Borrowing as a bank at nothing from the Fed discount window and then using the proceeds to trade is taking taxpayer money.

Dealing in derivatives where blowups are a concern of the government is taking taxpayer money.

Taking 12B of AIG bailout funds is taking taxpayer money.

HFT used for frontrunning legitimate investing, using advantageous relations with the treasury for profit, these are taking public money without providing a service.

Goldman does a lot of useful and important business activity, no question. We need the good things they do. But they are souring the public to capitalism through activities which, while perhaps legal, are not moral or fair.

Blankfein’s assertion that the bailout money was not needed is laughable. If there is a systemic collapse all investment banks would fail. They were levered substantially like everyone else. If you are highly levered, your do not withstand a depression, full stop.

Felix, I disagree with your assessment that LB should be concerned about any sort of regulation, TBTF or otherwise. Surely Mr Blankfein is more than aware that he and his firm are protected from any sort of inconvenience like regulation. TBTF? Sure, everyone but Goldman.

Leave TBTF to the peasants, this is Goldman we’re talking about here.

Securitization has generally increased risk enormously, and misallocated it, without providing long-run advantages. It is true that eventually we will probably have to cover everybody, not just the banks, if we are to rely on a “hold to maturity” standard. The unregulated non-prime speciality mortgage lenders proved this. It has been rationalized based on potential increased bank risk adjusted profitability, which is outside of the public purpose behind banking – namely a government public/private partnership. Banks are set up and supported by government for the further benefit of the macro economy via providing a payments system and lending in a way that is specifically defined by regulators. The public purpose of banking is NOT to provide profits per se to shareholders. Rather, the provision of the ability to earn profits is only a tool used to support the attendant public purpose.

Nice idea but…. not really. Following the switch over to a new payscale, almost all of your key employees who can go elsewhere, or can afford to take a few years off, just leave. I know, I know, “they caused the mess so we’re better off if they leave.” WRONG! This is a completely ignorant statement, and if you think it’s a good way to go about unwinding and liquidating failed firms, it shows your ignorance as to how derivatives and securitizations work. In any unwinding or liquidation of a firm, you NEED former employees, even ones who caused the mess! They are the ones who have the most intimate knowledge of the crap that is on the balance sheet and how to get rid of it. If you think they can’t find jobs elsewhere.

So go ahead, and bring in outside workers, almost of all whom didn’t work on the Street because they were too dumb to make the cut in the first place. Great idea. Take that AIG bailout of 180 billion and round it up to 200+ billlion if you practice your idea. yeah, it sucks to keep paying these guys good money for costing us billions, but the alternative is even worse.

Bankruptcy laws altered so that ALL the wealth of the execs that did the stupid is on the block to pay back investors. Not just corporate assets are up on the chopping block, but PERSONAL assets.

You want to go stupid and crazy and try for the solid gold ring? Ok, but if you fail as craptacularly as they ALL did in the meltdown, then they not only don’t get the gold ring, they also cough up EVERYTHING they obtained in the lead up to the shit hitting the fan.

There’s no one single problem, but there is one way to make a lot of these problems less systemically serious – by putting a hard limit on leverage. Canada does that, and it seems to work for their banks.

No need to explain why Goldman would not be a fan of such a limit.

Ps. WM, glad you enjoyed my ZeroHedge audition

If there’s a problem, its the capital rules not M2M.

Essentially you’re saying that because banks are secretive we should have them mark all assets to par value, cost, or mark to a number pulled out my ass? How is the investor supposed to make any sense of a bank’s balance sheet then.

The reality is that investors should know what the liquid worth of a bank is. As we’ve seen liquidity can dissapear in a heartbeat, and investors should know what a bank can sell its assets for now if needed. The idea that we can prevent liquidity crises from happening is a pipe dream, as there will always be new ways for investors to get scared brainless.

Let investors decide for themselves if the assets on a bank’s balance sheet are going up because of a bubble or because true economic worth is being created. In your world, no one gets to analyze anything, because no one has to bother to know anything. Everything is just marked to par until some analyst figures out what crap the bank is holding.

I also wonder if Blankfein’s actions don’t amount to the criminal level. GS supposedly did a study on the effects of mark-to-market back in the ’90s. They found that revenues would fluctuate severely, up 80-90% for two years, then down 40-50% the next two. Blankfein would surely be aware of these as CEO, and if he is not, that is surely utter incompetence. He is going against his shareholders’ fiduciary interests.

I will leave off here pointing out that Salmon’s point #2 demonstrates the old bit of wisdom about how the people who put on the most do-gooder airs are the very people sucking off the system. Parasitism and formal altruism go hand in hand. Never trust a do-gooder.

You can’t understate the chutzpah attached to his “fair market value” call to action, when last year Goldman used the Level 3 bucket like no other firm in the industry.

I do have grudging respect for some of the ways Goldman run their business, but the call for transparency is utter bull. And his point about the regulatory fora where systemic risk can be discussed… I used to participate in one, and Goldman got disinvited because they contributed jack-squat to the debate and treated it purely as intelligence gathering on competitors.

That’s how they roll, regardless of what Van Praag and co want you to believe.