The LAT’s Walter Hamilton makes a good point: with all the brouhaha over Goldman Sachs, how come the Charles Schwab news is considered positive for the company? Schwab’s stock rose by 1% after it said it would pay $200 million to settle a class action suit over its YieldPlus fund, which imploded after the company filled it up with toxic mortgage assets.
There is no scandal whatsoever associated with Goldman Sachs emails released by Senator Levin today. They show Goldman people going about their line of work, doing what Goldman people do, taking long positions, taking short positions, sometimes even taking big short positions. This is what broker-dealers should do if they have decent risk management.
I know you’ve been waiting for this one — here you go! Enjoy all 196 pages of it, and let me know what you find: Matthew Goldstein has already found a Goldman conflict of interest on page 71 (page 77 of the PDF) — the “Initial Collateral Security that is a CLO Security” turns out to be another Goldman product. Which is not obvious from the prospectus at all, since it isn’t even named.
The Euro-style bancassurance business model has never really taken off in the U.S., but there’s one big exception: USAA, the financial services company for military families. It’s an insurer which owns an excellent bank, and that structure — which is unusual if not unique in this country — puts it into conflict with the Volcker rule. Insurers, by their nature, invest in diversified portfolios of stocks and bonds, which is an activity which looks very much like prop trading if you’re a bank. Since the Volcker rule would ban prop trading at banks, USAA is worried that it will fall foul of it.
Michael Lewis addresses the fixed-income group at Goldman Sachs:
The masses will be curious to know, for instance, how you became blinded to the very simple difference between right and wrong. The more moralistic among them will ask the question mainly to fuel their own outrage; the more tactical will ask the question because they sense that the financial system doesn’t function unless you have the incentive to think in these terms — and you clearly do not.
When the WSJ and FT wrote articles about Paulson’s letter to investors yesterday, I was cross: I wanted to see it, and they neither posted it nor linked to it.* Since then, it has appeared on both Zero Hedge and the Big Picture; it can be downloaded directly here.