April 27th, 2010
05:38 PM GMT
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I am sitting here watching the much anticipated Goldman Sachs hearing and four of the executives who were in charge of running the mortgage unit during 2006-2008 have just given their opening statements.

They were smooth, confident and proved why Goldman employees are known as the best on Wall Street. They explained complex mortgage products, their role in them and said that any short positions taken at that time was at the request of the firm’s risk management team. It was all very impressive.

That is until the Q&A started. At that point the polished bankers quickly deteriorated into witnesses bumbling through the massive tome of evidence and emails.

As expected the U.S. senators asked pointed, aggressive questions about why Goldman peddled these crummy deals, if they disclosed information properly to clients, about the conflicts of interest.

The Goldman guys were vague, confused and kept asking, “What page was that?” “What email are you referring to?” At one point Senator Collins said she was beginning to suspect the confusion was a strategy the bankers were using to eat up time!

It is shocking to think these superstars of banking seemed so ambushed by what was clearly going to be a hostile audience. Maybe they did decide on a "Forrest Gump"-type strategy ahead of time. Or maybe they naively thought they were actually going to be talking about structured finance and their area of expertise and that the ethical questions about Goldman’s role in the crisis were going to be reserved for CEO Lloyd Blankfein. Not so.

Goldman executives seem to think that if they can just explain these markets well enough they will be vindicated. Everyone will understand that they did exactly what they were supposed to: recognized risk and acted on that when no one else did. Their job is to make money and they did that well.

What Goldman executives have failed to understand to date is the moral question that people want answered: Did Goldman Sachs sell matches to passengers getting on a wooden boat? Did the firm have a moral obligation to sound the alarm bell when they saw the housing fire eventually break out? Instead of rallying regulators or industry leaders they focused on self-preservation, found a life boat and then drifted along and watched as competitors, clients and eventually the economy sank. Not only did they watch, they may have even profited from it.

Lloyd Blankfein needs to deal with those larger issues of responsibility and ethics if he hopes to try and quell the anger and repair Goldman’s reputation.

Some in financial circles feel they are unfairly being made a scapegoat. Others insist they are a villain in this tale. What do you think?



soundoff (145 Responses)
  1. Jordyn

    What does everyone hate more than an Investment Bank that has (and not re-paid) tax-payer money? A successful one!

    Goldman Sachs doesn't deal with retail clients. They deal with Institutional Investors and large corporations (underwriting). If asset managers and other institutional investors are too stupid to analyze their risk, then the Senate should be grilling them for being incompetent with their companies or clients monies.

    Goldman underwrites and trades for their own accounts. Did any non retail clients not know this already? Did someone miss that in their MBA program? Goldman didn't miss that fact that Bernie Madoff was a fraud and thus didn't have him handling any of their funds. How are you in this business and can't manage your own risk?

    If Goldman hadn't acted on it's own behalf on THEIR assessment of a risk condition, then their stakeholders would be throwing this fit now. I'm not sure when people started expecting investors to act against their best interest?

    April 27, 2010 at 6:51 pm |
  2. Jordyn

    And, I don't and never have worked for Goldman. I have no money invested in Goldman, but I am aware that if they are trying to sell something in their own inventory, I should take with a grain of salt their opinion on the investment.

    April 27, 2010 at 6:53 pm |
  3. damian

    Bankers rule!!!

    April 27, 2010 at 7:58 pm |
  4. Per Holmlund

    A joke or are they just stupid

    The crises started yesterday with the tech melt down 2000 and continued with the financial crises 2007. Financial crises that are the effect of the solution to the market melt down. And the solution to the financial crises is the deficit swamp. A global deficit swamp that will take us to, hopefully, the final level that will be the deficit crises.

    Look at the history! It is obvious that the problems we see today were known yesterday and not one of Cheney’s unknown unknowns. In 2004 we could read about the deficit problems:
    “Treasury Secretary Vows to Halve U.S. Budget Deficit by 2009 Treasury’s Snow calls global economic imbalances a shared challenge Treasury Secretary John Snow says the Bush administration is committed to cutting the U.S. budget deficit in half by 2009 to help address global economic imbalances that may threaten world growth.”

    We have business cycles and then mega cycles. Mega cycles that change direction so rarely that you won’t find understanding for it in the senate. The Senate, a political circus with a four year cycle! And therefore today’s show were US is trying to cut the branch, finance, they are sitting on.

    “My aunt looked in the rare mirror when driving. First with on eye and then with two – pang and bang – and now she is ten feet under.” Börsens tio Budord, Holmlund 2003. An don’t forget to keep an eye on gold.

    April 27, 2010 at 8:49 pm |
  5. Ken Hansen

    The funny thing about all of this is that we take all of our money and give it to banks and investment folks believing that they are regulated. And they were except for the SEC porn parade. And of course the corrupt Bush administration on whose watch this whole thing came apart. The US was corrupt from the very top (the President and Vice President) so why wouldn't that corruption spread far and wide to all segments of our banking, business and investment . These folks had carte blanche. It is not a matter of morals here when the President and Vice President were pathological liars and everyone in high business places knew anyone but anyone could be bought. It happened earlier under good old Ronnie and the S&L's. How quickly we forget. The only moral here is: Corrupt government means corrupt business on all levels.

    April 28, 2010 at 2:18 am |
  6. Hugo Santos(Brazil)

    Its just the capitalism in its essence, the goverment acts like a Frankstein Daddy on this.

    April 28, 2010 at 2:21 am |
  7. Eric

    Look carefully at this photograph. Some of the people in this photo are nothing more than kids, dressed up like they're going to their first communion.

    Not more than 20 years ago, teachers – grade school teachers, high school teachers, and professors at some of the most brilliant schools in the nation – suspended their own career and monetary interests to teach these young whippersnappers about mathematics, science, and lifeskills; to teach them to tell the difference between right and wrong.

    I challenge anyone to explain how these teachers can live with the decision of having put their own life on hold, of having accepted below-market wages to go into teaching, only to watch these students grow up and become conceited, self-aggrandizing bankers. Can you imagine how their fourth grade teacher, well into retirement, feels watching her pupil explaining before the senate how he created an instrument designed to fail and sold it to unwitting clients with the sole purpose of fattening his own pocketbook?

    They look sharp in their suits, but I wouldn't in a million years want to trade places with the 26 year-old banker whose soul is so darkened that he cannot see how horrifyingly he has raped the social contract in this country.

    April 28, 2010 at 2:30 am |
  8. Scott

    To Jordyn – spoken like a true MBA who has bought into the corporate rubbish doctrine. One day maybe you'll get your bonus for towing the line.

    And yes, I do have a MBA, and no, I didn't miss that class. Fortunately though I did spend some time studying subjects outside of the business school that dealt with ethics, morality, critical thinking, and society.

    I completely agree that the general public is irrational and uneducated, or at least act as if they are. But just because people are stupid doesn't mean you should take advantage of them.

    April 28, 2010 at 2:33 am |
  9. Bernard Abinader

    I am not a banker, and I seldom bothered about global banking and finance; that is anything that went beyond my accounts and my pocket.
    However, I do strongly agree with Jordyn. If Goldman Sachs dealt with non-retail, that is with other subsidizing big companies (to my humble understanding of the banking system), why should it be to blame for their stupidity.
    Goldman Sachs dealt with pros supposedly, and the pros flunked here. They should be in the seat questioned.
    I do not say G-S are innocent dudes, but who is anyway? Why make scapegoats out of the elite? Why not deal with issues with balls and realism?

    April 28, 2010 at 2:35 am |
  10. Felicia

    Investment banks always hedge their bets. There is nothing wrong with selling one product and then turning around and betting against it AS LONG as it is properly disclosed to the client. Come on people this is the stock market we're talking about. If you want to risk earning money you've got to be prepared to take risks to lose money. The only think they did wrong here is not properly disclose the information but this is not a non-profit company they are in it to make money!

    April 28, 2010 at 2:36 am |
  11. James Adams

    How can we expect anyone who lives in a bubble to feel and be connected to the real world? Let them get their hands dirty or quarantine them.

    April 28, 2010 at 2:39 am |
  12. Jason of Oman

    Usury and gambling should be carefully controlled and regulated as the average Joe/Susan knows very little about derivatives and financial magic. Whenever a person earns money at someone else's lack of foresight or just plain stupidity, that is not right. I think most people who are on Wall Street are nothing short of very enlightened confidence artists. However, I can't hold Wall Street investors, bankers entirely at fault for other people's greed. Everything was going just fine until that got caught with their pants down. In short, I think everyone is the culprit here. People should stop living beyond their means and make do with what they have. Now, taxpayers get another insult. They have to pay all that money to watch those sophisticated and very educated Wall Street guys squirm in their pants. Just let this be a wake up call. If you aint's got the money, don't touch the merchandise. Case close.

    April 28, 2010 at 2:43 am |
  13. paul

    What a total waste of time. congress will do absolutely nothing, but maybe chastise them, boohoo. mean while more government big whigs get new jobs on wall street and board of directors...so much for the American oligopoly oh I mean democracy...the next financial mess coming soon at your nearest insurance company as they follow suit with worthless leveraged paper

    April 28, 2010 at 2:45 am |
  14. Lion Heart

    I have no sorrow for these guys! THEY ARE HUSTLERS! Simply put. These Illegal practices must end now!! We just need to wait until they're proven guilty in court! If you cheated on your spouse and got caught. Somewhere through it all; you would play dumb too. I would. Really I would!

    April 28, 2010 at 2:52 am |
  15. Daniel

    Why should Goldman Sachs be morally responsible for telling people who are not their clients about other people's shonky practises? Isn't that slander and libel if it is ultimately unproven?

    I don't see why G-S should be punished or have mud slung at them because they made money for their own people off the bad products of others. If they had the forsight to profit from this mess, then good for them. At least they're not getting bailed out.

    Investment banks are supposed to make money, not run around playing mother for non-client's wallets.

    April 28, 2010 at 3:04 am |
  16. Boscoe

    Sorry Jordyn, but that whole "it's not my fault I raped her, she should've known better than to let me into her house" kind of excuse is simply pathetic sociopathic justification.

    Defrauding someone who theoretically should've known better, does not magically exonerate the fraudster. And honestly, is that the kind of reputation GS wants? Is that in the best interest of their stakeholders? Seems to me there's not a lot of future in being known as the guys who will sell you a poison sandwich while telling you it's healthful.

    Or is Wall Street so infested with sociopaths that nobody cares about their reputation anymore?

    April 28, 2010 at 3:12 am |
  17. Purush

    It is entirely different ball game when you sell a financial instrument to an ordinary man, and when you sell to another financial assetts organisation. The standards for ehtics and statutory caution are entirely different.
    To that extent since Goldman sells stuff to other organisations it is unfiar to target them.
    But on prior disclosures front – whether you sell to an ordinary man or to or to an institution – it has to be same. You can not omitt disclosing information.
    The senate committee must keep this in mind while carrying out their investigations and cross interviews with Goldman executives.

    April 28, 2010 at 3:15 am |
  18. James

    These people should be crucified. It is time they stop raping the nation and the millions of people who are breaking their back everyday making them rich. It is time Obama step to the plate and put an end to obnoxious profits, salaries and bonuses and/or tax these bastards to the hilt and give it all back to the little guy. Go Obam! Tax the bastards into the poor house and give it back to the little guy who toils everyday so the rich can live extravagant lives, or better yet, tax them to death, give it all back to the little guy, then throw them all in prison for their obnoxious behavior.

    April 28, 2010 at 3:22 am |
  19. Lawrence

    Well done Maggie Lake-most rational and ethically driiven people will see that these men acted in an unethical manner. They promoted their own self-interest ahead of their clients and the general population from which they ultimately draw their funds, salaries and hughe bonuses. I have watched and noted this firm's behaviour over the years, and this is not the first time they have acted in way which they perceive as placing them above the legal and moral systems to which they are subordinated. Moreover, their gloating in the midst of a financial crisis unparalled in history-and down played to a certain extent by the financial sector-highlights their greed and selfishness. It will be interesting to see what the legal outcome of all this will be!

    April 28, 2010 at 3:52 am |
  20. cliffintokyo

    The Regulators failed miserably. The Banks (Goldman Sachs, and?) which knew and aimed to make money, (as they *always* do!), profited handsomely. And these 4 amoral corporate gladiators were obscenely overpaid for *just doing their job*. Fried alive in boiling oil is too good for them........but credibility with the public is not an issue, because they only *deal with* (ignorant and gullible) institutional investors. Make an example of them that will be excruciating and unforgettable for the *banking industry* (Hah! Fat greedy pigs club? Yeuk!), I say.

    April 28, 2010 at 3:52 am |
  21. Rohan Chauhan

    I completely agree with Jordyn especially the fact that Investors will never act against their best interests. Goldman was smart to assess the risk, and we would not expect it to do otherwise – its an investment bank even the best of the best don't get in.
    I think they are being made the scapegoat and the question as to their responsibility in advising people and competitors of a possible financial meltdown – is sheer non sense. Yes, may be justified from a moral standpoint.However, I know of no law that works on morality. The question to be asked is- did Golman purposely intended to do something to cause the financial meltdown. If they did yes they should be held accountable. however if they only saved themselves or did not share such info with the rest causes no concern for the law to interfere

    April 28, 2010 at 3:58 am |
  22. David Sakti

    I think the people who see Goldman Sachs as villains in this case are the ones who do not make as much money as they do – as simple as that.

    The politicians know that they can now gain the support (i.e. votes) of average Americans by going against Goldman Sachs. It's really all politics at the end of the day.

    I hope the government do not point fingers to a few companies – but rather to themselves for their bad policies. Isn't it why we have a government? To be responsible for the economy and the financial system? Obviously they have not done the job.

    April 28, 2010 at 4:06 am |
  23. Geza

    Jordyn says:

    "Goldman Sachs doesn't deal with retail clients. They deal with Institutional Investors and large corporations (underwriting). If asset managers and other institutional investors are too stupid to analyze their risk, then the Senate should be grilling them for being incompetent with their companies or clients monies."

    There is a certain amount of truth to this... but remember many of these "Institutional Investors" were pension funds and the like. The money really belonged to "retail" clients. Yes, the fund managers "should have known better", but think of what you would do in a more personal situation:

    You are selling shares in a "gold mine". Your prospectus says in small print that the mine has played out and is unlikely to yield any more gold. A few rich people come up and purchase shares, and you justify it by saying that they ought to have known better. A fool and their money are soon parted! Besides, they can afford the loss.

    Next in line is a money manager. He has pooled together the life savings of a couple dozen retirees and would like to buy some shares. Do you say..."Well, it is the money managers fault. He ought to read the prospectus. I have no moral responsibility" and sell the shares and wipe out the retirees? Or do you turn down the sale?

    Yes, there are some differences in the situations, but the fundamental analogy is there. Responsibility is, or should be, distributed in our society. To claim otherwise is to take advantage of the system.

    April 28, 2010 at 4:20 am |
  24. sampy

    I think the Goldman started to get confused because the questions by some of the senators were of such nature. Three things have to be kept in mind:
    a) the Goldman dealt with sopisticated investors;
    b) in any business, profit maximisation is the objective;
    c) the disclosures were complete and the instruments were rated by agencies which had access to all the information.

    If anyone is to blame, it is the regulators and the senators who have had a rude awakening. Now they are deflecting the blame by accusing others. One of the senators made a very apt remark that "anything can be sold as investment as long as the price reflect the risk". In the context of time and activity, i think the price did reflect the value.

    The senators have to answer the following questions:
    a) How did they permit sub-prime credit (incl. stated income mortgage)?
    b) why do they still permit sythetic derivatives which have no social value?
    c) what social responsiblity have they established which the financial firms have disregarded?

    If they honestly answer the above questions, they will find the answers they are seeking.

    April 28, 2010 at 4:22 am |
  25. Geza

    Rohan says:

    "I think they are being made the scapegoat and the question as to their responsibility in advising people and competitors of a possible financial meltdown – is sheer non sense. Yes, may be justified from a moral standpoint.However, I know of no law that works on morality."

    You're missing the point here. To ignore the morality and only care about the legal is profoundly disturbing. Do you really want a society where this is the norm? I have no legal obligation to notify my neighbor when I see his house burning in the middle of the night. I don't legally need to wake him and his family up. But knowing that I let my neighbor burn, would you really think that I am either a good person or a good neighbor? Wouldn't you shun me and shame me socially?

    I would hope so. But to this extent I agree with you: the law should not be involved. And in this case it isn't. The actions of the government are not the same thing as the law.

    If something is justified from a moral standpoint then you have a responsibility to do it

    April 28, 2010 at 4:27 am |
  26. Adam

    This is 100% political and a complete sham! The “process” makes the American system look cheap and sensationalist. Goldmans is being pursued by vote hungry politicians when the simple fact of the matter is that Goldmans is the very best at what it does and it's being pulled through the mud because of that well earned and well deserved position – it's the greatest firm in Wall Street history! Goldmans did nothing wrong and it will be vindicated for this. People will always be jealous and envious of the best.
    Moreover, the easiest path is always to find someone to blame for things that go wrong – the real culprits for the economic crisis are YOU, ME, and the average Joe/Jane on "main street" that went out and spent money we didn't have!
    Stop making a mockery of the system, applaud Goldmans for being the best and taking this undeserved scrutiny with such grace.
    Yes changes need to be made to the system, banks need to own their mortgage books, take responsibility for bad lending practises, and better manage their risk. But blaming Goldmans is just ridiculous.
    If there is a god, he/she certainly blessed Goldman Sachs. Hopefully now that same god can move to bless America and put an end to this charade

    April 28, 2010 at 4:33 am |
  27. Andrew

    So people who are smart and have figured out how to make money are wrong? The western world has access to knowledge and resources on a scale unheard of throughout history and if they still cannot take the time to educate themselves on an investment they are considering then they deserve to lose their money. GS doesn't even deal with the little man, they work with other investment organizations – what blows my mind is that those organizations did not take the time or spend the resources to fully comprehend what they were getting themselves into. Was it ethically wrong for GS to keep their knowledge to themselves? Maybe. Does ethics currently play a role in our capitalistic society? No. Should it? That's pure opinion. Any arguments against GS activities are only valid in a different socioeconomic environment than they were operating in. They do what every business tries to do – make money and keep shareholders happy.

    April 28, 2010 at 4:44 am |
  28. Tom Parsons

    I'm terrified someday I'll run into Rohan Chauhan who says, "I know of no law that works on morality." Yikes! Really? Makes sense that he's defending Goldman Sachs I guess ...

    April 28, 2010 at 4:48 am |
  29. Guijuan

    So is it a wonder why Goldman has been making tons of money in the past? The cat is finally out of the bag.

    April 28, 2010 at 4:49 am |
  30. Norman

    Who will be believed???

    April 28, 2010 at 4:52 am |
  31. silentlamb

    I am so anxious to see BEFORE THE END OF THE YEAR 2010.... the downfall of GOLDMAN SUCKS and the seizure of 1billion from Paulson n Co. by the OBAMA government .
    Well, it would be as sweet as honey, in revenge for the INNOCENTS VICTIMS AROUND THE WORLD that caused BY THIS ECONOMIC MELT WHICH THESE CROOKS have manipulated.

    April 28, 2010 at 4:55 am |
  32. J.J. Ueckermann

    Blankfein said they did nothing wrong but admitted that they as C.E.O's failed in their duty's to manage. So why did he still take the big bonus.
    He was taking a bonus while my funds under his management shrunk 60%.
    Mr. David Sakti, it not about jealous politician/s, it's about greed that's costing my kids their education.
    I hope for justice to the full extend of the law. If I steal money or write a bad cheque I will go to jail. Why should these thief's and scammers still live in their mansions and I have to down scale?

    April 28, 2010 at 5:03 am |
  33. valwayne

    I wonder why nobody asked them why they gave Obama nearly $1 million, or what they got in return for it?

    April 28, 2010 at 5:09 am |
  34. power4things

    Jordyn's "only institutional customers" – so, the guy who sells you a stolen car is off the hook, if you failed to check the paperwork ... uh, no. I agree with how young these two-bit pirates look – probably conned their classmates out of their lunch money in grade school by selling them "quiz answers". I personally apply a strong dose of "caveat emptor" to my life; it pays.

    April 28, 2010 at 5:17 am |
  35. Geez

    This whole issue has made a mountain out of a molehill. Proper documentation of a CDO is hardly relevant to and certainly did not cause the financial crisis. Shame on the Senators for grandstading against GS on this miniscule issue, and distracting everyone from the more substantive and constructive reform that needs to take place on Wall Street. C’mon guys, try to focus on what is important.

    April 28, 2010 at 5:24 am |
  36. Asif N

    I love how the public gets upset with bankers for moral obligations? When have money and morality ever gone side by side. My only complaint is that bankers don't really do anything – they're generally quite incompetent. However, they're good at kissing butt and it's because that gets you places in the world that they actually make some money in investment banking.

    I only wish they were a little more intelligent too. Of course, if they were smarter people, they'd actually go out and get real jobs. After all, how much effort does banking or brokering take? Been there and I can tell you it doesn't take much at all"

    April 28, 2010 at 5:29 am |
  37. senators-are-dumb

    It would help if the senators did their homework. And if they understood clearly the role of a market maker. Blankfein is right – in a trading situation (not buying a deal) – customers/clients should not care how Goldman is positioned. It's irrelevant. Goldman's only role is to give a good price.

    Assume there's a portfolio manager who tells his trader: "Let's buy XYZ CDO – this market skyrocketing. Let's go in big. Don't pay over 100. The trader goes to Goldman who offers a good price of 95 but is short that security, then checks with another investment bank who offers a decent price of 100 and is neutral the security, then checks with another investment bank with a high price of 105 who is long the security; and finally the trader checks with another investment bank who cannot even provide an offer price.

    What should the trader do? His portfolio manager wants XYZ CDO. The trader's job is only to get the lowest price. It doesn't matter how Goldman is positioned. Should the trader pay more at a different bank? This seems like common sense. Is Goldman wrong for being short? No. They're giving the client the best price in the market. A very good thing. Maybe they're only short because they're too long a different CDO. Who knows what their view is on XYZ CDO and who cares... They make a market.

    Finally. Goldman shorted some securities to manage their risk. Other banks did not manage risk well. Lehman. Bear Stearns. Would the senators rather have Goldman manage risk well and save money for their shareholders (owners)? Or manage risk poorly, lose money for shareholders, potentially collapse and cause turmoil for the whole financial market?

    People should think sometimes...

    April 28, 2010 at 5:32 am |
  38. Robert Odean

    Beginning with the Community Reinvestment Act under Jimmy Carter reinforced by Bill Clinton and his administration, then with Fannie Mae and Freddie Mac buying up bad loans made to unqualified people, with weak and ineffective attempts by the George W. Bush administration to rein in the corruption at Fannie Mae and Freddie Mac easily waved off by Chris Dodd and Barney Frank, both receiving large campaign contributions from Fannie Mae and Freddie Mac, the stage was set for the system to fail. Even Obama was a direct player in this financial calamity while also benefiting from large political contributions from those gaming the system. Thomas Sowell in his book "The Housing Boom and Bust" makes it clear that the political elite created the subprime mortgage collapse. The smart people on Wall Street found ways to make money off this unstable and doomed to fail situation by selling worthless paper to others. The culprits are first to be found in Washington. They are now looking for scapgoats to blame. What else is new?

    April 28, 2010 at 5:35 am |
  39. gary davies

    Obviously they are being scapegoated. It is the system which allowed, even facillitated their actions.

    April 28, 2010 at 5:37 am |
  40. Chris Johannesson

    People, now try to get this. The one and only reason to run a company is to make a profit. Social welfare and conscience, is the government’s table not the corporate. If there wasn’t any strong enforcement of laws and regulation then companies would of course use that to its full extent. Corporations don’t have any conscious only quarterly reports. Just look at how much money these entities are spending on buying up the entire congress and senate every year. Do any of you think that is to try to be nice to underpaid representatives and other people in influential positions? Of course not! It is to prevent things like gun laws, health reforms, which Americans seems scared out of their pants to get, they rather pay through their nose to a private corporations and support the lifestyle of the overpaid executives that they otherwise love to hate, and other forms of common sense regulation that would force corporations to act responsibly and ethically, since in their terms that is not financially desirable. Who do you think is behind this? People who think that they at some point in their life will need some medical assistance that might be more expensive than they could afford on a middle income retirement fund or some corporate group that are afraid of losing revenue and jeopardize their high flying positions at the next board meeting? It is only when the monetary cost of violating laws and regulations exceeds the potential profit of ignoring them that corporations will comply. The fabric of a social welfare net is for the government to create. Please, note that that has nothing to do with socialism or communism, but with common sense. However, the only problem with common sense is that it is not that common.

    April 28, 2010 at 5:38 am |
  41. laura Gunning

    when is goldman going to be grilled about its involvement in Greece??

    April 28, 2010 at 5:43 am |
  42. Mahmood

    All day long the hearing committee was focusing on ethical issue that Goldman Sachs should have told the clients that this thing we are selling you is likely to go bust...do these politicians always disclose to public what they actually believe about an issue? Politicians are even bigger liars...they are the ones who say one thing and do another...did Obama told Goldman Sachs that you are giving me 1 million dollar in Campaign funds but by the way I am going to cherry pick you and screw you from behind by making you a villain for a systemic problem? I am actually taking a short position against you?

    Also, if I am selling my 10 year old car about which I think that it might give some problems in the future (this is why I am selling it), if I start to tell every detail to the buyer that why car might fail, I will never be able to make sale. Infact, half of the marketing world if not all will come crashing down if the marketer start telling each and every detail that why you personally think that its not a good product to buy.

    April 28, 2010 at 5:52 am |
  43. jason

    I was a banker for 14 years, getting out in 2005. I got out because it was clear that ethical standards were slipping. I didn't enjoy scheming against my clients, other banks, regulators and investors all in the name of the bonus. The only rule is how much money you make. Revenue walks and everything else shuts the hell up.

    Trust me, the culture is impervious, condescending and entitled, and they only have pity for the rest of you, providing the free backstop for their money-printing game.

    Anyone not in the game who takes their side is a fool.

    April 28, 2010 at 6:07 am |
  44. Jan Swanepoel

    So they were only following orders. A common and popular pastime in Germany in the 1930s and 1940s.

    Bankers, and other financial industry players, should realize that they are not just money making machines, but that they are still human beings with moral and ethical responsibilities. It's not good enough to just blame it on one's boss. That being said, management and shareholders pursuing profits at any cost should be come down on hardest of all, as they hold the livelihoods of so many in their hands.

    April 28, 2010 at 6:18 am |
  45. Ian

    The bottom line is that we are no longer manufacturing to build wealth. Instead, we shuffle money around to make a profit by the few that came up with these schemes. A utility once cashed a check that I did not sign... the lack of dedication and pride in the work place is deteriorating at a rapid rate. It's no wonder that these bankers can out smart regulators, senators and the average joe. I employ the technique of inundating my term papers with sentences that sounded plausible, something I was not proud of, during looming deadlines and got away with it. Just look at the binders the bankers have on their desk, do you seriously think someone is going read all that and COMPREHEND it during this investigation?? Blankfein will use the same technique that Condoleezza Rice used to dodge the 9/11 commission to shift blame.

    No wonder reality shows are so popular, we rather watch someone else's than face our own. It is time for America to wake up and face reality... stop unfair trade, put solar panels on every roof and make really durable goods that we will be proud of... or the day of reckoning will surely come.

    April 28, 2010 at 6:25 am |
  46. Mathew

    what strikes me most is those huge files in front of them, which these guys seems to have brought along with them, which in all probability is the summary of their dirty linen and i wonder how these guys ask such silly questions.
    they very well know they are not their for a screening of "Avatar" rather for a grilling by some very angry people who are pissed of on what could be termed as one of the biggest crisis in the banking history, created by some of these so called smart bankers, whose greed and high handedness brought to their knees some of the previously untouchables like Lehman and ML
    which makes me think that these guys are not so smart after all.
    yes, in business ethics go for a walk, but not when it involves poeples hard earned money, thousands of jobs, uncertainity and complete mayhem.
    the only way this could be avoided in the future is by bringing more transparency in to the banking system atleast from the government point of view. The bankers should also be made understood that they cannot get away after commiting such stupidity.
    if a CEO of once a behemoth of a bank, decide to work for 1$ pay package because his bank is being bailed out by public money, there is nothing impressive, what would be worth watching would be wether these idiots have learned a lesson or will be back to their wily ways the moment the economy is back in track.

    April 28, 2010 at 6:30 am |
  47. Invisible people

    Crime no longer pays on the street level. why jack a bank, when you can become a "Crooked Corporate Eco. Jacker"? Street hoodlums turn into state property and face heavy sentences, while the corporate scum laugh in the face of justice. The invisible...

    April 28, 2010 at 6:32 am |
  48. Aamod Wagh

    .. am apalled by the thought that the likes of Jordyn and Rohan Chauhan have the gall to say what they say without even a hint of remorse, repentance or any kind of guilt... I guess "making an honest buck" is an unknown entity to such 'creatures'... .. they turn a blind eye to the fact that there is very little difference between GS and the average con man... both of them establish an environment of implicit trust and then stab you in the back... only difference is that the GS guys wear suits and carry financial instruments as weapons...

    Jordyn & Rohan seem to believe that making millions through 'intelligent, deliberate and legal defrauding" (and then watching the customers drown due to such advice) is a very 'smart' business. Their primary (and perhaps only) measure of success is whether it made money for the stakeholders.. the fallout on the rest of the folks simply doesn't matter... don't know if that is socially acceptable behavior?

    .. we have to make sure that we keep ourselves far away from the B Schools that these guys attended if this is what they teach..

    ... and the final shocker is that the customer has to be blamed – since they were naive enough to trust GS !!

    I am sure these guys have 5 foot posters of Bernie Madoff in their houses as well!!

    .. all that comes to mind is "forgive them since they know not what they say"..

    April 28, 2010 at 6:34 am |
  49. asher

    Buying those CDOs from Goldman was like rolling a loaded dice. If Paulson did, indeed, have a hand in selecting them then the game is rigged without the customer knowing. Goldman has no obligation to offer advice to sophisticated investors but it does have an obligation to create a level playing field between counterparties. Paulson was given both the chance to bet against the team and the gun with which to cull all the good players.

    April 28, 2010 at 6:41 am |
  50. JohnChang

    This is why President Obama wants to rein in the fly boys of Wall St. with regulations to protect the consumers from such nefarious 'investments'. But is anyone listening? Seems like America is more concerned with freedom than any moral or ethical consideration.

    It's a case of "let them eat cake".

    April 28, 2010 at 6:46 am |
  51. Max

    As I see it it's hardly a question about whether or not things like ethics should play a role in the way G S runs its business. But, it certainly looks like G S helped some institutions rip off other institutions and that makes them accessories to crimes and they should be treated accordingly. Hell, they even helped Greece conceal the true extent of their debt. In any other business you're obliged to a certain amount of transparency. If a restaurant owner helps conceal that the one of his supplier's goods are tainted then he deserves to get into legal trouble. I don´t see why this should't apply to bankers whose conduct has affected the lives of millions, if not billions of people!

    April 28, 2010 at 6:49 am |
  52. Stan

    Living in Europe and working as a portfolio manager I was struck by several things inthe testimony.

    1. How dreadfully stupid these "brightest of young men" suddenly appeared, once they were pointedly questioned about seemingly simple ethical issues. Either they were quickly taught, one after another to speak the same lines over and over, or I would be troubled to let them have a penny of my money because "I do not know" was the most repeated answer. The ethical issue of disclosure is big and it is real, and unfortunately we saw a performance of baboons. Not a one of them including Mr. Feinstein "the captain of the ship" was wlling and able to focus on Goldman's specific diclosure practice IN THIS BUSINESS LINE. 2. Goldman Sachs, if there had been proper exposure is right to say "buyer beware" because ultimately every person who saves or invests money is ultimately responsible to control what they do BY THEMSELVES and certainly in their own interest.

    3. There appears to be massive confusion in the fact that Goldman has OTHER BUSINESS LINES where they have historically broadcast that they "put their clients' interests first" as fiduciaries. The fact that investment banks can engage in these different types of business makes it imperative that walls between theses businesses exist, something that has been a cause of trouble throughout history. Here, i think the lawmakers need to consider splitting types of businesses. Here in Europe the concept of the universal bank is full of interest conflicts up to absolute horror levels. this is why we have the Glass Steagel law in America, and this is why its temporary overturning, during the credit crisis, is so troubling. Conflicts of interest are the core of disclosure documents.

    3. I was impressed by the grip on the facts that the majority of law makers had and I believe their outrage at all the appearances of immoral (non-disclosed) practices is justified. The focus needs to be on proper disclosure, plain and simple. Once fulfilled, let markets work as they are supposed to, by bringing matching investors with diverse views and interests on an investment together. i do not wish to fully vindicate Mr. Feinmann because I think his performance was less than fully forthcoming, but he was right to say that his brokering business is there to match opposing parties. Clean up your house Mr. Feinmann and reearn a reputation for real fairness in what your people are doing because right now the fish stinks, and of course this means from the top. To paraphrase President Obama, your young men ought to be "bright enough" to make money fairly, with open disclosure to all concerned. If they didn't they should be fired and left to hang out to dry, because all their wonderful profits for the house can not restore a lost reputation.

    April 28, 2010 at 6:55 am |
  53. isarkhan

    lets they do their work.thks and regs isar

    April 28, 2010 at 6:55 am |
  54. Renato Santos

    Goldman Sachs was off to a great start, giving access to millions of pages of e-mails like they had nothing to hide. Then they threw away all the good will away in an instant. They were evasive and uncooperative, often employing dilatory tactics to waste time and antagonize the Senators. What a wasted opportunity! There were probably a lot of people who had already pre-judged the case and were there just to see some fireworks or watch them burn. But there were also people like me who gave them the benefit of the doubt and wanted to hear their side of the story and understand their deliberate or inadvertent role through all of the financial chaos. I have such high regard for the firm and its employees. I wanted to see and believe that it was possible for core values such as dedicated service, highest standards of excellence, and integrity to truly pervade corporate culture and be practiced in and out of work. Was I in for a rude awakening.? However distasteful and contemptuous it may seem to others, benefiting and reaping huge profits from a correct read of the market is fair game and legal. But it is another thing to develop and market financial products that have no real value and incapable of enhancing wealth for their clients. It becomes a crime when investment firms mislead, defraud, and steal hard earned money from common folks to rake in money and delight in their misery.

    Timberwolf, Abacus, Anderson and ADX index were some of the financial products allegely sold to their clients. When asked about Anderson, Mr. Sparks couldn't even answer the question how can Goldman Sachs get confortable in aggressively marketing and offering such a high-risk product to clients. I don't think it would have been dubious to market the product so long as the client is sophisticated enough to understand all the risks involved. This is why I am advocating for financial instruments or products be tested before it is made available to the market. So that regulators could assess the financial products, study it and rate it. Consumers are protected from defective products. The same principle should apply to investors who can be bank-krupt in an instant. This way regulators will be able to determine whether the product has value and is capable of growing wealth at all or a trap with artificial or hollow value that is designed to fade in an instant. The ADX index was quoted to be theoretical, conceptual, and impossible to value, a virtual death trap. Regulators need to evaluate these products and rate them according to sophistication of expertise in the product. This is to avoid mismatches that would put clients at an inadvantage where they can be easily be taken advantaged-off. When the upside to the timberwolf products were determined to be greatly limited with hedgers, the product was offered to less sophisticated clients who were less adept in understanding of the product much less profit from it. Like movies, these products should be rated according to the sophistication of the user. I wanted Goldman Sachs to clarify, explain, and tell the truth about all of these. Elevating the ethical standards to those of investment advisers is also a great idea.

    It is not too late for Goldman Sachs. A year ago, along with the stimulus packages from the government, Goldman Sachs opened lines of credit from entrepreneurs and struggling businesses. This is a testament to their generosity and kindness, I'd like to believe. I hope the firm realizes that at some point in time, the truth wll be uncovered, that there is nothing they cannot hide. I hope they come out clean. Cooperate in the hearings and contribute as much as they can to avert a crisis like this from ever happening again. Profits and share values are easily recovered but reputation takes a lifetime to build. I hope they don't throw it away and seize the opportunity to contribute to financial reform as a giant step to redemption.

    April 28, 2010 at 6:55 am |
  55. gary davies

    In fact, given the way in which the markets work, it is hypocritical to target a capable entity for a lack of scruples or ethics.

    April 28, 2010 at 6:56 am |
  56. george gao

    Not only their sins, but also the whole humanity and this financial system, maybe from the courses in the MBA!!

    April 28, 2010 at 7:04 am |
  57. Nik

    Though Main Street suffers as a result of Goldman's shenanigans it is the sophisticated, greedy investors, fund managers and bankers who should be blamed too. Why buy into Goldman's 'too good to be true' products? What are their risk managers doing? Surfing for porn?

    April 28, 2010 at 7:04 am |
  58. Khoo Boo Boon

    Goldman Sachs' official clearly knew what to do at the testimony. They were going in to 'confuse the enemy'. And they played this strategy to the hilt. The four of the executives and Blankenfein clearly were at their best in muddling the issues. How else can one explained Blankenfein's responses: "what Goldman Sachs did was essentially market making ". "we basically give our clients what they want" and "I don't know ....".

    I don't think Blankenfein and the four executive were as 'blank' (pardon the pun) as what many would make them to be. They knew who they were up to and they knew what they they need to do – confuse, obfuscate and play dumb!

    Khoo Boo Boon,
    Manila

    April 28, 2010 at 7:04 am |
  59. michael scott

    It is quite clear these fresh-faced GS "bankers" have been nurtured in a culture of dishonesty. By encouraging clients to take long positions on products while they themselves were taking short positions for the same products, they, GS, were in fact swindling: thanks to misrepresentation, removing money from other people's pockets to put in in their own. This is not a proof of competency. It is proof they should all be standing if the dock. This kind of judicial signal is necessary to maintain the minimal ethical component of trading necessary for the interdependent world market of today.

    April 28, 2010 at 7:08 am |
  60. Donny

    In 1929 banksters did not restore the honour of their families by suicide. The fascists, financed by the banksters to contain communism, blamed the crisis on their fellow 'jews'. I wonder who will die in the aftermath of the current crisis.

    April 28, 2010 at 7:10 am |
  61. oblio

    In banking it is a common rule that a crime is a crime only if the sums involved are small, otherwise it is business as usual.

    April 28, 2010 at 7:13 am |
  62. View with an Twist

    While Americans are busily stuffing their mouths with mountains and mountains of non-nutritious foods, guys on Wall Street work hard at duping so many people. Capitalism really sucks and absolute capitalism sucks absolutely. Many people worship money to the point that they are willing to do next to anything. Quite frankly, I think that Goldman Sachs intention is to run America to the ground. What no one wants to say, but it is one the mind of many is so many Jews are involved in all of these dastardly deals. They drain people and then turn around and throw all of that money to the state of Israel. It is insidious. Yes, I am very cynical about it all, but I am certain that there are more Jews involved in Wall Street than others. Wake up America! One day, America will go begging to the state of Israel for financial support. Anyway, that is my take on the situation. Yes, I am ready for Jews to hurl the too frequent comment that I am being anti semetic. Hey, don't even care anymore what they say. The fact is that Jews will do anything to protect the state of Israel even if means trashing governments.

    April 28, 2010 at 7:19 am |
  63. Thomas Van Horn

    Well I certainly interpreted the hearings differently. I saw some intelligent bankers attempting to give specific and reasoned responses to questions that were leading and confusing. I saw a group of senators that seemed unable to put together coherent questions – or in many cases even coherent sentences. On a number of times I asked myself "who taught these elected officials the english language – because perhaps those educators should be investigated." I saw pandering, politically motivated Senators that knew what answer they wanted and chose not to listen. Senators who seemed unable to understand financial markets and unable (or unwilling) to even attempt to learn. Senators who represent the worst of our political system. If there was any bumbling it was on the part of the committee and a sad commentary for our country.

    April 28, 2010 at 7:22 am |
  64. khaled

    THEY ARE THERE TO MAKE MONEY!!!! what do you want??? They are business people and all successful business people know that every thing goes. The only thing I regret is that I did not invest in their hedge fund. Heck, priests and popes are not honest now tell me how the heck do you expect a banker or even a president or Washington to be honest? quit sucking on that pacifier and grow up. We are a capitalistic country (the best system in the world) and capitalists are there to MAKE MONEY!!!!!!!!!

    April 28, 2010 at 7:25 am |
  65. Aamod Wagh

    .. Renato makes a lot of sense... If its possible, let these hi-risk products be tested and rated before being made available... Maybe these banks could show faith in their own products by putting in a significant amount of their own investments in them as proof of the product reliability and robustness as well...

    April 28, 2010 at 7:28 am |
  66. james

    I feel that the executives at all levels, and not just the CEO, should be held accountable with regard to questions of ethics and responsibility.
    On an unrelated note, does anyone know where I can read an objective article about the GS hearing? This one strikes me as extremely biased.

    April 28, 2010 at 7:31 am |
  67. Aamod Wagh

    ... looks like some people here have quit "sucking on their pacifiers" and now that they have "grown up" they would have no qualms about doing anything to make money... including selling their families and friends down the river ..after all "everything goes"...

    April 28, 2010 at 7:42 am |
  68. Antje

    Isn't there a very angry greek who, instead of turning on his own countryman, for once focuses on the facilitater of all this fraud and give these goldman saches of the world an american style treatment.

    April 28, 2010 at 7:52 am |
  69. BallerB

    It is another sad thing to witness that the Greed of Some people made many suffer.

    Here is the PUNISHMENT.

    Let's all give one good squeeze each at those shrinking balls of CEOs of Goldman SUCKS, or

    Send those Goldman Sachs CEOs to Burma and have their balls squeezed by Dictator (so-called & self-appointed) Senior General Than Shwe, or

    Have those CEOs and Senators squeeze each other's Balls in turns, or

    Have all those CEOs of Goldman Sucks and Investigating Senators squeeze the cute little balls of former President GW Bush.

    April 28, 2010 at 7:56 am |
  70. jacqui

    look people, what the senate is doing is a complete waste of time. if one doesnt understand risk, they have no business going into this in the first place. the business of these guys is to make money-they're not pretentious about that! hell-let them be they did their job-the guys who should be answering are those who made poor judgement. Jordyn, Chris- I support your views 100%. financial institutions are not a hold-my-hand and mother-me institutions-they are out to make cash-if you dont like that-stay away. Governement bears the responsibility of regulation, in the absence of a law-what crime have they committted? Thanks a lot George Bush! your legacy lives on!

    April 28, 2010 at 7:58 am |
  71. JT

    These 'successful business people' facilitated in the near collapse of the US economy...does the fact they made a profit in the process nullify their culpability?

    April 28, 2010 at 8:02 am |
  72. Kees van Eck

    I, from the Netherlands, cannot understand why these people, were not fired in the first place.

    Within their group (Goldman or the banking industry as a whole) they might even truly believe that they have done nothing wrong (that's socially very natural and rewarding for it strengthens the group). For that reason only they should have been replaced by a new staff who is willing to cooperate with the community outside.

    April 28, 2010 at 8:11 am |
  73. Henrique

    Creative accounting – decent words for stealing , thats what these MBA s' are teaching these"decent " kids in ploished suits. Remorse and guilty, capitalism took these away a long time ago!

    April 28, 2010 at 8:15 am |
  74. lisaweyn

    I do agree Goldman Sachs doesn't deal with retail clients. They deal with Institutional Investors and large corporations. And the should laid squarely on asset managers.

    April 28, 2010 at 8:17 am |
  75. Michael

    If memory serves me correctly Goldman was also deeply involved in the crash of 1930. Maybe it is time someone split this company up for the sake of the Nation.

    April 28, 2010 at 8:24 am |
  76. Ebiye

    This is the true spirit of the business world...morality has never counted...what has always mattered is profit.

    April 28, 2010 at 8:46 am |
  77. Mohan

    Investigate fully and proceed against Moodys and Standard and Poors too.
    They lent their name to junk bonds and enabled vultures like Goldman to profit out of it. And the losers (supposedly sophisticated investors) were playing with the money of ordinary citizens, pension funds, churches, schools, universities, city councils, etc.
    Seems like organised fraud to me. May be they should bring in Racketeering Police (just like the ones against Mafia/Gangsters) to take care of these investment bankers.

    April 28, 2010 at 8:47 am |
  78. Toks

    I sincerely believe that G-S didn't commit any crime here other the unsubstatiated disclusure issue. It is not the place of the firm to look after the economy but thier shareholders interest (profit maximisation), what are the regulators that are paid to protect the economy doing?

    As regards the issue of pension funds that invested in these complex instrument losing thier funds, waht happens to other pension funds that benefited immensely from the downturn.

    What we have all failed to realise that is that someone has to lose money for others to gain so I dont see a reason for all these finger pointing.

    April 28, 2010 at 8:49 am |
  79. peter

    bottom line question : would they sell these products knowing everything what they know today? Answer is obviously NO, but i would argue that they would not sell the product because they know it is morally irresponsible and wrong, but because they know now they cannot get away with it. moral of the story : they knew it was bad back then but they could never imagine they would be held accountable back then. however they were not alone, other people should be held accountable, and i do not believe in little show cases to draw blood to appease the masses. other responsible areas include : regulators, politicians, fed etc... i think i would prefer to see them on trial, they have a more wider responsibility than a greedy banker trying to make a quick buck

    April 28, 2010 at 8:54 am |
  80. ashley

    The gov't is looking for a scapegoat. goldman is an investment bank, whose job is to make money for itself and its clients, not look after the rest of the economy. they have no responisbility for the rest of the country, that's the gov'ts job, and yes, it's somewhat cut throat to think this, but it's the truth. just because they do it the best, doesnt mean that they are obligated to share their information. they were trying to minimize their risk, and did it rather well.

    April 28, 2010 at 8:59 am |
  81. j.hart

    i don´t understand the people defending Goldman Sachs arguing, they were only doing their job, and it is expected from banks to make money.

    every company wants to make money, still they have to play by the rules – even banks. why accuse Toyota of making faulty brakes, which can ruin lifes, and not accuse Goldman Sachs of faulty financial products? they can also ruin lifes! ..as we have seen

    April 28, 2010 at 8:59 am |
  82. clive

    The organisations who bought from Goldman – why did they not have in-house risk analysis or were their relationship with Goldman's perhaps just too cosy?
    Goldman's shafted their clients – but the clients COULD have not bought the product.

    April 28, 2010 at 9:02 am |
  83. Frank Heydenreich

    Work forces are very much controlled and very much regulated.

    Yes, Goldman Sachs plays by its own rules above any laws.
    GS has been able to create wealth especially for themselves.

    If you don't regulate the financial world, it will just bring down the entire world economy as it did many times already.

    Do have the politician the 'balls' to get this sorted out and get the financial sector REGULATED or are lobbying groups keep on going to infiltrate the democratic institutions to prevent this?

    April 28, 2010 at 9:17 am |
  84. Pat Greene

    I like Maggie Lake's interventions on TV. She adds a
    freshness and a little humor which is necessary to digest
    business news. Please pass this along to her re her article on
    the testimony of the G.S. execs as well as this: the word is
    PEDDLE, as in selling,
    not pedal, as in biking.
    thanks

    April 28, 2010 at 9:39 am |
  85. simask

    Can someone explain why what Tourre/Goldman did is not akin to insider trading as they acted on inside information when shorting. Can the laws that cover insider trading be applied here?

    April 28, 2010 at 9:39 am |
  86. passarinha

    Is it in fact illegal "to sell matches to passengers getting on a wooden boat"? No, it's just stupid and wrong. Why should be we be surprised when huge, powerful firms dedicated to making massive amounts of money behave in accordance with that goal? I feel disgusted by the actions of Goldman Sachs, but much of the blame for the financial mess goes to Ronald Reagan and the Republicans who pushed financial deregulation, and the Democrats who went along with it. If we don't like what they did, we should make it illegal; in fact, much of what they did probably was (barely) within the law. These hearings should be shining a light on the myth of the self-regulating free market.

    April 28, 2010 at 9:53 am |
  87. haydenl

    nice suits

    April 28, 2010 at 9:57 am |
  88. Mr. Freeman

    They were playing with synthetic markets... setting companies up for failure in order to bet against them and make out good after the collapse. Its like a doctor tells a cancer paitent that they dont have cancer... then the doc and his friends go take out life insurance on you to gain when you don't. Best description is like saying they played fantasy football with wall street. I say hang em. I can understand greed to a certain level, but THIS?! Its downright appaling. Who wakes up and says, "Lets make million of people jobless with my good idea."? HANG EM OUT TO DRY!!!

    April 28, 2010 at 10:02 am |
  89. Frank Fineggan

    Why are these putzes not in jail? Why is justice taking so long? Their confident, leering smiles at certain stage of the hearings were disgusting. They should be made to, each, personally give ALL the money back to cheated investors (American taxpayers) and begin shifts, in stripes, in chain gangs on the side of minor US highways. But, that will never happen: it is only white collar crime and they have good lawyers and pols lining their pockets. Fraud, fraud, fraud, no justice, no justice, no justice.

    April 28, 2010 at 10:12 am |
  90. Anne Armstrong

    These people are villians and should be jailed for abuse of power and for undermining the security of the US financial system.

    April 28, 2010 at 10:12 am |
  91. Ivan Farrugia

    Greed and more greed.....

    April 28, 2010 at 10:13 am |
  92. Sergio

    If the role of GS is to sell the products clients want, if it's merely a transaction between two counterparts each one with its own idea of how the securities will perform, why do Goldman Sachs need the trust of his clients, why Blankfein in its introduction said G. S. needs to be trusted.?

    April 28, 2010 at 10:18 am |
  93. capitalism needs positive evolution

    the ' THEY ARE THERE TO MAKE MONEY AND THEY ARE GOOD AT IT, SO WHO CARES? ' argument is childish and weak, typical modern philosophy ... you can apply that as an excuse to any former immoral YET successful person: Moussollini for instance was a huge success – thereby he is forgiven, and outside moral justification of his actions?

    no

    These people have responsibilities outside of their existance as money makers – ESPECIALLY so in light of their position and the power they wield. They require more regulation and accountability than those of us in lower positions, and deserve harsher penalties for their obvious lack of consideration and general selfish greed...

    April 28, 2010 at 10:36 am |
  94. Tam

    Have we forgotten how America was built?... Thieves, liiars and BS artists... The 'game' ain't changed folks, just the players. Ready to change the game yet?

    April 28, 2010 at 10:38 am |
  95. abhishek

    down with capitalism

    April 28, 2010 at 10:47 am |
  96. Mike Cooper, Edinburgh

    Well clear to me they are all as guilty as a puppy sitting beside a pile of pooh ! Should be made an example of – 200 years in Prison + Snatch all of there assets – Otherwise its going to happen again.

    Clear also that mom & pop pensions were being invested into these complex products – thats real problem they were cheated. pure & simple !!

    I keep my own investments simple – as Recommended buy Mr Buffet.
    Seems everyone thought they could invest, take more risk and double there $ in small time frame. I pretty much understand everything I invest into; can reckon some of the root investors need to take ownership of at least some of the blame here.

    GS was trusted and clearly took advantage.
    Put it this way if you were at a casino and one dude kept winning again and again – surely they have to be cheating ?? its common sense.
    Im bit upset at the cheeky antics of these bounders on TV – they made a joke on US Government and demonstrated nothing but arrogance and contempt for the US people.
    Perhaps they wont find it so amusing when they loose all there own $

    April 28, 2010 at 10:56 am |
  97. Sherif

    The next car I buy will be a Toyota, because they recall cars when they find a fault. The next bank I choose to deal with will not be Goldman Sachs, because they do not tell you when the S___ hits the fan.

    April 28, 2010 at 10:56 am |
  98. Jose

    The problem of those executives is that 99% of there products are sub or by products form other financial applications.
    And they can´t talk about that because those ways are not checked by the regulators since it´s on the Insurance schemes that many are based.
    Let´s face the true: right on 2009 GS had the control over half of all american money. They decided who lived and died. (and they still do... but let me wait a moment on that).
    With those sub and by products they could get your trust fund of 100k dollars and transform it into a 100M products that would be invested by GS in some markets. That is the way that the big financial groups like GS are using since the end of the 80's.
    With that "weapon" they can choose the admnistrations all over the western world. It´s not our vote that choose the winner... it´s the one that gets those guys behind them. Bush had them and won, now they changed to Obama and he won (all because bush let them fall and was ready to let the big groups crush to get them into smaller ones... where he could get some help for mcain).
    Those answers are so normal that you can see them on your local branch. Just go to your bank and ask them about some product that they sell and have big publicity on the outsides, tv and radios. You will see that the person knows everything that "can give you money" and that "you won´t lose 1 cent with this product". But if you read the 10 pages of conditions and start to ask them about the "the client will need to pay 10% of the initial value after 2 years" or "the client can´t get there money back in less than x months or he needs to pay ywds for getting there money back and losing all the interest that was got during the contract". They start to bauble and get out to aks someone else about that.
    And that is the normal move for the investment banks. They receive what you and your neighbours send to the bank and your bank invests that money on one of those investment banks. That way your bank can get more money for them... and pay you something for your money.
    The problem is that those moves are so underground that your money gets by 15000 accounts every second and at the end of the day your 10 dollar bill is like a 1 million dolars to the banks.
    Right now the regulators, the treasure and the admnistration just don´t have power to fight them... and all because 100% of our taxes are for paying the debts of those banks.
    This years those values are raising and raising and raising that the banks advanced on another point: public debt.
    Right now ALL the rating companies are protecting the big banks and started to raise the middle class countries to get more money in a near future. That way they can cover there holes and can kill the smaller players.

    The biggest problem of this is that if you and me get the money out of there scheme (something that can only be done by removing the money from the banks and just buy the minimal for survival) they will crash and burn. With the current crisis many of them should have crashed and burn... but look at wall street. 100% of the financial companies are presenting, at least, a 20% increase on there profits for the first quarter. On the other side they say that the profits are appearing from reducing there company workers between 10% and 50%. And those that are losing there jobs are the ones that have big debts with the banks.
    So the snowball is rolling and rolling over a snow field and they are pushing it at the same time that they fill up there pockets.

    April 28, 2010 at 10:56 am |
  99. Jo

    The most repeated answer by Goldman Sachs' guys during 'the grilling' session was, "I had no knowledge about the information." Do they expect us to believe that a banker at that level, where he/she advices and influences the investors' - would have no information other than related to his profile. All the 'coffee meeting', internal gossip and market info just breezed their alongside and they had no knowledge...difficult to believe but I think it might be more difficult to prove this wrong.

    April 28, 2010 at 10:57 am |
  100. AK

    By making money (shorting) against these very products as they knew the mortgage backed products were doomed makes it a case of insider trading. If one company tell other it becomes insider trading however if one division sells a product and other dicvision bets against it it is not. I see a conflict of interest in making money on its own products by short selling.

    April 28, 2010 at 11:04 am |
  101. MarkUhrich

    Villain. They helped create and sell "securities" that were designed to fail – and they knew this. They should be required to pay back every cent that all of us lost – and then go to jail for fraud.

    This is also the company that coached Greece on how to hide its excessive debt – leading to the current financial problems there.

    But, they are not the only ones. There are others and they must be brought to justice.

    This all demonstrates the clear need for the proposed reform of the financial industry.

    April 28, 2010 at 11:08 am |
  102. Goran Turner - Display "Kale of Sydney"

    Hm, amazing, you all missed the big picture. The Obama Administration wants to introduce new laws and just by sheer coincidence SEC starts action against Goldmans. It is so irrelevant as to their guilt or innocence, the game here is to generate enough heat and put pressure on recalcitrant Republicans to get enough votes to get the legislation through. The rest of it will play out in due course – it always does. And you know what? It just will make no difference. Next 20 years will be like the last.

    April 28, 2010 at 11:11 am |
  103. tony gil

    I don't want to exculpate Goldman Sachs or any other investment bank: they have crossed legal, ethical and moral borders galore. more than a living, they make a killing out of it.

    BUT, they did it because WE, clients, investors (big and small), mortgagees and stockowners WANT an agressive market, with lots of chances of making it big. It is the small guy who asked for this particular market configuration. Dura lex sedi lex.

    Besides, it is the voter who kept Reagan, Clinton and Bush in office – because we liked living in bonanza.

    Ultimately, we created this mess and if we are not careful, these future convicts will be no more than scapegoats in designer suits.

    April 28, 2010 at 11:25 am |
  104. Paul Kinner

    Daniel Sparks, seem smart and confident. Beleves he did things ethically, win or lose
    Joshua S. Birnbaum, seemed shifty and evasive, like he knows he did something wrong.
    Michael J. Swenson, henpecked, caught up in something he did not fully understand.
    Fabrice Tourre, too smart, you can’t catch me.

    April 28, 2010 at 11:25 am |
  105. from Europe

    One word from old Europe: in Germany we don´t have that sort of people. And I am happy about it. or should I say I am not? The people at GS are the most brilliant and smart people in the industry, maybe even on Earth. With a few exceptions: nobel-prize winning scientists, chess players, professional poker players, wait a minute....isn´t it known that investment banking attracts nobel-prize winning scientists, and poker players, and...

    My view on that is that these very bright people of that generation were looking where to best invest their brains and make the highest amount of money. And: where they could use their superiority of intelligence. And here´s my point – they kidnapped an industry where superior intelligence with limited regulation. It provides a huge playground for their brains, and they take huge advantage of the knowledge and intelligence gap between the average crowd and themselves. That´s why they can also sell their products to other insitutions in the industry. I just imagine a sales pitch of a well-trained GS superbrain to an average Bavarian banker.

    Social contract? Touc base with main street? How, when where? In their Ivy League schools or out of their Porsche´s or on their private islands or gated community? They don´t live on Planet Earth and I hope the senate comitee brings them back-with a hard landing

    April 28, 2010 at 11:26 am |
  106. RichP, easton, pa

    Remember for every finger you elected clowns in DC point three of them are pointed right back at you.

    April 28, 2010 at 11:37 am |
  107. Peter Warren

    Watching the Goldman Whacks you executives avoiding answering the question the only thing it reminded me of was the Neurenberg trials "Yr honor, if I didn't drop the cyanide pellets in, someone else would have done. We are not responsible for anything ever. We'll screw up the economy any time – we are just paid to make money for us and we don't have any other standards, ethical or otherwise" Despicable bunch of thieves in Wall Street clothing. Yea for Goldman Whacks you.

    April 28, 2010 at 11:41 am |
  108. Gene C.

    Too much gaming was the cause of the financial meltdown. Goldman and others steered to much of the world's savings net-surplus into a single market, the U.S. housing market and then profited by realizing the bubble they helped create was about to burst. Don't forget, Goldman's payoff for betting against the housing market came mainly from its default-credit swap contracts with AIG who, courtesy of the U.S. taxpayer, honored them in full. The gambling junkies that head our private financial system desperately want our respect for which, up till now, they have been able to afford. But last night's performance shattered their public relations effort as we collectively saw just how big a casino they run on Wall Street. We should all be so privileged and be able to write contracts to speculate on the direction of anything we want, including things like our neighbors risks but that would turn us into a nation of gamblers and gambling as a component of GDP has already crossed the line and put us into the danger zone.

    April 28, 2010 at 11:50 am |
  109. Woody

    These guys think the law does not apply to them and are thumbing their noses at the public and the Government. They should be strung up!

    April 28, 2010 at 11:51 am |
  110. George

    Jordyn ..I find unbelievable that any one with any sense of basic honesty/morals can even dare to deffend these thieves. The money they have(had) is NOT their property and the reckless / criminal practices they used and still do these days, a shameless violation of the trust their clients saw betrayed by the ones who faked and LIED to get their trust/capital.
    They all speak, move and dress like a monochordic bunch of charlatans dressed in expensive suits and nice ties that to try to hide their obvious criminal character and practices, but obvioulsy they are the opposite of what they fake and pretend to be.They should be arrested and the bank took away from them ASAP.criminals aren't supposed to rule banks and given any credit or merit, but rather arrested for destroying millions of hard-working/hard-won american lives and capital.

    April 28, 2010 at 11:54 am |
  111. JoeJoe9

    Looking at the picture above I see 4 people who are representatives of pure greed at the highest levels. They represent why the US is no longer a democracy, and is now a plutonomy. Why capitalism has been extremely abused, unchecked due to deregulation, and why the American Dream (along with capitalism itself) is now a lie. They help instill fear of socialism, but at the same time help grow extreme capitalism, which is by far more dangerous and hurts the majority of people more than any other 'ism'. Over 300,000,000 people help feed these super rich, while the rest are left to struggle, suffer, and many brainwashed into thinking they are in pursuit of the American Dream...that is a dream based on pure greed, looking out for oneself only, and not looking out for the good of all citizens. It is a lie.

    April 28, 2010 at 12:02 pm |
  112. JoeJoe9

    These guys are all dangerous greedy self-absorbed atheists. They believe in 'money', 'greed', and taking what they can no matter how many people/busniesses they have to destroy to get it. No person of faith in a God could be this greedy and self-absorbed.

    The American Dream at its best. Capitalism at its best. They are the ones that help keep the lie alive and push the lie about socialism to keep people in fear and not question what they've always been led to believe.

    April 28, 2010 at 12:07 pm |
  113. Jordyn

    Boscoe – GS didn't "rape" anyone. They thought a deal was not a good risk and set out to get rid of it. Their counterparties (not the general public as one post suggest), should evaulate that risk on their own.

    Risk is a "view" not the "facts" of the future. One man's view and tolerance of risk is not anothers. The biggest fraudsters in the structured product market is the rating agencies who whould have rated these products based on the creditworthiness of the underlying mortgages. The traders and sales guys are not analyst and are strictly prohibited from publishing their opinions.

    In 1999 (under the Clinton Administration), Freddie and Fannie both warned of them being forced to guarantee terrible debt. They were forced by the White House and congress to not only continue but heighten this financing. Regulators created this horrible debt and Wall Street backed it by assessing risk. They kept some of the risk for their own profit and doled it out to other INSTITUTIONAL investors who determined by their own analysis the associated risk. As many began to realize that the BAD debt was not a minor percentage of these securitiezed loans, they began removing theirselves from it. Others blindely ignore their responsibility to assess risk and in their own greed jumped in deeper.

    As these 5 year ARMs (which were improperly marketed to long term home owners rather than the mobile sort), started re-setting at the higher rates for these people who could barely pay the lower payment, the house of cards fell. And, now everyone is mad at the guy who pulled his money out and sold it to someone who had the money and know how to manage risk and chose not to?

    April 28, 2010 at 1:53 pm |
  114. Jordyn

    George – the money they had was definitely theirs and they managed it in a way that was proper for the stakeholders. They did nothing improper in selling assets to another bank or asset manager that should have known what they were buying. Goldman doesn't have "the in" on the value of any debt. The value of debt is based on the price it will fetch in the market (so general market opinion). Goldman is only one player in that market and it was their opinion it was worthless, but for the buyer (let's say the incompetent Bear Stearns), it had whatever value that they offered in way of price.

    The underlying securities of a particular structured product is a known comodity. Goldman didn't hide the CUSIP and all the corresponding market data. Bear (or insert whoever), should have analyzed the market data and evaluated the risk and determined for themselves if they have the tolderance for the associated risk. People go to school to learn how to do this stuff, you don't just graduate from high school and apply at Goldman Sachs. If you don't have the ability to analyze risk, you shouldn't be working for these types of institutions.

    April 28, 2010 at 2:02 pm |
  115. Peter-Paul Meiler

    I live in The Netherlands (Europe). Although we have our burdens too, this is one of the times that I am very happy that Europe hasn't come as far as the USA with capitalism.

    Goldman Sucks may not have broken any rules but they did abuse the people of the USA and abroad on a scale that has never been reached before. The fact that their clients (institutions) may not always have been very smart doesn't make it right to take advantage of them. In my mind, these bankers are criminals of the worst kind. They are directly and indirectly responsible for unimaganable suffering and loss of life (if you take the suicides into account that resulted from desperation).

    @JoeJoe9: I don't see the link with atheism. Bush, Cheney, Rumsfeld were all "man of faith" and their government lead by example (in this case the example was corruption). They endorsed this corruption and profited from it. Let alone the Catholic church. My guess is that catholics rape more children than the average atheist.

    People of the USA: I hope you make it through this. And I would recoomend some good old-fashioned tar and feather treatment for some specific US citizens . . . . .

    Peter-Paul

    April 28, 2010 at 3:58 pm |
  116. Fred

    This is a "public reality show" thrown by the US Gov´t in the absence of any tangible evidence of wrongdoing by GS. Had they any conclusive evidence, they would already be in jail.

    Wake up America. Read a bit of history and see how empires and wars and victories and land conquests were made and bet over thousands of years. Capitalism is certainly not American, it has been the bread and butter of human civilization since people discovered the use of the abacus (no pun intended though very timely!)

    Stop being so "self-righteous" and focus on constructive, positive events in your daily life. That will make a change!

    April 28, 2010 at 10:21 pm |
  117. Aquarius

    Just listening to them answer the commitee's questions and the their arrogant body language proved beyond doubt that these Goldman Sachs execs are a bunch of crooks who kept lying through their teeth even in the face of factual evidence of their own malfeasance. Too bad the US does not have the same sort of laws as China has for white collar crimes. They would find themselves before a firing squad and no one would weep for them not even their brother rats in the sewers.

    April 28, 2010 at 11:31 pm |
  118. Jordyn

    Peter-Paul Meiler – those institutions aren't their "clients",they are their "counterparties". They have no obligation to disclose their opinion of a security they are "trading". And, those counterparties shouldn't care what Goldman's "OPINION" is anyway, they should have their own opinion.

    If bonds are being "TRADED" on an exchange, traders don't exchange TALK (opinions) on the quality of that security. They do exchange a CASH PRICE (opinions). And, the rating agencies should have properly rated these and and been part of the risk tool that firms utilize to manage their risk. Although no on on the street took those ratings seriously. No one thought these were AAA investments. They were all betting that it wouldn't all fall a part when they were so heavily invested. And, the fools attempted exiting the market way too late.

    April 29, 2010 at 3:10 am |
  119. Chris Petersen

    Yes, Goldman has a right to act in its own self interest, which they did. However, for a bank that built its reputation over the past century as the world's most client focused investment banking firm, they are letting the short-term damage a long-built reputation. Blankfein championed this shift in the early 2000s after GS went public (read "The Partnership" for a detailed account about the internal debate on whether balooning their own book could co-exist with still serving clients.) We are now seeing the payback for a strategy that has too many internal conflicts of interest. Is it illegal, no? Ethical? Maybe. Good business? Absolutely not as they have now lost the trust of their clients and the general public. Goldman is now known as a firm that could care less about its clients, even if that is not the case for the i-banking, advisory business units.

    April 29, 2010 at 3:59 am |
  120. Greg

    Maggie
    you are being simplistic – matches to passengers in wooden boat is wrong analogy – the counter-parties in this case are NOT retail customers so the analogy should be selling matches to fully equipped and professional firemen with all their equipment on board the wooden boat and who know what risks they are taking, Should Goldman have raised the alarm? Therein lies the rub – investment banks thrive on information and the risk arbitrage that comes with knowing more or having an opinion that is more solid than your competitor and making money out of it.
    Remember, Goldman was hired by Paulson (who is their client) to create a product and as market maker, they did just that. They then got an independent firm to structure the product and then went out to look for clients (IKB et al). Paulson had an opinion that he will want to short this product (freedom of choice in this country) while other counter-parties had differing opinions and other information to say that they can long this product. As market maker, Goldman has no obligation to tell consenting and well informed sophisticated clients which way the market will go. So it is simplistic and of course makes headlines and pander to the public (who has less understanding of how investment banking works) for the politicians to jump on this bandwagon. But exactly what Goldman does in structured finance is exactly what greases the wheels of commerce and enables globalisation to take place and allows for the cars, services and the toys and food for you and your family, so as a responsible journalist, please articulate a less simplistic tale.

    April 29, 2010 at 5:58 am |
  121. jack Miller

    Goldman should be congratulated .They are the only Investment Bank who survived the Crisis .I believe as a Market maker ,they had no duty to disclose. They returned the Tarp Funds with a 23% return to the taxpayer..The ones that should be taken to task are the risk managers of competing firms who did not have the intelligence to see that the HOUSING BUBBLE WAS POPPING .LETS REWARD GOOD DECISION MAKING .IS IT NOT WHAT CAPITALISM AND AMERICA IS ALL ABOUT ?
    POLITICS!!POLITIC !! THIS IS WHAT I SEE HERE.
    BELIEVE ME ,there is plenty of blame to go around.The American consumer who used his home as a piggy bank .The very low rated ,The regulators,The POLITICIANS WHO IMPOSED THAT BANKS MAKE LOANS TO SUBPRIME BORROWERS (.REMEBER REDLINING )???

    April 29, 2010 at 8:07 am |
  122. Steve - Australia

    As I watched these dapper high rollers answer pointed Senate questions about the ethics of shorting losing stocks with the left-hand while selling them to investors with the right-hand, all the while cognizant of the outcome, that it was clear that these Execs were neither lying or being deceitful. Instead, it's apparent that any semblance of moral fabric simply does not exist in them; i.e, making money is what makes "right". What's more, chances are that if one traces the origins of this distorted philosophy back to its source that trail will lead right back the the high-powered business schools that handed these morally weak minded drifters their dry, arid and lifeless degrees which provide no useful purpose for mankind except to foster pain, hardship and despair for good common folk.

    April 29, 2010 at 9:09 am |
  123. George

    Peter Paul Meiler...fact is Golden sacks(thieves) abused their privileges to inflict maximum pain and suffering to millions of hard-working honest americans while makind insane profits at their expenses. Only the honest workers took the consequences of the risks , not the super-rich bankers who messed up bigtime.
    Another fact is that the atheists DO rape more children than the average catholic. There are hundreds of thousands of catholic priests and associated clergy that have never abused any one sexually or violently. The number of these accused of any abuse is wayyy smaller than the number of atheists acused of pedophilia.

    April 29, 2010 at 10:59 am |
  124. Mohanraj Dhanagopal

    I am from India and watched the Senate live. I think the Goldman guys did a reasonable job. They came with a strategy and apparently had lots of brainstorming on the ethics issue. I think the real issue is:

    Who is the client?

    For Goldman it is both, themselves as well as people who buy these esoteric financial instruments. In my opinion, the market regulators are a lot to blame for letting this conflict exist. This is like playing poker where one party sees all the cards and the other doesn't.

    The financial regulation bill can't come early enough and I hope it addresses these fundamental issues.

    On the ABACUS issue, I think it was like insider trading. Paulson & Co. had access to information – that the packs were set to fail – and they used this information to make a Billion. The other party didn't know this information and the 'insider' cashed out. This is not betting. Betting is when you wager based on speculation. When you pick a pack that is set to fail, it is not speculation.

    Banks like Goldman should be let to do only one kind of business – either advice clients or trade for themselves. They should not be let to do both.

    Trust in God but lock the door!

    April 29, 2010 at 11:31 am |
  125. Paul Asman

    Simply .... THIEVES
    Sadly ... with US patronage
    Moral lesson? What smells burnt, probably is – only it puts our administration shaky ethics standard on line again.
    Wake up America!

    April 29, 2010 at 1:03 pm |
  126. Chester Gary

    The ignorance displayed in these comments and by the Senators is appalling.

    -Non-Goldman employee who isn't an idiot

    April 29, 2010 at 4:05 pm |
  127. John Home-Douglas

    Probably the best analogy I have heard so far "it is like someone selling a car with no brakes and then insuring the driver"

    April 29, 2010 at 9:54 pm |
  128. Fin Svcs industry professional

    Let's be clear about a few things – the compenation of GS bankers and whether or not they profited from the crisis is not the issue! And let;s be clear, it's NOT just GS, it's all the other I-banks as well.

    The issue is that they claim to be serving their clients interest, then they package and heavily market structured products to "clients", and yet they are betting that these same products will fail. (This is just Liar's Poker writ large...go back and read the part in Liar's poker about the young salesman "blowing up" his first client)

    For market makers in liquid markets, where the client calls up for a quote, there is no need to disclose your position. You can happily sell to them while you're shorting.

    But in a market that you have built yourself (bought and packaged securities, structured a highly complex investment, etc.), where you have gone out to actively cover clients and sell to them, you clearly have an ethical duty to inform the client whether you think the security represents a reasonable investment or not.

    GS's actions were clearly unethical, regardless of their legality, and they clearly explained through their senate questioning that they do not believe they have a duty to act in the best interest of their clients, regardless of what they insist is one of their core corporate values.

    And finally, when the sh*t was hitting the fan, they were doing everything they could to dump their own inventory and profit from others (like Paulson) shorting the market....in these actions, it appears that there is certainly "smoke" relating to fraudulent lack of disclosure when selling products, and where there is smoke, there may be fire.

    April 30, 2010 at 8:44 am |
  129. Jordyn

    George –

    Goldman Sachs and the other investors in the CDO market made it possible for these "hard working Americans" to keep their credit cards, home loans, student loans, farm loans. If it wasn't for these types of investors where do you think all that credit would come from? Your neighbor, "hard working American" going to loan you $200,000 for that new house? Do, you think the local bank has the deposits for those types of high risk loans? They make loans, group them together in bundles, securitize them and sell them on Wall Street so there is liquidity to make more loans. If there weren't so many "hard working Americans" buying houses they couldn't afford, and so many front line lenders making these bad loans, and government agencies backing these loans, then Wall Street wouldn't have been left holding the bad. Doesn't mean I feel sorry for Investment Banks holding the bag, they have risk management tools to help them decide how much of this risk they can legitimately take on. Goldman managed their risk, Bear didn't. GS is here greasing the wheels of those hard working Americans need for credit and Bear isn't. Be a self preservasionist and celebrate the success and intelligence of at least one Investment Bank.

    April 30, 2010 at 1:32 pm |
  130. John Soullier

    ROTTEN SMUG BASTARDS!

    May 1, 2010 at 9:05 pm |
  131. eric

    These Wall street "firms" should not be classified as banks or financial institutions. They need to apply for a casino license and need to be regulated the same way as the Las Vegas casinos for example.
    That would include they it is a crime to bet or take bets on any states economy and currency.

    May 1, 2010 at 11:23 pm |
  132. Carlos

    The fact of the matter is, the interest rates started to rise (via Fed’s decisions) very quickly in early 2004. The Fed reasoned that inflation was getting out of control, so they decided to slam on the brakes continuously over 2 years, increasing central rates fivefold from 1% to over 5%. This means interest expense on mortgages quintupled in 2 years, making it impossible for new homeowners to pay the mortgage, and making it “easier” to simply walk-away from their new homes.

    http://www.global-rates.com/interest-rates/central-banks/central-bank-america/fed-interest-rate.aspx

    Goldman Sachs is not guilty of betting against the American homeowner – anyone should have seen this coming. Let’s remember, a fivefold increase in the interest expense of your new home, in under 2 years! This is impossible to adjust for if your salary hasn’t changed as well. The result is to try to desperately sell your home, even while making a loss, or simply walking away, leaving your equity there.

    The politicians should not be looking for blame for the crisis in the banks who traded CDO’s, but instead, we should consider reviewing the knowledge of the people running central banks, especially the Fed. While we are at it, let’s review the ECB (European Central bank), and the Bank of Canada (BOC) as well.

    It is evident that the Fed’s decision to raise interest rates on a monthly basis between 2004-2006 is ridiculous, not giving the over-heated economy enough time to REACT and absorb the increased debt burden from increased interest expenses, and thereby cool-off slowly. Some variable mortgages get interest rate adjustments on a monthly basis, other fixed-rate mortgages don’t get an adjustment for years, regardless of any changes in the market place. Adjusting central interest rates requires time for *everyone* to feel it’s impact and adjust accordingly. It’s like trying to stop an oil tanker on the high seas, it takes time to slow down. And like an oil tanker, if you apply the brakes on too much, once your realize it, you may end up losing all momentum. Getting the tanker to increase speed again takes time. It is important for central bankers to understand this time-lag in having interest rate changes affect the economy and underlying inflation rates.

    The over-braking in 2004-2006 in the USA’s Fed is evident, since in mid 2007, merely 1 year after reaching the recent peak of 5.25%, the US economy was stalling, requiring a virtual free-fall in interest rates from 5.25% to 0,25% in less than 1 year. In retrospect, the Fed looks like a new driving, getting the car to act like a wild bronco. Would it not have been better to have set a more realistic rate of 2 or 3% in 2005, and avoid such extremes in central rates?

    The Fed is not the only obvious incompetent driver at the helm of a central bank. If we look at the ECB rates (below), we pretty much the same error in judgment, where the ECB actually raised rates from 4% to 4.25% in July/2008 , just a few months before the free-all rates to 1% in early 2009! Where was the ECB looking in July/August? Why apply the brakes to them slam on the accelerator a few months later!?

    http://www.global-rates.com/interest-rates/central-banks/european-central-bank/ecb-interest-rate.aspx

    The same goes for the Bank of Canada (below), in terms of a crazy roller-coaster ride. However, what is interesting is that, unlike the Fed and ECB, between 2002-2005, rates didn’t stay at low levels for more than 6 months at a time, which has helped the Canadian economy from suffering a huge growth spurt in the mid-2000’s, and thereby avoid a huge downfall as other markets. That being said, the BOC (Bank of Canada) has followed the example of the Fed in the free-fall central rates, during 2008-2009, for reasons which may include avoiding a strong CAD$ against the USD$, in an attempt to maintain its trade balance with its largest trading partner.

    http://www.global-rates.com/interest-rates/central-banks/central-bank-canada/boc-interest-rate.aspx

    In conclusion, while committees sit and interview Goldman Sachs, in trying to understand the bank’s role in the crisis, it is evident that we need to go back to square one – central bank rates, and the legislation that may be needed to regulate the extremes allowed in central bank rates. Just as central banks look at keeping inflation within a range of 1%-3%, central banks should also consider keeping central rates within a range, or perhaps defining the acceptable changes in the central rate within a particular time frame, and thereby avoid over-stimulating or over-braking the economies that they are trying to control and improve.

    Goldman Sachs may be guilty of non-disclosure with their CDO trading, but one thing remains, the underlying mortgages were “junk” because the people couldn’t pay their mortgages due to the central bank rates. The first domino was pushed by the Fed. Goldman Sachs just didn’t want to be left standing with the hot potato once the music stopped. When you are playing musical chairs, maybe it’s the DJ’s fault rather than the players’ reaction to do whatever it takes to get a chair.

    May 2, 2010 at 5:02 pm |
  133. Scott

    I suspect that most people are ignorant about the economics here and GS is being villified. The senators were aggresive and at time looked like they were out of their league on how the financial system works. Mcain especially.

    May 2, 2010 at 10:34 pm |
  134. Allen

    Sad when Goldman justifies its conduct by saying they kept 90 million of a deal that went bad and lost the 90 million when the facts proved out that Goldman initially tried and couldn't peddle the 90 million investment and continued to be unable to find a buyer for it until it was too late. All credibility is lost, if this is what Goldman calls exculpatory evidence.

    Sadder still when-in an interview-Fared did not question this Goldman justification. He, then, also loses credibility.

    May 2, 2010 at 11:45 pm |
  135. Jordyn

    Carlos – you just flew past 70% of the posters heads with common sense backed up with evidence. Let's go back to name calling without a clear understanding of the big picture and how it works please! It's much easier to make the rich guys the scape goat.

    May 3, 2010 at 12:57 pm |
  136. Chi

    Once upon a time there were Masters of the Universe that could do no wrong. Successful businessmen chose to emulate them. They were feted by Heads of State. They were more welcome by Heads of State around the world than the US President as they could move enormous amount of capital for development. They were above regulators as they made profits. The Fed only prints money and Government only spends money. They were view with awe and pride by American public as symbols of success and Yankee ingenuity. The whole world and the best brains were sucked in by their success. Greenspan thought they were great. As stated by Maggie Lake: Their job is to make money and they did that well.
    They are now mongrels. So what went wrong?
    We (public, business and government) all jointly created the Masters of the Universe. We respected them, put them on a pedestal and created the conditions and the rules that allowed them to become market makers that are very good at making money.
    We should not now be so shocked that they worked only for narrow and selfish interests. After all, politicians, political parties, public institutions, local councils, school councils, religious orders, individuals etc all selfishly work for narrow and petty aims. The Masters of the Universe are only reflections of us and who we wish to be. Let those who have not sin cast the first stone.
    Can we now move towards higher goals that are more inclusive and serve the greater good? I am optimistic that, over time, public consciousness is raised and we haltingly lurch towards greater good – colonialism to freedom, slavery to emancipation, cold war to peace, limited health care to universal health care. As a solution towards mitigating the damaging impact of selfish interests, real transparency is a good place to start. The public will be much less tolerant of many practices if they know what is happening. The rule of transparency also applies to political parties, public institutions, local councils, school councils, religious orders, etc.

    May 4, 2010 at 7:19 am |
  137. Paul Gibson

    I am afraid Maggie has dragged Goldman Sachs into a debate about the ethics of short-selling and market-making. Goldman followed the rules and regulations set out by the market regulatory body - in this case, the Fed and SEC. Nothing more to it. While markets tanked, Goldman which had wisely short-sold positions to cover their clients and themselves made a bundle. The only reason Congress has these ridiculous hearing is to cry about the fact that it wasn't them that made money in the process. Maggie, learn your market regulations first before making striking and untruthful judgement statements about market professionals.

    May 4, 2010 at 7:38 am |
  138. Carlos

    Hi Jordyn, yes, it is easier to look for rich guys to be guilty for all the pain. Especially if they didn't disclose things properly when things started turning sour. The really guilty guys, however, are the idiots runnning the central banks. Why isn't anyone questioning the wisdom (or ignorance) of raising central rates from 1% to over 5% between 2004-2006? This was going to create major loses no matter what. The only question is, who was going to be affected by the people defaulting on their mortgage payments that were the basis of the CDO's? The current grilling of GS is based on non-disclosure of the underlying "junk" mortgages mixed in with "AAA" debt. Now, what abot all the homeowners and mortgage brokers who blatantly misrepresented their incomes to get the loans in the first place? Shouldn't we be putting them in jail? Is it right for homeowners to walk away from their mortgage payment obligations when the interest rates go up? What happens to the equity of the family who does stay on the street will all the foreclosures because many ex-neighbours didn't take their home ownership seriously? Where is the common sense and evidence that analyzes the underlying issues here? If we convince ourselves that by grilling GS things are going to be fixed, we are deluding ourselves. We need more accountability by central bankers (not private bankers such as GS) in knowing their economics 101 theories in setting central rates. Central bankers also need to better understand how to measure the main indicator they are trying to control "INFLATION". How are central bankers supposed to make good decisions if they ignored asset price increases in their measure of inflation? This is like measuring the speed of your car in relation to another car instead of the ground. If two cars are going at 100 per hour, relative to each other they look like their standing still, however, when they hit the wall, the impact is going to be rather severe. We need to ask central bankers to go back to basics: 1) how do we measure inflation? 2) how do we determine the changes in central bank rates? 3) how do determine the time-lag (reaction) of our changes to central bank rates on the inflation that we are supposedly trying to control? All the GS stuff is a smoke and mirrors show to take our attention away from the real issues. The GS stuff is more of a reality–TV-show, than a serious exercise in understanding how this crisis happened, and how to avoid it.

    May 4, 2010 at 8:04 am |
  139. Shake

    What I cannot understand is that if GS actually shorted the mortgage market as claimed, why are they so shy about admitting it? Why should shorting an overheated US residential subprime market by an Investment Bank be morally wrong, when parcelling junk securities into synthetic CDOs for purchase by some so called non-retail investors in a different part of the world be socially adding valure by distributing risk?

    May 4, 2010 at 12:10 pm |
  140. joe

    when GS shorted their own product they were saying we are betting the products we sold today are going to be worth less tomorrow

    who would buy into that as an investment if they knew GS was shorting it ?

    where were the rating agencys ?

    May 5, 2010 at 3:00 am |
  141. carlos

    Hello Shake, going short on mortgages and expecting them to default is like having your mother bet against you (not believing in you)….. and she ends up being right! GS is being labelled as anti-American, betting on the failure of the American Dream... and they are trying to avoid that, even though they saw the demise when everyone else was in happy-party mode, thinking about the great investments they were making, only to watch American homeowners default on the mortgages due to the escalating central Fed rates.

    May 5, 2010 at 10:38 am |
  142. dios

    just one last thing to keep in mind for all of you being proud on their MBA. Business environment is changing and companies will ultimately have to adapt to this. Profit maximization will not be a corporate´s ultimate goal! Just think about it. Successfull companies will be the ones helping their stakeholders grow. And if pure capitalism isn´t as strong as I fear, one day US.GAP, HGB, UK.-GAP; IFRS and all of them will swift there aswell. Like it or not.
    Maybe you should have spent more time in clases about logic than in your mid.class MBA program, because the finest MBA programs deliver that message

    May 5, 2010 at 5:09 pm |
  143. Chris

    To my opinion, there is two point of view:
    Professionally & Lawfully; they did their job and did it well and ahead of their competitors with "tools" available only to those smart enough to understand and foresee the next turn in our economy.
    Morally & Ethically; this may represents some serious issues or even outrage for some as they would see those bankers as greedy an evil but we need to remember the whole purpose of wall street and investment banking, making money for itself and its customer with speculation as a main tool.
    Let's stop pretending being shock by those practices and let those boys do what they do best, making money.

    May 5, 2010 at 6:36 pm |
  144. Oladipo Akinyemi Omole

    Hello Maggie,
    Goldman Sachs thrived over the years ,because of their commitment to clients.It would be a little harsh and unfair to say that they would bite the fingers that fed them.From your analysis I think they have played their role pretty well.What really happened was that the regulators went to sleep and hesitated a little in reacting to the signals indicating an impending crisis. You're absolutely right that Goldman Sachs role is to make money for their clients and make profit in the process within legally permissible means. That they did and it's also a moral responsibility they fulfilled to their clients. Like some experts in the sector have said "Goldman Sachs is being unfairly scapegoated".
    Cheers.
    It's me Oladipo Omole

    July 1, 2010 at 5:21 pm |
  145. Mark Kanegis

    Maggie, your report on Android vs. Apple was flawed and biased. Shame on you. You also cited false numbers. iPhone sales for outweigh Android. Get some facts first.

    August 14, 2010 at 8:56 pm |

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