Our lawmakers don't understand capital markets. It's embarrassing. If clients want securities backed by boat loans, Goldman Sachs and other investment banks will create securities backed by boat loans even if Goldman believes that, yes, boat loans are "crap". The buyer doesn't care about Goldman's views. In the institutional market, the buyer is responsible for due diligence. Levin should have someone on staff who understands this.
Goldman is a broker-dealer. They are not a fiduciary. Their interest is Goldman and its shareholders.
I am an RIA, a fiduciary. If you ask me to invest all your money in China, I can't do that. It goes against my fiduciary role. Ask a broker/dealer to do it, and they will in the blink of an eye. They are not fiduciaries. If your grandmother begs for a deferred annuity, they'll provide it.
I agree with your point of view, but they are trying Goldman in the court of public opinion, and it is a public who doesn't understand the issues or the products that are being discussed. So all the public will do is equate Goldman to the bank on the corner and believe that Goldman intentionally mislead their customers to rip them off. That's the impression the politicians want to create with this circus.
ReplyDeleteI've only been able to watch a little of the testimony this evening. Blankfein is not defending himself or his firm strongly enough. He looks like a deer caught in the headlights half the time. If he doesn't shut these pompous asses down the witch hunt will continue. The companies they should be grilling are Bear, Lehman, AIG, Fannie and Freddie.
And Congress should be questioning its role in this this mess too. But that will never happen.
ReplyDeleteI agree with The Grouch. And what abou fiat money?? Is it real???
ReplyDeleteCoburn is one who is explicitly stating that Congress is responsible for the debacle. My problem with Levin is that he doesn't seem to understand the difference between product sold out of inventory and new issues. I think that's part of the reason Blankfein gets that goofy. squinty, "I can't believe this question" look and goes into his "there are two sides to a transaction" riff. I guess product creators will have to sign a statement saying that collateral was chosen to ensure that the issue would perform its best for the buyer and that the product may still be hazardous to your health.
ReplyDeleteI'm not sure that Congress understands that there are people trying to avoid or lessen risk and this necessitates players willing to gamble and take on that risk.
Meanwhile in the other ring Europe is imploding.
Hey D Waz welcome-
ReplyDeleteYea fiat money is real...go into Dunkin Donuts, put it on the counter and chomp away.
The problem is that fiat money depends on people having confidence in the government, which in turn requires that the government run a responsible monetary policy - that is doesn't destroy the value of the dollar.
We have come through a long period of time where we have had irresponsible policy. Greenspan in my view was a nanny Fed Chairman. Everytime it looked like the economy would slow down slightly he lowered interest rates. Wall Street caught on and made billions through what is known as the carry trade. Unfortunately Wall Street now feels more entitled than ever. It doesn't understand that the country is upset because it is raking in billions after being bailed out. Congress loves playing this to the hilt.
What scares me is that Congress is playing a game of chicken and could destroy the capital markets if it goes too far in its witch hunt.
Control leverage and the downside is limited. Easily done if Congress does its job.