back in 1989 (fantastic book BTW). This is nothing new. As the saying goes, "Where are the customer's yachts?"

I will say it must be fun to resign and throw a grenade on your former employer from the pages of the NY Times opinion section though.

[fiamme red]

However, a healthy, ethical financial industry that promotes efficient allocation of capital and supports steady long-term growth would actually benefit all of us.I agree. But the current atmosphere on Wall Street is all about short-term profits.

I really doubt that Goldman Sachs has changed so much in the last 12 years, as the author says. It's more that as he's been promoted into more responsible positions, he's gained an insight into the inner workings of the company that he didn't have when he first started out there.

[laupsi]

Me no care! Me just want 12% average annual return paid out in COOKIES!!!!!

this method of paying out works well for Kevin of "The Office" too...

[PQJ]

I really doubt that Goldman Sachs has changed so much in the last 12 years, as the author says.

That was my initial reaction as well. But consider that the alleged cultural shift coincides to a degree with the repeal of Glass-Steagall, and it's not so far fetched. That little bit of deregulation is a huge reason for what went on in the go go 00s.

[54ny77]

I-banks became giant prop desks/hedge funds, in every product category, and arbed their own clients.

That's because at least one of the schlubs everyone sat next to and worked side by side with 18-20 hours a day left 3 years prior to go to these things called hedge funds, which shuffled the decks in their favor and made a lot of money.

The chumps who remained said, "Hey, me too." Eventually, those chumps ran the firms. And the rest, as they say, is history.

I'm as eager to heap scorn on today's Wall Street as most.

However, a healthy, ethical financial industry that promotes efficient allocation of capital and supports steady long-term growth would actually benefit all of us.

This is a discussion very much worth having in the public sphere, imho, and the OWS populist clamoring from below, and gov't regulation (Dodd-Frank, lolz) are no substitute for some real soul-searching within the system.

[thenewguy11]

Goldman Sachs doesn't do commercial banking so the repeal of Glass-Steagall doesn't play into it for them (Citi is another story I suppose). I think the real cultural milestone came when the firm went public in 1999. The partnership structure forced a longer term mentality on the senior management, which is lacking in the public arena with a quarterly focus.

[goonster]

the alleged cultural shift coincides to a degree with the repeal of Glass-Steagall
That, and taking the company public. (IPO was in '99)

[54ny77]

True.

When liabilities that are super-levered can be pawned off on clients (as opposed to potentially causing that house in the Hamptons to be seized in personal bankruptcy), the candy jar lid came off completely.

Goldman Sachs doesn't do commercial banking so the repeal of Glass-Steagall doesn't play into it for them (Citi is another story I suppose). I think the real cultural milestone came when the firm went public in 1999. The partnership structure forced a longer term mentality on the senior management, which is lacking in the public arena with a quarterly focus.

[Ahneida Ride]

What's the big deal ?

We have a private central bank formed in 1913. It creates out $ outa
thin air and charges the US taxpayer interest on it ...



When these private bank "notes" hit the commercial banks ....
They, using the Ponzi Scheme they call fractional "reserve"
create an additional 9 times that amount (also outa thin air and
also charge interest on nothing)

:crap:

History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance. -James Madison

The real truth of the matter is,as you and I know, that a financial
element in the large centers has owned the government ever since
the days of Andrew Jackson… -Franklin D. Roosevelt
(in a letter to Colonel House, dated November 21, 1933)


“The study of money, above all other fields in economics, is one in which complexity is used to disguise truth or to evade truth, not to reveal it. The process by which banks create money is so simple the mind is repelled. With something so important, a deeper mystery seems only decent.” John Kenneth Galbraith (1908- ), former professor of economics at Harvard, writing in ‘Money: Whence it came, where it went’ (1975).


“Money is a new form of slavery, and distinguishable from the old simply by the fact that it is impersonal – that there is no human relation between master and slave.” Leo Tolstoy, Russian writer.


“The few who understand the system will either be so interested in its profits or be so dependent upon its favours that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests.” The Rothschild brothers of London writing to associates in New York, 1863.

[Fixed]

he probably doesn't need to work any longer
cheers

[Elefantino]

What will change?

Nothing.

What's amazing to me is that the world's economy was wrecked by a group of people whose sole "product" was the ability to alchemize profits where none should have existed and yet it was no one's fault, just the fault of the "system" that created men like Dick Fuld and Angelo Mozelli.

My son was in the mortgage business, briefly. He wrote a loan for a house that people couldn't afford and took five grand out of the back end, although he was told by his mgr he could have taken more. He then quit with an ulcer and now is happily making movies.

The manager moved into a nice, riverfront home.

http://images.sodahead.com/polls/001030235/Proud_to_be_an_American_xlarge.jpeg

[jimsantos]

.

[1centaur]

When Spanish house prices were inflated to the moon before the credit crisis, was it the fault of the Dick Fulds of the world? Massive global liquidity sought outlets and demand for returns conflicted with that; leverage ensued and then crumbled. Yes indeed there was plenty of greed over character in business, finance, governments, and even individuals and unions. Standards get lax over time when people have not lived through the consequences of their lack. Finger pointing at one or two bad actors out of many is ultimately counterproductive and naive. Call it the system if you want, call it culture and character too, but it's not inherent in Wall Street or Main Street as institutions, it's very widespread.

Speaking of culture, I'm scratching my head at the thought that the Goldman he thought existed when he joined actually did exist. I think he heard the PR from higher ups and bought it, and then he grew up. Sell side culture has not been that refined or thoughtful in the last 30 years (I'll withhold judgment on prior periods). We on the buy side EXPECT the sell side to do what they can to sell their stuff to us and make money; we know they're there for them, not us. Not just Goldman but every sell side firm. It's our job to protect client money from our sell side coverage as best we can. Would it be nicer if everybody was in it together in a profit sharing kind of way? I suppose, but let's be realistic, the culture of the country and the world is not much that way. There are individuals on the sell side who through their own upbringing are more helpful and less naked in their ambition (thanks Mom & Dad) but a lot of people are not brought up that way. If our culture gets more cooperative, Goldman will too, but until then, Goldman is Citi is B of A is JPM is Fred the guy selling a car and Tony the guy buying a car. Regulation has to adapt to the change in culture as far less is implicit than perhaps it was 60 years ago.

Shared values - it's not just an issue for a firm but for all of us. Let's hear a politician try that out without being laughed at by mainstream media.

[goonster]

Call it the system if you want, call it culture and character too, but it's not inherent in Wall Street or Main Street as institutions, it's very widespread.

The upper echelons of Wall Street should be held to higher standards of culture and character than the lowest common denominator in our society. Their standards for intelligence, productivity and compensation are higher than average also, are they not?

[CunegoFan]

When Spanish house prices were inflated to the moon before the credit crisis, was it the fault of the Dick Fulds of the world? Massive global liquidity sought outlets and demand for returns conflicted with that; leverage ensued and then crumbled. Yes indeed there was plenty of greed over character in business, finance, governments, and even individuals and unions. Standards get lax over time when people have not lived through the consequences of their lack. Finger pointing at one or two bad actors out of many is ultimately counterproductive and naive. Call it the system if you want, call it culture and character too, but it's not inherent in Wall Street or Main Street as institutions, it's very widespread.

Speaking of culture, I'm scratching my head at the thought that the Goldman he thought existed when he joined actually did exist. I think he heard the PR from higher ups and bought it, and then he grew up. Sell side culture has not been that refined or thoughtful in the last 30 years (I'll withhold judgment on prior periods). We on the buy side EXPECT the sell side to do what they can to sell their stuff to us and make money; we know they're there for them, not us. Not just Goldman but every sell side firm. It's our job to protect client money from our sell side coverage as best we can. Would it be nicer if everybody was in it together in a profit sharing kind of way? I suppose, but let's be realistic, the culture of the country and the world is not much that way. There are individuals on the sell side who through their own upbringing are more helpful and less naked in their ambition (thanks Mom & Dad) but a lot of people are not brought up that way. If our culture gets more cooperative, Goldman will too, but until then, Goldman is Citi is B of A is JPM is Fred the guy selling a car and Tony the guy buying a car. Regulation has to adapt to the change in culture as far less is implicit than perhaps it was 60 years ago.

Shared values - it's not just an issue for a firm but for all of us. Let's hear a politician try that out without being laughed at by mainstream media.
I tend to think that it is the fault of the Dick Fulds. Massive liquidity is only half the equation. The other half is massive fraud. Without the fraud returns would have declined as too much money chased too few opportunities. The fraud is what maintained the continuing scheme.

The U.S. has experienced a complete breakdown of the enforcement of law and now operates with a scapegoat justice system where a few people are slaughtered to maintain the illusion that the law is being enforced. Meanwhile the rest of the crooks roll on and laugh at the poor bastards who are part of the small small percentage unlucky enough to get caught.

[firerescuefin]

duplicate post.

[firerescuefin]

I tend to think that it is the fault of the Dick Fulds. Massive liquidity is only half the equation. The other half is massive fraud. Without the fraud returns would have declined as too much money chased too few opportunities. The fraud is what maintained the continuing scheme.

The U.S. has experienced a complete breakdown of the enforcement of law and now operates with a scapegoat justice system where a few people are slaughtered to maintain the illusion that the law is being enforced. Meanwhile the rest of the crooks roll on and laugh at the poor bastards to are part of the small small percentage unlucky enough to get caught.

Well put...When those at the top essentially own government (Ultra Wealthy/Lobbyist,/Special Interest Donors), and essentially the justice system, the justice we see is merely a facade to keep the masses believing that justice is a genuine concept.

I've become more jaded/realistic in the last 6 years than the first 32 combined. Human nature has never and will never change...get what you can, when you can and F%$& everyone else.

As a dad it's hard to raise children to not play using those standards, while teaching them to be streetwise...and that those are the rules that are being played by the majority of the players...from Fire Chiefs, to City Councilman, to Senators, to CEOs.

[verticaldoug]

I tend to think that it is the fault of the Dick Fulds. Massive liquidity is only half the equation. The other half is massive fraud. Without the fraud returns would have declined as too much money chased too few opportunities. The fraud is what maintained the continuing scheme.

The U.S. has experienced a complete breakdown of the enforcement of law and now operates with a scapegoat justice system where a few people are slaughtered to maintain the illusion that the law is being enforced. Meanwhile the rest of the crooks roll on and laugh at the poor bastards to are part of the small small percentage unlucky enough to get caught.

It was way beyond Dick Fuld and Joe Gregory. You can thank people like Senator Chris Dodd taking VIP loans from Angelo Mozilo and Countrywide. Or AIG BOD forcing Hank Greenberg to resign in 2005 under the threat from Eliot Spitzer. Greenberg probably would have been more suspect of the assumptions of the financial products unit. Over this time period, I believe Fannie/Freddie were the biggest spenders on lobbyists. The final nail was when Hank Paulson arrogantly thought the market was prepared for a Lehman default. The legal entities with multiple counterparties alone were so complex, the market had no chance. More importantly, Lehman had been bailed out in '98 during the Thai/Russia debt crisis and Dick Fuld incorrectly assumed the government would blink.

Light my hair fire.

Shakespeare knew all great stories are either tragedies or comedies. This is both.

[Viper]

When Spanish house prices were inflated to the moon before the credit crisis, was it the fault of the Dick Fulds of the world? Massive global liquidity sought outlets and demand for returns conflicted with that; leverage ensued and then crumbled. Yes indeed there was plenty of greed over character in business, finance, governments, and even individuals and unions. Standards get lax over time when people have not lived through the consequences of their lack. Finger pointing at one or two bad actors out of many is ultimately counterproductive and naive. Call it the system if you want, call it culture and character too, but it's not inherent in Wall Street or Main Street as institutions, it's very widespread.

Speaking of culture, I'm scratching my head at the thought that the Goldman he thought existed when he joined actually did exist. I think he heard the PR from higher ups and bought it, and then he grew up. Sell side culture has not been that refined or thoughtful in the last 30 years (I'll withhold judgment on prior periods). We on the buy side EXPECT the sell side to do what they can to sell their stuff to us and make money; we know they're there for them, not us. Not just Goldman but every sell side firm. It's our job to protect client money from our sell side coverage as best we can. Would it be nicer if everybody was in it together in a profit sharing kind of way? I suppose, but let's be realistic, the culture of the country and the world is not much that way. There are individuals on the sell side who through their own upbringing are more helpful and less naked in their ambition (thanks Mom & Dad) but a lot of people are not brought up that way. If our culture gets more cooperative, Goldman will too, but until then, Goldman is Citi is B of A is JPM is Fred the guy selling a car and Tony the guy buying a car. Regulation has to adapt to the change in culture as far less is implicit than perhaps it was 60 years ago.

Shared values - it's not just an issue for a firm but for all of us. Let's hear a politician try that out without being laughed at by mainstream media.

You my friend are a rare bird. A person from Massachussetts with an honestly open perspective when it comes to politics, capable of easily displaying three-dimensional thought. I do not by any means intend here to insult the state of MA, it is a nice place. I do mean to compliment you.

My interaction with many of those in Mass is hearing and seeing just one side, one view and the sound emiting from one horn when it comes to off-topic (aka p*litics).

That said, when it comes to the crash, Recession/Depression, it's not merely the banks to point the finger at. Many politicians were the salesmen and saleswomen with their mantras, "A home for every American and an American for every home." President Clinton pushed along this line hard (there are YouTube videos of the Clintons at the pulpit of Baptist Churches in the South telling the folks in 1995, "Ya'll should own houses!" while they ran for re-election) Bush echoed it and folks like ACORN, Obama, Senator Dodd and Barney Frank helped make it happen. Dodd was a dudd who lost his job because of this crisis and Frank is now stepping down (I believe he should have at the same time Dodd walked away). Amazing how folks on one side of the aisle never look at Dodd/Frank as major blunders and failures.

Moreoever, I never blame a bank for a loan I signed on the dotted line. I don't blame a politician for that same loan, selling me an idea or the ink. I am an adult. My mistakes are always my own and my accomplishments are there for me to look around and thank family and friends.

Compelling and telling:

http://bostonherald.com/news/politics/view/2011_0526frank_knocked_on_his_fannie_rep_admits_to _helping_lover_land_job_at_mortgage_giant_in_91

http://www.uspoliticsonline.com/economic-issues/61045-barney-frank-admits-homeownership-push-started-under-clinton-also-says-lie.html

http://winteryknight.wordpress.com/2010/10/15/democrat-barney-frank-admits-his-role-in-causing-the-recession/

The most recent issue that intrigues me is 'Student Loan Debt Forgiveness'.

When will adults accept accountability for their actions including the purchase of homes, cars and debt? While I do see a very strong case that education is overpriced, I struggle with the concept debt should be erradicated. Perhaps as the D0E has offered, Student Debt can be cut down slightly with certain criteria (some criteria like having to teach to poor or underprivileged seems somewhat odd to me, shouldn't a teacher simply teach well?):

http://studentaid.ed.gov/PORTALSWebApp/students/english/cancelstaff.jsp

This article offers deeper perspective:

http://www.freakonomics.com/2011/09/19/forgive-student-loans-worst-idea-ever/


:beer:

[CunegoFan]

It was way beyond Dick Fuld and Joe Gregory. You can thank people like Senator Chris Dodd taking VIP loans from Angelo Mozilo and Countrywide. Or AIG BOD forcing Hank Greenberg to resign in 2005 under the threat from Eliot Spitzer. Greenberg probably would have been more suspect of the assumptions of the financial products unit. Over this time period, I believe Fannie/Freddie were the biggest spenders on lobbyists. The final nail was when Hank Paulson arrogantly thought the market was prepared for a Lehman default. The legal entities with multiple counterparties alone were so complex, the market had no chance. More importantly, Lehman had been bailed out in '98 during the Thai/Russia debt crisis and Dick Fuld incorrectly assumed the government would blink.

Light my hair fire.

Shakespeare knew all great stories are either tragedies or comedies. This is both.
Yeah. You are describing systemic corruption where the rule of law has not just broken down but illegal acts have become a business expense just like what is spent paying politicians to twist the laws to suit an organization's most profitable business model. Americans grow up with fairy tales about how we are a nation of laws, not of men, and that is what set us apart from other countries. It has become more and more obvious that that is a crock. It is propaganda for the masses while the elites operate under a different set of rules, or lack thereof.

It is not just finance. It's everything. How can you expect people to do the right thing when they can look at someone like Lance Armstrong and think, "That's the way you do it. Cheat your way to the top. If anyone questions you, look 'em straight in the eye and lie about it." Or they look at celebrity bimbos like Paris Hilton whose only accomplishment is being famous for being famous. It has a corrosive effect on society when people cannot see that honest work is the way to get ahead.

[verticaldoug]

Yeah. You are describing systemic corruption where the rule of law has not just broken down but illegal acts have become a business expense just like what is spent paying politicians to twist the laws to suit an organization's most profitable business model. Americans grow up with fairy tales about how we are a nation of laws, not of men, and that is what set us apart from other countries. It has become more and more obvious that that is a crock. It is propaganda for the masses while the elites operate under a different set of rules, or lack thereof.

It is not just finance. It's everything. How can you expect people to do the right thing when they can look at someone like Lance Armstrong and think, "That's the way you do it. Cheat your way to the top. If anyone questions you, look 'em straight in the eye and lie about it." Or they look at celebrity bimbos like Paris Hilton whose only accomplishment is being famous for being famous. It has a corrosive effect on society when people cannot see that honest work is the way to get ahead.

Yes, very corrosive at all levels. The spread of pension spiking by public workers is a prime example. Everyone is now out to get theirs.

I guess we can just apply broken window theory to all of this...

[Viper]

Yes, very corrosive at all levels. The spread of pension spiking by public workers is a prime example. Everyone is now out to get theirs.

I guess we can just apply broken window theory to all of this...

All this has happened before.
And all of this will happen again.
~Cylon proverb

And: www.youtube.com/watch?v=uACBMyrV2Bs

Glenn Frey. Interestingly I was never a huge Eagles fan. Then one day at sunset, summer of 1989 as a squire Lifeguard doing the evening sit (6-8pm) I heard a boom box (back when it was the opposite of nanoPod or iPods) on the beach playing Hotel California. Began to appreciate them. Then I got into Don Henley and Frey once they broke up.

[PQJ]

If Mr. Smith is just now waking up to this, he can't possibly be as smart as the people who hired him thought he was; too bad that never stopped them from handing him what were no doubt very generous bonuses. Good for that little capitalist, I 'spose.

It's a fact - the pace at which $$ and greed are corrupting and ruining us is accelerating. And it isn't in our (American) DNA to reverse course.

[godfrey1112000]

he got his money from GS, Stock Options and the 30 pieces of Silver,

now he writes an article, now he has morals,

Must have been booted out "club"

We as investors lost trillions while the made trillions, sounds like a bunch of bookies

I never use four letter words and bank is one of them

[54ny77]

What probably put him over the edge was the firm dropping the daily late-night work meal allowance to $25 from $30, and free car service only if you're working past 11 pm vs. the previous 9pm... :banana:

If Mr. Smith is just now waking up to this, he can't possibly be as smart as the people who hired him thought he was; too bad that never stopped them from handing him what were no doubt very generous bonuses. Good for that little capitalist, I 'spose.

It's a fact - the pace at which $$ and greed are corrupting and ruining us is accelerating. And it isn't in our (American) DNA to reverse course.

[Climb01742]

a friend of mine is a lawyer who negotiates contracts in hollywood. he says every good lawyer in town enters into negotiations with the explicit, understood goal of getting their client every last dime they can without a care in the world if they screw they other side. actually, screwing the other side is considered a pleasant bonus. just two sharks being sharks. and everyone knows what the game is.

not sure how much of that culture i admire but i do admire their honesty about the ground rules of the transactions. no spin, no false fig leaf of nobility. they're just sharks looking after one side.

what i object to about wall street is their lack of honesty about their greed. don't cloak it in pious homilies about putting the client's best interests first. charles merrill built an incredible company on that premise and based on the letters of his i have read and the research i did in my professional life, i think charlie may have actually believed and lived it. but how many others on the street did, even 50 years ago?

if you aren't going to care what happens to the client who buys the crap you sell, then just don't say you are...which is exactly the lie that lloyd blankfein was telling today.

i wish wall street was different. but if it isn't going to be different, and if our gov't is going to keep letting wall street be wall street as long as the campaign contribution flow in, then at least be honest about being sharks and not caring if you screw your clients. don't be a shark dressed like a guppy.

this is a low bar but...maybe wall street can be as honest as hollywood lawyers?

[PQJ]

What probably put him over the edge was the firm dropping the daily late-night work meal allowance to $25 from $30, and free car service only if you're working past 11 pm vs. the previous 9pm... :banana:

I totally feel for him. As a corporate attorney at a big firm in NYC (also known as a monkey fcuk!ng scribe) during the go go OOs, we had a tough time adjusting to the post-crash realignment that changed car service from 7pm to 9pm and imposed an actual limit on dinners. And then we had to suffer the indignity of limits on summer lunch reimbursements. How in hell did they expect us to impress the noobs with a $30/pp cap at midtown Manhattan's finest? The gall, I tell ya. :crap:

[Viper]

a friend of mine is a lawyer who negotiates contracts in hollywood. he says every good lawyer in town enters into negotiations with the explicit, understood goal of getting their client every last dime they can without a care in the world if they screw they other side. actually, screwing the other side is considered a pleasant bonus. just two sharks being sharks. and everyone knows what the game is.

not sure how much of that culture i admire but i do admire their honesty about the ground rules of the transactions. no spin, no false fig leaf of nobility. they're just sharks looking after one side.

what i object to about wall street is their lack of honesty about their greed. don't cloak it in pious homilies about putting the client's best interests first. charles merrill built an incredible company on that premise and based on the letters of his i have read and the research i did in my professional life, i think charlie may have actually believed and lived it. but how many others on the street did, even 50 years ago?

if you aren't going to care what happens to the client who buys the crap you sell, then just don't say you are...which is exactly the lie that lloyd blankfein was telling today.

i wish wall street was different. but if it isn't going to be different, and if our gov't is going to keep letting wall street be wall street as long as the campaign contribution flow in, then at least be honest about being sharks and not caring if you screw your clients. don't be a shark dressed like a guppy.

this is a low bar but...maybe wall street can be as honest as hollywood lawyers?

The 2004 movie 'Closer' was to me, fairly lame. I can't stand Jude Law. Anyway, it narrates four people, two couples who hose eachother down with lies and bad love. There is one line that I thought of from the flick, reading your post:

Dan: When I get back, please tell me the truth.
Alice: Why?
Dan: Because I'm addicted to it. Because without it, we're animals. Trust me.

Without the truth my friend, we are animals. And the liar thinks he/she is the zoo keeper, in charge. The liar can't see the bars. He/she is the one trapped in the cage.

Don't pee on my leg and tell me it's raining.
Don't let your dog cr*p on my lawn and tell me it's fertilizer.
Don't lie to me about who's in your bed and tell me you're doing me a favor by covering it up.
Don't cook for someone else and ask me to clean the pots and pans.

Those come to mind.

George Carlin on euphemisms # 15:

http://www.iceboxman.com/carlin/pael.php#track15

"People don't run out of dreams. People just run out of time":

http://www.youtube.com/watch?v=c_7Ch1jSN-k

If I run in 2020, I might dust Glenn Frey off and ask him to be at my Convention.

note: this message brought to you by ViperPac 2020, a non-profit org (but please donate lots of cash).

:beer:

[1centaur]

I guess people will believe what they believe, but the truth as I see it is that:

The super elite do not own government (Herb Greenberg was an example) but they do get an audience. Politicians do whatever works for them, donations or not.

Fraud was not the other half of the equation in the global financial crisis. By fraud I mean criminal intent combined with planned and executed actions to effectuate that intent. Even aside from there being far more than two causes for the crisis (among them stupidity, poor regulation, lack of accurate ratings in a financial system that demands ratings, inexperience, political pressure that may have been well-intentioned but created unintended consequences, and lack of analytical foresight by those who needed it), I would propose personal indifference as a prime driver of the problems to come. Because housing prices kept going up, and liquidity from the shadow banking system was ubiquitous, it became easy for incautious (average) people to borrow too much, lend too much, buy highly rated structured products without doing independent analysis, create mispriced insurance in the form of derivatives and happily (Goldman) trade this stuff back and forth for a spread without sufficient capital to sustain a major hit. To do otherwise was to let history trample your sorry, cautious ass because who knew how long the party would last. Red flags were raised in 2003, 2004, 2005, 2006, and then the blow-up came in 2007 structured mortgage products. That's a lot of years to sit back and be sure you are right and not make a living (mortgage brokers, packagers, salesmen, traders, raters, investors, mutual funds) while all around you are living the good life, or to not buy an investment property or take out a second mortgage and buy a flat screen, etc., etc. Those are the facts, and fraud was a small part of that fact pattern vs. indifference, all the way to Dick Fuld who saw his balance sheet with blinders on and only had limited mental capacity for the big picture (yes he made bad intentional choices from what I've read, but hubris drove him far more than criminal intent over the years). Fraud on a massive scale is far too complex to pull off; tunnel vision indifference is the barking dog.

As for brokers screwing clients, the vast majority of what we're talking about here are institutional buyers with sophisticated analysts and PMs who are paid to know what they are buying. It does not pay Goldman to screw clients in the sense of selling them crap, it pays Goldman to maximize profits with whatever its client base wants to buy. (There's a legitimate question of sustainability here, I recognize.) If Goldman had known what was coming they would not have been taken to the brink of extinction - they are only slightly better at the game than most. "Screwing" is a term that needs to be defined. Most Goldman clients of 2007 are Goldman clients today. We were wary then and we're wary now, sometimes voices are raised, but we both gain from the relationship in the aggregate. While I don't know what Blankfein has said lately that might be designed to appease the sound-bite people, what he said to Carl Levin was generally fair and accurate - Goldman is in the business of making a spread and being long and short is part of that business; being short is not "betting against clients" any more than being long is betting with clients, it's just a position designed to make a spread and a risk that needs to be monitored. If Blankfein is now saying Goldman's there for the customer, I think it's fair to say the customers he has are barely paying attention and don't care anymore than if Wal-Mart said they're here for the customer. I can't speak for municipalities here, where I think there needs to be an affirmative duty to help clearly unsophisticated institutions, but most of the client base expects to take care of themselves by trying to pay the lowest spread possible while Goldman does the opposite.

As for the thought that Wall Street leaders are smarter and better educated than most so should live at a higher standard, I'd caution that living such a standard and thereby managing an underperforming stock would cause all those lesser educated and lower IQ people to throw the guy out and get a better CEO. Human nature, including indifference, limited capacity to perceive long trends and outcomes, and fear of competition is not eliminated by IQ points or education. The smartest guys don't get to be CEOs anyway because their IQ points overwhelm their social skills.

[Climb01742]

As for brokers screwing clients, the vast majority of what we're talking about here are institutional buyers with sophisticated analysts and PMs who are paid to know what they are buying. It does not pay Goldman to screw clients in the sense of selling them crap, it pays Goldman to maximize profits with whatever its client base wants to buy.

have you read michael lewis' 'the big short'? in his telling, a great many people in positions where they were paid (quite well) to know, did not in fact understand what they were buying or selling. and when goldman was unwinding their mortgage backed securities positions as the crisis approached, can you truly say they didn't dump crap on clients too uniformed to know?

i do buy that there are many people like you in the business (thank god) but i'm afraid i don't buy that there aren't also a fair number of ethically-devoid slimeballs.

i know someone who, in a past life, designed quite esoteric financial instruments and by his telling, he was often asked to design things that at the very least you wouldn't want your mother knowing you designed and gave compelling evidence to the position that legal and ethical aren't the same things. and this dude had no shortage of clients asking him to skirt that line.

[54ny77]

People "gettin' what they can" exists in all walks of life. My father had a triple bypass some time not so long ago. Short while later during recovery one of the cardiologists comes in and says, "Oh you need a pacemaker, here's the brand and you need it. Have a nice day." (I'm paraphrasing, but that was the gist of it.)

Later in the day the chief surgeon comes in, a real crusty old school guy (and highly reputable doc who actually performed the surgery), and we tell him that another cardiolgist said to get a pacemaker ASAP. Chief doc says that that other doc is full of s&$%!, he's trying to make quota for [pacemaker manufacturer]. And he wasn't joking either.

[wooly]

That article made me wanting more.

[54ny77]

http://www.thedailymash.co.uk/

My favorite: "What are three quick ways to become a leader? a) Execute on the firm's 'axes', which is Empire-speak for persuading your clients to invest in 'prime-quality' residential building plots on Alderaan that don't exist and have not existed since we blew it up...."

:D :hello:

That article made me wanting more.

[wooly]

It also reminded me of my 6 months at Enron in 1999. The interview process was 10 months long and I met every senior leader in the firm besides Skilling and Lay. They were written up on every major business rag as the most cutting edge firm. The honeymoon period was short but when the kimono opened it was ugly. It was the most unhealthy corp culture I'd ever seen and after three months I knew it wasn't for me. 2.5 years later (or so) the company went under and it was no surprise to me.

[wooly]

http://www.thedailymash.co.uk/

My favorite: "What are three quick ways to become a leader? a) Execute on the firm's 'axes', which is Empire-speak for persuading your clients to invest in 'prime-quality' residential building plots on Alderaan that don't exist and have not existed since we blew it up...."

:D :hello:

That is some funny shi'ite.

[Viper]

People "gettin' what they can" exists in all walks of life. My father had a triple bypass some time not so long ago. Short while later during recovery one of the cardiologists comes in and says, "Oh you need a pacemaker, here's the brand and you need it. Have a nice day." (I'm paraphrasing, but that was the gist of it.)

Later in the day the chief surgeon comes in, a real crusty old school guy (and highly reputable doc who actually performed the surgery), and we tell him that another cardiolgist said to get a pacemaker ASAP. Chief doc says that that other doc is full of s&$%!, he's trying to make quota for [pacemaker manufacturer]. And he wasn't joking either.

Big Pharma.
We save lives.
It's like Mother Ocean telling you "I keep you floating."
Just don't get tired treading water.
That same ocean kills.

[sg8357]

We as investors lost trillions while the made trillions, sounds like a bunch of bookies

Bookies and 3 card Monte dealers are honest workmen, not to be confused
with bankers. Like the fellow said, if you are an adult
and your lawyers aren't as smart as their lawyers, expect to get taken.

The OP ed guy is a whiner, who apparently has never read a bio of
JP Morgan or Rockefeller, real capitalists, who knew how to fix the game,
so they would win.

[Elefantino]

If Wall Street isn't reformed, we're screwed.

If Wall Street is reformed, we're screwed.

Basically, we're screwed.

Bottom line in this corner: Try to earn money, save wisely, try not to turn it into fool's gold, buy a bike occasionally, ride lots, love more, be happy.

The rest is a stroke waiting to happen.

[akelman]

Bottom line in this corner: Try to earn money, save wisely, try not to turn it into fool's gold, buy a bike occasionally, ride lots, love more, be happy.

The rest is a stroke waiting to happen.

Any time you want to get a beer, just let me know. It'll be on me, okay?

[1centaur]

Climb: I've read excerpts. And I've read plenty from the media on the topic, much of it spun - no attempt at evenhandedness in the quest of a juicy sounding narrative that publishers will buy, which perhaps ironically mirrors the lack of evenhandedness of which Wall Street is accused.

I think there remains a legitimate question that will not be answered on this cycle: are professional investors so unqualified to understand new investment products that they should be treated like retail investors (moms and pops) and thereby pretty much denied the products because the fiduciary hurdle is too high? That's an answer neither side will lobby for but may actually have merit.

Not having read the book I am not sure how Goldman could have crapped on their clients in unwinding their mortgage positions anymore than anybody did or does selling stuff they don't like at whatever price the market will bear. We don't tell Goldman what our analyst says when we sell them stuff; the presumption is on the buyer to do the due diligence. Where great disparities in information are presumed (houses; cars) there may be laws on full disclosure (or not; in some states you have to ask about flaws when buying a house), but on investment products where SEC documents exist to define structure and the portfolio contents of MBS are defined in ways that both sides accept, the playing field is even enough, even if some buyers don't make the effort they should.

[cdimattio]

...Most Goldman clients of 2007 are Goldman clients today...

The infamous Wall Steet partnerships are dead and we are left with a handful of banks that are too big to fail. There are botique advisory firms and other niches, but how many real alternatives to Goldman exist? With the example of MF Global, I do not believe the current small club of behemoths will be expanding any time soom.

The op-ed piece in the Times speaks to many of the same issues raised by the infamous 'Vampire Squid' characterization in Rolling Stone. Forget the distraction about some revered "culture" changing. The same culture has been present for years.

The real concern is the size and systemic risk present today and paired with that same culture. The systemic risk introduced from joining Commercial Banking with Investment Banking and other high risk activities is of concern to all of us.

[William]

Bookies and 3 card Monte dealers are honest workmen, not to be confused
with bankers. Like the fellow said, if you are an adult
and your lawyers aren't as smart as their lawyers, expect to get taken.

The OP ed guy is a whiner, who apparently has never read a bio of
JP Morgan or Rockefeller, real capitalists, who knew how to fix the game,
so they would win.


Reminds me of poker: If you're playing at the table and you don't know who the sucker is ............it's you.




William

[Rueda Tropical]

I think there remains a legitimate question that will not be answered on this cycle: are professional investors so unqualified to understand new investment products that they should be treated like retail investors (moms and pops) and thereby pretty much denied the products because the fiduciary hurdle is too high? That's an answer neither side will lobby for but may actually have merit.

If no one had to pay the price for their folly- then sure let them invest in any way or form they want ( and go broke if they are wrong ). But when you pile in the leverage, a risk miscalcualation by a big investment house or hedge fund can wreck the entire economy. So we all get to pay the price for financial firms that are to big to fail. So the question has nothing to do with their qualifications or smarts. Things inevitably do not go as planed. How much risk do you want to expose society to for the benefit of a tiny group of financial speculators?

If you want to race on the track and risk it all pushing the envelope? Go for it - if you crash and burn it's you who pays the price. But racing on public roads where you can take out my family if you screw up? No way.

[Viper]

Folks, it's much worse than we think:

http://www.thedailymash.co.uk/index.php?option=com_content&task=view&id=5007&Itemid=81

:beer:

Why I am leaving the Empire, by Darth Vader

TODAY is my last day at the Empire.

'I no longer have the pride, or the belief' After almost 12 years, first as a summer intern, then in the Death Star and now in London, I believe I have worked here long enough to understand the trajectory of its culture, its people and its massive, genocidal space machines. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.

To put the problem in the simplest terms, throttling people with your mind continues to be sidelined in the way the firm operates and thinks about making people dead.

The Empire is one of the galaxy's largest and most important oppressive regimes and it is too integral to galactic murder to continue to act this way. The firm has veered so far from the place I joined right out of Yoda College that I can no longer in good conscience point menacingly and say that I identify with what it stands for.

For more than a decade I recruited and mentored candidates, some of whom were my secret children, through our gruelling interview process. In 2006 I managed the summer intern program in detecting strange disturbances in the Force for the 80 younglings who made the cut.

I knew it was time to leave when I realised I could no longer speak to these students inside their heads and tell them what a great place this was to work.

How did we get here? The Empire changed the way it thought about leadership. Leadership used to be about ideas, setting an example and killing your former mentor with a light sabre. Today, if you make enough money you will be promoted into a position of influence, even if you have a disturbing lack of faith.

What are three quick ways to become a leader? a) Execute on the firm's 'axes', which is Empire-speak for persuading your clients to invest in 'prime-quality' residential building plots on Alderaan that don't exist and have not existed since we blew it up. b) 'Hunt Elephants'. In English: get your clients - some of whom are sophisticated, and some of whom aren't - to tempt their friends to Cloud City and then betray them. c) Hand over rebel smugglers to an incredibly fat gangster.

When I was a first-year analyst I didn't know where the bathroom was, or how to tie my shoelaces telepathically. I was taught to be concerned with learning the ropes, finding out what a protocol droid was and putting my helmet on properly
so people could not see my badly damaged head.

My proudest moments in life - the pod race, being lured over to the Dark Side and winning a bronze medal for mind control ping-pong at the Midi-Chlorian Games - known as the Jedi Olympics - have all come through hard work, with no shortcuts.

The Empire today has become too much about shortcuts and not enough about remote strangulation. It just doesn’t feel right to me anymore.

I hope this can be a wake-up call. Make killing people in terrifying and unstoppable ways the focal point of your business again. Without it you will not exist. Weed out the morally bankrupt people, no matter how much non-existent Alderaan real estate they sell. And get the culture right again, so people want to make millions of voices cry out in terror before being suddenly silenced

[Elefantino]

I guess this means Luke was right?

[Viper]

I guess this means Luke was right?

Scully - Why I left X-Files.
Battlestar Galactica's Starbuck - Why I left humanity
JAWS - Why I left Amity
Demi Moore - Why I left rehab
Lindsey Lohan - Why I can't leave rehab
Clint Eastwood - Why you can't go ahead and make my day
Chief Brody - Why Don't I Get to Drive the Boat?
Alberto Contador - Why I can't stop eating Spanish beef
Mulder - Why I BELIEVE I Can't Leave X-Files
X-Files' Pentaverate - Why our Kung Fu is better than Yours
Spock - Why I gave up Celibacy for Uhura
X-Files' Cancer Man - Why I finally gave up Marlboros (and switched to Newports)
Hooper - Why I Can Count Money and Kill Sharks
Britney Spears - Why I need $3,400.00 a Year for Birth Control and How You Should Know the Difference Between a Real Sl*t and a Real Ho.
Mitt Romney - Why I can't Quit Being Rich
Obama - Why You Fools Think I'm Poor (but I aint!).
Lion-O - Why I Can't Give Up the Sword of Omen
Quint - Why I Floored the Throttle of my Diesel on my Vessel the Orca, Siezed my Engine and Had a Little Drink About an Hour Ago.

[wasfast]

I watched "Inside Job" recently. It found it insightful. The writer seems interested in finding out what why we got into the financial mess we're in. I won't claim he's 100% right but there are aspects you can't deny were iffy
When someone is pushing for you to buy known bad product on the one hand and betting against that very sale, things are very messed up.

Overview on wikipedia:

http://en.wikipedia.org/wiki/Inside_Job_(film)

I've not had great experience in the markets (the 401K portion of the film pretty much sums up me) and I really got burned (for cash not leveraged debt) in the current real estate mess. Where else do you go.......mattress?

[Viper]

"Government is an id-ridden, newborn baby." I quote it often, very appropriate. "Government is like a baby. An alimentary canal with a big appetite at one end and no sense of responsibility at the other."

Remember: "How and Who are the same words...just spelled differently"
~(Viper) (and you can quote me)

I know lotsa people whose Adult Id is outta control (and they haven't a clue except when they break down crying once in a while, then revert back to booze and lying). People often think "ego". Not always. Listening to NPR this morning and someone mentioned how this whole leaving Goldman Sachs thingy is, "Id, id, id."

Wiki:

The id is the unorganized part of the personality structure which contains the basic drives. The id acts according to the "pleasure principle", seeking to avoid pain or displeasure aroused by increases in instinctual tension.

The id is unconscious by definition:

It is the dark, inaccessible part of our personality, what little we know of it we have learned from our study of the Dreamwork and of the construction of neurotic symptoms, and most of that is of a negative character and can be described only as a contrast to the ego. We approach the id with analogies: we call it a chaos, a cauldron full of seething excitations... It is filled with energy reaching it from the instincts, but it has no organization, produces no collective will, but only a striving to bring about the satisfaction of the instinctual needs subject to the observance of the pleasure principle.


In the id,"contrary impulses exist side by side, without cancelling each other out....There is nothing in the id that could be compared with negation...nothing in the id which corresponds to the idea of time."
Developmentally, the id precedes the ego; i.e. the psychic apparatus begins, at birth, as an undifferentiated id, part of which then develops into a structured ego.

Thus, the id:"...contains everything that is inherited, that is present at birth, is laid down in the constitution — above all, therefore, the instincts, which originate from the somatic organization, and which find a first psychical expression here (in the id) in forms unknown to us."

The mind of a newborn child is regarded as completely "id-ridden", in the sense that it is a mass of instinctive drives and impulses, and needs immediate satisfaction, a view which equates a newborn child with an id-ridden individual—often humorously—with this analogy: an alimentary tract with no sense of responsibility at either end, paraphrasing a quip made by former U.S. President Ronald Reagan during his 1965 campaign for Governor of California in which he compared government to a baby.

[Louis]

The real concern is the size and systemic risk present today and paired with that same culture. The systemic risk introduced from joining Commercial Banking with Investment Banking and other high risk activities is of concern to all of us.

+10^100

[crownjewelwl]

this is what 6th year executive directors (vice president in U.S.) do when you don't make the managing director cut...

[1centaur]

If no one had to pay the price for their folly- then sure let them invest in any way or form they want ( and go broke if they are wrong ). But when you pile in the leverage, a risk miscalcualation by a big investment house or hedge fund can wreck the entire economy. So we all get to pay the price for financial firms that are to big to fail. So the question has nothing to do with their qualifications or smarts. Things inevitably do not go as planed. How much risk do you want to expose society to for the benefit of a tiny group of financial speculators?

If you want to race on the track and risk it all pushing the envelope? Go for it - if you crash and burn it's you who pays the price. But racing on public roads where you can take out my family if you screw up? No way.

Which is why rating agencies exist and why it was so important to get those ratings right. To some degree it was the mandating of AAA ratings for certain investors that created the problem in that due diligence was pawned off to the seal of approval.

And yes, I don't want anybody to be too big to fail, including banks and car companies. The threat of real failure is a great motivator. It would be an interesting regulatory imperative not to have ANY business be allowed to become strategically important to the United States to such an extent that the regular bankruptcy process is viewed as too dangerous to our welfare.

[Ahneida Ride]

http://forums.thepaceline.net/attachment.php?attachmentid=65132

[1centaur]

What velocity of money would accompany a 50% reserve margin and how much societal good would have been lost therefrom (assuming advances in science and medicine reflect in part a nation's rate of GDP growth)? Even the funny money buys some good stuff.

[Ahneida Ride]

Zero

[PQJ]

this is what 6th year executive directors (vice president in U.S.) do when you don't make the managing director cut...

Not necessarily. He has effectively killed his future prospects in the entire industry. He either has enough $$ to not have to care about it or to be in a position to start his own shop of rapacious capitalists.

[the bottle ride]

At work we joke that as soon as we trade with Goldman and they hang up the phone they are on the phone with their other clients telling them to buy/sell. Which is totally illegal.*(We trade very thinly traded securities which have no volume- that is till we trade.)*We see the bulk trades come through trying piggyback on the trade- scum bags but smart/big/powerful scum bags that rule the play ground.

*They are not going anywhere till their clients get wise.


I am fan of the guy who left and called BS on the GS- he has balls.

[54ny77]

Your comment on Morgan and Rockefeller is spot on.

Seems like Goldman's done a pretty good job of doing just this, but behind the scenes to the extent possible. The modern era just has a brighter spotlight, that's all.


The OP ed guy is a whiner, who apparently has never read a bio of
JP Morgan or Rockefeller, real capitalists, who knew how to fix the game,
so they would win.

[Rueda Tropical]

What velocity of money would accompany a 50% reserve margin and how much societal good would have been lost therefrom (assuming advances in science and medicine reflect in part a nation's rate of GDP growth)? Even the funny money buys some good stuff.

+1

Be careful what you wish for. You might want to look at the number of financial panics, degree of economic volatility and frequency of deflationary events that preceded the Central banking system of today. Certainly letting the invisible hand of the market cure the mal-investment and excesses without any attempt at containing the blow back or cushioning the blow would cure the decease... by killing the patient.

[MadRocketSci]

"Government is an id-ridden, newborn baby." I quote it often, very appropriate. "Government is like a baby. An alimentary canal with a big appetite at one end and no sense of responsibility at the other."

.. Listening to NPR this morning and someone mentioned how this whole leaving Goldman Sachs thingy is, "Id, id, id."



Sooo...what it sounds like is the higher echelons of GS are populated by mind flayers (http://forgottenrealms.wikia.com/wiki/Mind_flayer), who use the powers of id insinuation and the ego whip against their customers and our hapless government officials, who lack the defensive tower of iron will necessary to deflect these psionic attacks. It all makes sense now...

http://images1.wikia.nocookie.net/__cb20060823145009/forgottenrealms/images/thumb/3/34/Mind_flayer.jpg/250px-Mind_flayer.jpg

I can see the where the vampire squid thing comes from...

[Elefantino]

President "Bobby": Mr. Gardner, do you agree with Ben, or do you think that we can stimulate growth through temporary incentives?

[Long pause]

Chance the Gardener: As long as the roots are not severed, all is well. And all will be well in the garden.

President "Bobby": In the garden.


Chance the Gardener: Yes. In the garden, growth has it seasons. First comes spring and summer, but then we have fall and winter And then we get spring and summer again.

President "Bobby": Spring and summer.

Chance the Gardener: Yes.

President "Bobby": Then fall and winter.

Chance the Gardener: Yes.

Benjamin Rand: I think what our insightful young friend is saying is that we welcome the inevitable seasons of nature, but we're upset by the seasons of our economy.

Chance the Gardener: Yes! There will be growth in the spring.

Benjamin Rand: Hmm!

Chance the Gardener: Hmm!

President "Bobby": Hm. Well, Mr Gardner, I must admit that is one of the most refreshing and optimistic statements I've heard in a very, very long time.

[Benjamin Rand applauds]

President "Bobby": I admire your good, solid sense. That's precisely what we lack on Capitol Hill!

[CunegoFan]

+1

Be careful what you wish for. You might want to look at the number of financial panics, degree of economic volatility and frequency of deflationary events that preceded the Central banking system of today. Certainly letting the invisible hand of the market cure the mal-investment and excesses without any attempt at containing the blow back or cushioning the blow would cure the decease... by killing the patient.
Bah! You guys are amateurs. Getting rid of fractional reserve banking does not go far enough. I'm Ron Paul and I demand that we go back to the wampum standard. The wampum standard will fix all the ills with the economy that the common man does not have the knowledge to understand.

[54ny77]

ron pauls' gold standard makes so much sense too, because that's a reliable and consistent indicator of value.... :rolleyes:

or in simple terms, going from one fiction to another. pick your currency-backing fiction!

Bah! You guys are amateurs. Getting rid of fractional reserve banking does not go far enough. I'm Ron Paul and I demand that we go back to the wampum standard. The wampum standard will fix all the ills with the economy that the common man does not have the knowledge to understand.

[Viper]

Sooo...what it sounds like is the higher echelons of GS are populated by mind flayers (http://forgottenrealms.wikia.com/wiki/Mind_flayer), who use the powers of id insinuation and the ego whip against their customers and our hapless government officials, who lack the defensive tower of iron will necessary to deflect these psionic attacks. It all makes sense now...

http://images1.wikia.nocookie.net/__cb20060823145009/forgottenrealms/images/thumb/3/34/Mind_flayer.jpg/250px-Mind_flayer.jpg

I can see the where the vampire squid thing comes from...

Bro I think I saw one of those recently in one of my favorite shows:

[cdimattio]

One of the more interesting and spot on perspectives I read on Greg Smith and his Op-Ed resignation from Goldman Sachs went like this:

To those Junior folks at Goldman Sachs clamoring for a well paid position like this fellow held, he is viewed as "crazy."

To senior management, he is viewed as a "traitor."

To colleagues, he is alternately viewed as a "hypocrite" or "naïve"

Give it a week for the Goldman PR machine to ramp up the character assassination. Random genuine folks will come out of the woodwork to portray this fellow as the disgruntled middling employee with huge personal flaws.

[fiamme red]

http://www.reuters.com/article/2012/03/21/us-goldman-blankfein-idUSBRE82K1K320120321

Goldman Sachs Group Inc has begun scanning internal emails for the term "muppet"...

:p

[Louis]

Goldman Sachs Group Inc has begun scanning internal emails for the term "muppet"...

Easy fix to that - they'll just refer to them (sarcastically, of course) as "our most valued and precious customers."

[veloduffer]

Easy fix to that - they'll just refer to them (sarcastically, of course) as "our most valued and precious customers."

You mean "muppet" is not an endearing term. Fozzy bear is so lovable. :p

[RonW87]

...but on investment products where SEC documents exist to define structure and the portfolio contents of MBS are defined in ways that both sides accept, the playing field is even enough, even if some buyers don't make the effort they should.

The very guy GS retained to choose a portfolio of securities for a fund chose securities that he had already bet would become worthless. This was not disclosed to the fund's investors. How is that not material information that should have been disclosed?

[Uncle Jam's Army]

The very guy GS retained to choose a portfolio of securities for a fund chose securities that he had already bet would become worthless. This was not disclosed to the fund's investors. How is that not material information that should have been disclosed?

That, by definition, is fraudulent concealment........

[54ny77]

Did the sophisticated accredited investor not see the name of the deal on the offering memo? It's hard not to imagine there was some form of inherent risk in a deal called, "Sweet, Now I Can Pawn Off the Risk and No Longer Have to Delta Hedge My Gargantuan Book, Series 2007-1."

:banana:


The very guy GS retained to choose a portfolio of securities for a fund chose securities that he had already bet would become worthless. This was not disclosed to the fund's investors. How is that not material information that should have been disclosed?

[RonW87]

Turns out that one was settled:

Reuters: "Goldman's CDO practices have drawn regulatory scrutiny. In April 2010, Goldman agreed to pay $550 million to settle U.S. Securities and Exchange Commission charges that it sold the risky Abacus 2007-AC1 CDO while letting hedge fund billionaire John Paulson bet against it. The bank did not admit wrongdoing."

That last sentence is interesting.

[Louis]

Turns out that one was settled:

Reuters: "...The bank did not admit wrongdoing."

That last sentence is interesting.

Perhaps if they did nothing wrong they plan on doing it again in the future.

[verticaldoug]

Perhaps if they did nothing wrong they plan on doing it again in the future.

You always settle with the regulators with money and never admit wrong doing. That will just open you up to more litigation. Moreover, the fines are usually small relative to the overall scope of the business profitability. It's like a nuisance tax.

[54ny77]

When you're doing God's work, there is no wrong.

;)

Perhaps if they did nothing wrong they plan on doing it again in the future.

[Uncle Jam's Army]

Turns out that one was settled:

Reuters: "Goldman's CDO practices have drawn regulatory scrutiny. In April 2010, Goldman agreed to pay $550 million to settle U.S. Securities and Exchange Commission charges that it sold the risky Abacus 2007-AC1 CDO while letting hedge fund billionaire John Paulson bet against it. The bank did not admit wrongdoing."

That last sentence is interesting.

That doesn't cover the civil suits. I hope the plaintiffs' lawyers take them to the cleaners in those cases.

[Louis]

You always settle with the regulators with money and never admit wrong doing. That will just open you up to more litigation. Moreover, the fines are usually small relative to the overall scope of the business profitability. It's like a nuisance tax.

I know. I was just pointing out the irony of not admitting wrongdoing.

[Louis]

When you're doing God's work, there is no wrong.

;)

I suppose for some Mammon can count as a god, perhaps THE god.

[1centaur]

The very guy GS retained to choose a portfolio of securities for a fund chose securities that he had already bet would become worthless. This was not disclosed to the fund's investors. How is that not material information that should have been disclosed?

Could be argued either way, but it's not on its face the horror it appears. If I recall the testimony correctly, this deal was a synthetic CDO. Goldman being in the business of making a spread, primarily, needed somebody to be short the default swaps in order to create a security where the other side could be long the credit default swaps. Now let me ask you as a sophisticated investor: if you choose to buy something that BY ITS NATURE has somebody short it on the other side, and you did not select the reference securities, do you think you'd understand that it's your opinion of credit quality vs. their's? And that they would not do it if they didn't want to bet it was going down? This is not like a stock portfolio; it's a highly levered bet that something will go up or down. Who'd create something like that and bet against it without thinking it would go down? The buyer was a big institution that went long structures like that all the time. Theoretically they had people who could disaggregate the notional risks via their real estate expertise and their understanding of structured synthetic CDOs. And BTW, if they'd bought the structure because they thought the guys putting it together were making a positive bet, the fraud might be against the buyers' investors.

The counterargument is that sophisticated investors are not sophisticated and therefore need all those material disclosure rules created in the 1930s for less sophisticated buyers. Maybe even the best institutions are more like Grandmas than (the popular conception of) Warren Buffett. In the wake of the credit crisis I think that argument has a lot of validity. We could develop an entire industry that had boilerplate prospectuses that said, "Buying this vehicle involves risks, including the risk that the other side of the trade is right and you are wrong, which could lead to you losing a lot of money and the other side making a lot of money. You should understand the nature of this portfolio before you invest." And then the folks going long would go long just the same (just my prediction).

Perhaps Grandma needs to be told every time she buys a stock that the seller might include major financial institutions that have real analysts with big models who have decided this thing is a pig.

The notion that a seller of securities should be a fiduciary, not just a discloser of information, is I think the crux of the matter. In that role, Goldman should have held the hand of the buyer a lot more. And the seller, right, because he needs to understand that sophisticated buyers are betting against him. Of course, if the buyers had turned out to be right, nobody would have worried about the poor seller, correct? I think we'd all be a lot better off if the rules slanted more to fiduciary instincts, because fewer very risky products could get past the compliance department of the arranger. But in the environment that existed leading up to the crisis, facilitating trades between people with diametrically opposed views on value was par for the course and it was not Goldman's role to tell the buyer or the seller that the other side was really smart and experienced, because they both, supposedly, were. That's why Goldman did not admit guilt, in my opinion. The fine was a cost of doing business; it gave the government a headline win and it was affordable to Goldman.

[54ny77]

from what i read, goldman helped paulson get seriously shorty in a highly customized fashion. where was goldman on those trades? probably net long, maybe. who'd take that trade, right? risk transfer strategy discussion probably took place at pj clarke's: "holy smokes, how do we pawn this off?"

yeah by its nature of course the investor should know that someone was short the the trade. except.....the only thing was, woopsie daisy goldman neglected to tell the long abacus investor that they helped paulson custom craft a massive short in the first place, a.ka. designed to fail.

they weren't just making a spread, otherwise there wouldn't be litigation. who's master was goldman really serving? and did they toss in a little extra long desk positions into the abacus stew while they were add it, all in the name of diversity score? :p

Could be argued either way, but it's not on its face the horror it appears. If I recall the testimony correctly, this deal was a synthetic CDO. Goldman being in the business of making a spread, primarily, needed somebody to be short the default swaps in order to create a security where the other side could be long the credit default swaps. Now let me ask you as a sophisticated investor: if you choose to buy something that BY ITS NATURE has somebody short it on the other side, and you did not select the reference securities, do you think you'd understand that it's your opinion of credit quality vs. their's? And that they would not do it if they didn't want to bet it was going down? This is not like a stock portfolio; it's a highly levered bet that something will go up or down. Who'd create something like that and bet against it without thinking it would go down? The buyer was a big institution that went long structures like that all the time. Theoretically they had people who could disaggregate the notional risks via their real estate expertise and their understanding of structured synthetic CDOs. And BTW, if they'd bought the structure because they thought the guys putting it together were making a positive bet, the fraud might be against the buyers' investors.

The counterargument is that sophisticated investors are not sophisticated and therefore need all those material disclosure rules created in the 1930s for less sophisticated buyers. Maybe even the best institutions are more like Grandmas than (the popular conception of) Warren Buffett. In the wake of the credit crisis I think that argument has a lot of validity. We could develop an entire industry that had boilerplate prospectuses that said, "Buying this vehicle involves risks, including the risk that the other side of the trade is right and you are wrong, which could lead to you losing a lot of money and the other side making a lot of money. You should understand the nature of this portfolio before you invest." And then the folks going long would go long just the same (just my prediction).

Perhaps Grandma needs to be told every time she buys a stock that the seller might include major financial institutions that have real analysts with big models who have decided this thing is a pig.

The notion that a seller of securities should be a fiduciary, not just a discloser of information, is I think the crux of the matter. In that role, Goldman should have held the hand of the buyer a lot more. And the seller, right, because he needs to understand that sophisticated buyers are betting against him. Of course, if the buyers had turned out to be right, nobody would have worried about the poor seller, correct? I think we'd all be a lot better off if the rules slanted more to fiduciary instincts, because fewer very risky products could get past the compliance department of the arranger. But in the environment that existed leading up to the crisis, facilitating trades between people with diametrically opposed views on value was par for the course and it was not Goldman's role to tell the buyer or the seller that the other side was really smart and experienced, because they both, supposedly, were. That's why Goldman did not admit guilt, in my opinion. The fine was a cost of doing business; it gave the government a headline win and it was affordable to Goldman.

[1centaur]

from what i read, goldman helped paulson get seriously shorty in a highly customized fashion. where was goldman on those trades? probably net long, maybe. who'd take that trade, right? risk transfer strategy discussion probably took place at pj clarke's: "holy smokes, how do we pawn this off?"

yeah by its nature of course the investor should know that someone was short the the trade. except.....the only thing was, woopsie daisy goldman neglected to tell the long abacus investor that they helped paulson custom craft a massive short in the first place, a.ka. designed to fail.

they weren't just making a spread, otherwise there wouldn't be litigation. who's master was goldman really serving? and did they toss in a little extra long desk positions into the abacus stew while they were add it, all in the name of diversity score? :p

Paulson who at that point had no reputation as particularly smart (and since then has not covered himself in glory either). From what I've read, Goldman had lots of shorts and longs in that space, as befits a trader. If they threw in desk positions I don't think that changes anything - desk positions can be right or wrong or just detritus from the trading process that need to be dumped before risk charges are placed on the desk. Regardless, a portfolio that by its nature is short on one side, unlike a stock portfolio, demands that the side going long be diligent about finding out how it was constructed. I'm guessing the buyer made an assumption on that topic for which there was no basis; the regulatory process will decide if there should have been such a basis. If there's civil litigation, the argument that Goldman owed the buyer a duty but the buyer did not owe a parallel duty to its investors (where there presumably was a fiduciary relationship) is a tightrope their lawyers will not enjoy walking.

[54ny77]

Your last sentence--bingo. Unless there was a few emails containing "muppets" reference to abacus equity investor and others up and down cap structure....if so, woops....


Paulson who at that point had no reputation as particularly smart (and since then has not covered himself in glory either). From what I've read, Goldman had lots of shorts and longs in that space, as befits a trader. If they threw in desk positions I don't think that changes anything - desk positions can be right or wrong or just detritus from the trading process that need to be dumped before risk charges are placed on the desk. Regardless, a portfolio that by its nature is short on one side, unlike a stock portfolio, demands that the side going long be diligent about finding out how it was constructed. I'm guessing the buyer made an assumption on that topic for which there was no basis; the regulatory process will decide if there should have been such a basis. If there's civil litigation, the argument that Goldman owed the buyer a duty but the buyer did not owe a parallel duty to its investors (where there presumably was a fiduciary relationship) is a tightrope their lawyers will not enjoy walking.

[CoKeithRecord]

It take courage to leave a lucrative job Speaking from experience, peace of mind is more valuable than a massive paycheck.

[PQJ]

Sometimes it takes courage. In the case of a 10-year GS veteran, it's probably more a function of nest egg than courage. It also doesn't hurt that he's a bona fide genius (IQ-wise) with a nice little network of contacts. He probably won't get a job at another big, institutional blood-sucking...er...investment bank, but he'll land a plum job somewhere. He's either a fool for not knowing the nature of the beast that he joined, when he joined it; or he's a hypocrite for cutting and running when he did, how he did.

[MadRocketSci]

not entirely germane to the discussion topic, but just a cute little piece from greg smith when he was a senior at Stanford...doesn't seem like a total tosser, perhaps more on the naive side?

http://www.stanforddaily.com/2012/03/16/greg-smith-ex-goldman-employee-writes-on-american-slang-in-2001/

on a personal note, every time i see something about someone (Neil Kashkari, Marc Andreesen, this guy) whom i shared either an academic path or overlap in place/time, I feel like such a financial failure!! I think I watched too much Star Trek growing up :)

[Louis]

on a personal note, every time i see something about someone (Neil Kashkari, Marc Andreesen, this guy) whom i shared either an academic path or overlap in place/time, I feel like such a financial failure!! I think I watched too much Star Trek growing up :)

But you're a much better person than any of them ever will be. ;)

[PQJ]

not entirely germane to the discussion topic, but just a cute little piece from greg smith when he was a senior at Stanford...doesn't seem like a total tosser, perhaps more on the naive side?

http://www.stanforddaily.com/2012/03/16/greg-smith-ex-goldman-employee-writes-on-american-slang-in-2001/

on a personal note, every time i see something about someone (Neil Kashkari, Marc Andreesen, this guy) whom i shared either an academic path or overlap in place/time, I feel like such a financial failure!! I think I watched too much Star Trek growing up :)

As someone who grew up in a near identical environment and who also shared his transition to the USA through college, I can't help but think - more and more - that he's a total tool. Or a fool. Or both. Book smart he is, but street smart he most certainly is not.