Comments on: Levin vs Blankfein

By: randymiller

randymiller — Thu, 29 Apr 2010 04:22:07 +0000

If a teenager mows lawns and puts the money in the bank for college, he has always been able to trust that the money would be there when he graduated from high school. Banking has always been about trust. Only a fool does business with a banker he does not trust.

But if somebody puts money into a old age fund, and their fund manager deals with firms like Goldman, can he trust the money will be there at retirement. Just because Goldman calls themselves a bank does not mean you can trust them like the bank you grew up with?

I agree with the bloggers who urge Goldman to take a hit now, admit wrongdoing even when they might not be convicted in court. Sadly, their lawyers are like the tobacco company lawyers; several tobacco companies worked on a cigarette less likely to cause cancer, the so-called “safe cigarette”. But their lawyers told them not to do it, because marketing it as a safer cigarette would mean admitting their previous product was unsafe, and leave them open to lawsuits. Goldman’s lawyers are telling them there is no way to admit some fault and cut their losses, because doing so will lead to more investor lawsuits.

OK bloggers, putting all the comments aside about what will happen to Goldman, or should happen to Goldman, answer a simple question: would you feel safe investing your kid’s college fund with Goldman?

By: yr2009

yr2009 — Wed, 28 Apr 2010 12:50:51 +0000

It all depends on how you define ‘sell’ -
If by ‘sell’ you mean merely accepting an order from a client, then such practices are acceptable.
However, if by ‘sell’ you mean explaining to a potential buyer the advantages of buying a certain product from you, or from someone you represent, then such practices should change, because they are ethically flawed.

By: Acetracy

Acetracy — Wed, 28 Apr 2010 12:25:01 +0000

What GS did is exactly what every investment banking division has done and still does: push high fee products down the throat of private clients via their wealth management/private client division. As a rule in managing clients money, I have never, never sold a product coming out of firm’s investment banking division: structured products, crappy IPOs, MBS, etc. The fees are ridiculous but by dangling 3% to 5% payout to the financial consultant, the investment banks get this crap peddled to unsuspecting clients.

Furthermore, in the GS case, everyone says these were sophistcated institutional investors. Far from it. Most of the mortgage securities GS sold were to pension funds, the savings for mom & pop retirements. Yet they sold them some of the riskiest investments possible. Just now I see that my former employer’s pension has 1/3 of its assets with hedge funds who are making 2 & 20 off of my savings.

GS is criminal. They clearly stated in emails to move stuff off their own books into clients accounts when they knew the investments were toxic.

INvestment banks should NOT be part of private client/wealth management institutions. The conflicts are just too apparent and the client always suffers.

By: newchum

newchum — Wed, 28 Apr 2010 06:56:46 +0000

G.S just played by the rules. Let’s remember some of the people who made gambling with other people’s money so easy. All the good ‘ol boys who scrapped Glass-Steagall – Phil Gramm who added a clause to an appropriations bill forbidding the regulation of derivatives – Alan Greenspan, under whom the Fed failed in its regulatory role because he believed that markets were self regulating – William Donaldson, under whom the SEC relaxed how much capital banks needed to keep on hand to cover loses… There were lots of other players of both parties. They set the rules of the game.

By: alliswell

alliswell — Wed, 28 Apr 2010 06:06:28 +0000

Would there be any merit in saying that Goldman was using borrowed financial acumen to an extent as it went short i.e. bet in favour of a fall in the mortgage markets mirroring client Paulson’s game plan? One would not expect Goldman to do so but there is no taking away from the fact the Paulson connection has been publicised heavily in the press. At best, Goldman could have avoided following in Paulson’s footsteps with respect to the ABACUS 1.

By: bob123

bob123 — Wed, 28 Apr 2010 03:06:20 +0000

Well said, too bad this type of commentary can’t make it’s way into the press so that the average person is given a more appropriate view of the situation.

By: BMWoverlandpark

BMWoverlandpark — Wed, 28 Apr 2010 02:49:31 +0000

The only thing better than seeing Carl Levin lecture Goldman would have been to have Barney Frank lecture them. Meanwhile, Levin never mentioned how he and others forced Freddy and Fannie and banks to make risky loans to unqualified buyers “so everyone has a chance to be a homeowner…” This is true hyprocrisy at work! I would love to supeona Carl and ask him why he and his compatriots continue to spend money as if they have found a flowing well all the while a debt commmission is created to stop spending? These guys are losers and I can hardly wait to vote against all of them.

Buyer beware, evidently these firms who lost so much money completed significant due diligence and thought they were a good buy! Oops, they were wrong and the market nailed them. Sorry Carl, you are in over your head unfortuately for the few of us who understand derivatives and futures, you look really stupid. Its risk reward baby and perhaps you need to understand how it works.

By: HBC

HBC — Wed, 28 Apr 2010 02:38:54 +0000

Goldman being loosely scolded by Carl Levin is one thing, the people’s representatives taking meaningful action against the blatantly culpable parties on Wall Street is quite another.

Nitpicking Carl Levin is one thing, taking a meaningful stance on Goldman, who did not “lose money” – they may have lost *some money* on isolated MBS – but profited immensely from this macro scam and a series of other implosions on economies that couldn’t have been more destructive to the world if staged deliberately… that would be another thing entirely.

You ought to stick to that other thing, Felix.

By: Benny_Acosta

Benny_Acosta — Wed, 28 Apr 2010 01:53:52 +0000

The idea is that as a bank you are supposed to work FOR your clients. GS wanted to get rid of a bunch of junk. It knew it was creating and selling junk. So why have it on the balance sheet in the first place? Why create “synthetic” products which are nothing more than simple bets and then put your own clients on what you believe to be the losing side? That’s where the conflict of interest comes in.

If I’m a car dealer and I have a lemon on the lot, it would be considered fraud to sell it to you. Why is it not considered fraud when a bank puts together a portfolio of failing investments and then sells them to its clients? It basically amounts to the same thing. How can I trust a financial institution to advise me on the one hand, when it sells me crap on the other? Offering advice to clients requires a certain amount of trust. Can you trust someone that would knowingly put you in what they believe to be a losing position? Of course not.

Goldman Sachs chose to prioritize its own profit above its duty to serve its clients. It could still have made a huge profit while protecting its clients or at least advising them against exposure that has a real chance of harming their business. But of course it simply could not do that because it was one of the major producers of this garbage.

By: docmej

docmej — Wed, 28 Apr 2010 01:34:22 +0000

What spin! This is the kind of testimony that a jury of honest Americans would maximize the penalty for Blankfein and even some of the investigators. Does the left really think we are ignoring what the president, his cabinet and some of the big corps are doing? The emperor has no clothes and my children know.

By: LibertyAtStake

LibertyAtStake — Wed, 28 Apr 2010 00:13:06 +0000

Good technical analysis. To put a finer point on it – Carl Levin = Demagogue.

http://libertyatstake.blogspot.com/
[For a light hearted take on our present peril]

By: STORYBURNcom_0

STORYBURNcom_0 — Wed, 28 Apr 2010 00:07:40 +0000

While it was darn funny to see Blankfein get confused but he was in such shock at how stupid the senators really were

By: Benny_Acosta

Benny_Acosta — Wed, 28 Apr 2010 00:01:23 +0000

I’m watching the senate hearing. It’s amazing to me how Blankfein dances around the issues. He was questioned about whether selling a long position to his clients on a security, while keeping a short position on that very security was a conflict of interest. He was unable to answer.

He refuses to believe that there was anything wrong with selling an investment GS believes to bad, to a client. He doesn’t acknowledge that this is not good business.

By: Woltmann

Woltmann — Tue, 27 Apr 2010 23:25:12 +0000

If it weren’t for the part about Paulson backroom engineering the Abacus deal and Goldman omitting to mention that to anyone, then you would have a valid point. How does all that fit into your current poor Goldman is so misunderstood whine job. To hell with your whole all Wall Street is at least this bad and some of them even worse argument. We’re not talking about the rest of Wall Street. We’re talking about Goldman. This is the same Goldman that pulled off the backroom engineered bailout of AIG to their own tremendous benefit. That was the other Paulson ..

By: Ghandiolfini

Ghandiolfini — Tue, 27 Apr 2010 21:05:00 +0000

Felix, you seem to have changed allegiance. This is more like Spy versus Spy from the good old Mad Magazine with the role model political commentator and anarchist Alfred E Neuman as editor at large.

Maybe the German are stupid, listening to the leader of the Green Party justifying their involvement in Afghanistan, when much more than 50% of the nation is against it, and Merkel drowning the sinking Greece with admin, yes, I think they are. Then again, maybe these losses were intentional, let’s for argument sake say, to get tax breaks to fund American Air Force bases there.