Goldman, how dare you!
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I am choking as I write this. I have steadfastly defended Goldman Sachs over the last year. No, I never suggested they were doing “God’s work”. I never thought they were a force for good at all. But my main contention was, these were the smartest kids on the block, the true rocket scientists when it came to finance. They knew how to exploit every loophole in the system to wring megabucks from creating and trading exotic financial instruments that benefitted no one but them. As the scorpion would have said, had it been a financier — I ruthlessly exploit because it’s in my nature.
BUT…
I defended them because as far as I could tell, they were doing nothing illegal. If the system could be so eggregiously exploited by conscience-less smart guys, then change the damned system.
So I listened to the SEC’s press conference earlier with mounting disgust. Yeah, Goldman is being sued. Apparently it collaborated with a big hedge fund to create and sell some collateralized debt obligations, getting a hefty fee for doing so. And it persuaded investors that these were great places to put their money. Meanwhile, Goldman was busily shorting the items itself. Result: billions went from investor pockets directly into Goldman pockets.
The SEC has sued Goldman for fraud, and from what I can see, the firm cannot possibly win. But I can’t wait to see how it tries to dig itself out of this hole. This will not be possible to spin.
Most of the immediate blame seems to go to John Paulson (ironic name, no?), a particularly aggressive trader at the hedgefend, and the one who brought the deal to Goldman. But it takes a particularly forgiving culture for someone like him, and the Goldman folks he dealt with, to thrive. This is not like Jason Blair, who I assure you was an anomaly at the NYTimes. I have to believe that the numbers from the Paulson-initiated deal elicited envy and admiration and would-be imitation in the Goldman halls, not suspicion or contempt.
The question now is whether this is isolated to Goldman, or was pervasive throughout the financial industry. Investors clearly are scared — Goldman’s shares are plunging steeply, but other financial shares are dropping too.
What’s clear is that every one of these big banks — Goldman of course in the lead — has got to take a long, hard look at itself and how its culture has evolved. These institutions started out as places that made mucho money from delivering actual services — in some cases, lending money, in others brokering mergers, in others taking deposits and in others serving as stock brokers. (In many cases, of course, all of the above). But so many of them have evolved into institutions that spend the vast amount of their time creating and trading useless financial instruments, behind an ever-more-opaque veil of secrecy.
I am deeply hoping that people with actual consciences start rising to the top of these firms (possible, although not probable) and/or that they look to the fates of AIG and Lehmann and Wamu and realize that, in fact, the good old days weren’t only better for society, but better for the industry.
A gal can hope, no?
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The fact that the suit against Goldman Sachs is a civil one displays that none of this is a s serious effort to rein in or hold these players accountable. The Supremes have repeatedly given corporations “citizen” status regarding free spending/free speech, etc. But while the rest of us would be arrested and charged in a criminal court for fraud and conspiracy, these guys can’t be seen in jail jumpers.
It’s a civil suit only because the SEC does not have authority to bring criminal charges. Double jeopardy does not apply — there may yet be criminal charges in the future, if the Justice Department decides to weigh in. I’m not polyanna-ish enough to say that it certainly will. But neither am I cynical enough to say that it won’t. Fingers crossed.
In response to another comment. See in context »From your mouth to the Justice Department’s ears.
In response to another comment. See in context »RE:They knew how to exploit every loophole in the system
Isn’t that what the shit bumms obama, pelosi, reid did to pass health care? i am sure they did, and then they called themselves heroes….
Please provide an actual example of criminal behavior on the part of anyone- Republican or Democrat- in Congress, or the administration, involved in the passage of, or the opposition to, the health care law. Or shut up, whichever is easier.
In response to another comment. See in context »When I am called in to testify against them….I will
In response to another comment. See in context »And here I was thinking that you had no sense of humor.
In response to another comment. See in context »thanx for choosing to be a much needed voice of reason. you are a better (hu)man than I am — i was just going to ignore the drivel
In response to another comment. See in context »Do you really think this will have any traction beyond a slap on the wrist? C’mon the White House has been infected by GS for many administrations, as well as the SEC and the Fed. The whole system is beholding to these schmucks for generations and it ain’t gonna stop anytime soon.
this is where we disagree. You believe that GS has been populated by bad guys for decades. I believe that the original Mr. Goldman and Mr. Sachs are spinning in their graves. Until the last decade or so, the Goldman folks were in fact a group of super smart but also super ethical guys, and Washington was smart enough to recognize them. All that changed in this last decade of rampant greed. Blankfein is a trader, not a banker — and I don’t think a decade or so ago, he would have ever risen to the top of this firm
In response to another comment. See in context »I dunno, Claudia. The culture of greed and alpha maleness has been pretty rampant in these firms for a long time. Michael Lewis’ “Liar’s Poker” written in the 80’s (nearly 30 years ago now) was about Salomon Bros., but I think the intent was to demonstrate that culture was not unique to that particular firm.
In response to another comment. See in context »Oh, and one more thing. When you read “Tales From the Boom-Boom Room” by Susan Antilla it speaks volumes about how “ethical” these guys in the financial industry are. Yes, I know, separate topic–sexism in finance–but I wouldn’t rush in so fast to defend their better natures.
In response to another comment. See in context »Wait a minute — defend their better nature? I’m the one who’s talking knee-jerk scorpion, remember?
In response to another comment. See in context »All I’m saying is that the truly horrid behavior didn’t set in until these firms moved away from classic investment banking — which really is high-level consulting — to trading for their own accounts. The original founders did not envisage that and I don’t think would approve — just like I doubt Thomas Edison would be particularly happy to learn that his beloved GE is now one of the country’s biggest banks.
And BTW, I worked with Susan Antilla years ago at the Times. She is brilliant!
I was responding to your “super smart, super ethical until a decade ago” comment. And my point was to say, those “ethics” have been questionable for a lot longer than that.
In response to another comment. See in context »GS set up alot of risky stock deals in 1929 and they were humiliated in front of the whole country.
In response to another comment. See in context »Then regulators and /or shame controlled them for a while. Until Reagan, Clinton ,Rubin etc gave them loopholes to exploit again
They did alot of shady stuff with IPOs during the internet boom, arranging behind the scenes stock trading and price guarantees
Being smart is not a virtue. Investment banking is where greedy smart people go to work. It’s not complicated. Then, like politicians, their indulgence becomes their addiction, and they become corrupted. Let’s not forget a lot of extremely smart people have better things to do with themselves than foresake all semplance of normal life to do nothing more than amass cash. Their is a fundamental character flaw in these people. I hope they all get their just comeuppance. Wall Street is a temple of non-value-adding villianly that shouldn’t even be called an “industry”. That is an insult to real enterprise that serves the real needs of mankind and the rest of the planet.
I’ve been singing that tune all along — that’s why from the start I said don’t blame Goldman for its greed, it’s in their nature, people don’t go for careers in Wall Street to solve humanity’s ills.
In response to another comment. See in context »But having said that, I think you’re going too far. Being dumb isn’t a virtue either. And investment banking is certainly as “useful” as management consulting — and probably more useful than advertising or pet rocks (remember those)? The problem was that the investment banking firms lost sight of their original premise, and turned into simply money-hungry traders who do nothing but swap pieces of useless paper.
Incredible!! You are still defending these lampreys. What a hoot! Jefferson and Roosevelt knew them to be a threat to society hundreds of years ago and your still claiming that they are inherently good (just recently taking a wayward detour in their othwise wholesome journey of progress). The entire state of New York will be an economic wasteland when this giant government-enabled parasitic cash transfer system is destroyed. New York should suffer the same economic dislocation Pennsylvania did 25 years ago when the nation decided “to hell with the steel industry”. It just might even happen (and it would be a good thing), except for the carpet bagger “smart people” arriving in Pittsburgh to try to participate in real enterprise.
In response to another comment. See in context »I’ll try this one more time: I am agreeing that they have turned into a bunch of dangerous creeps that should be regulated out of existence — some, with a stop at the federal pen along the way. But yes, I still say that there is nothing inherently evil or unethical about investment banking, or even regular banking. Yes, I am saying that places that lend money or broker deals can be useful — and have been so at times in the past. And no, I do not see the world in either/or terms — the fact that I refuse to brand them as evil does not mean I think they are inherently good.
In response to another comment. See in context »Oh, and HumbleO — the software wouldn’t let me answer you directly, the comment thread had gotten too long. Anyway — I have a lousy sense of time. Ready, happily, to say 20, 30 years ago rather than a decade ago. And yeah, I do remember Liar’s Poker — great book.
Why , why do people defend these companies? They don’t care about you.
In response to another comment. See in context »it’s not a case of defending them. It’s a case of refusing to blame them for everything wrong in this world. Goldman did not start the war in Iraq, it did not teach priests to abuse children, it did not cause health care costs to skyrocket. I’m just saying that demonizing a companymay feel good, but does nothing to change the rules under which they are allowed to operate
In response to another comment. See in context »“I defended them because as far as I could tell, they were doing nothing illegal.
”
That’s right, Deutsch. You said they were just being like scorpions, an animal whose actions would get them put in prison from birth if they were human.
So, what does this post signify? You’ve decided to stop playing the complete pain-in-the-ass devil’s advocate troll on T/S?
Ohwait:
“I am deeply hoping that people with actual consciences start rising to the top of these firms…”
And maybe Santy Claus will bring you an adorable puppy this year!
Let me guess your next headline: “FIVE (OR 500) BAD APPLES DON’T NECESSARILY SPOIL THE WHOLE BUNCH, SRSLY!”
Fucking hopeless. What would be proper onomatopoia for the sound of projectile vomiting?
good grief — even when I’m admitting I was wrong I’m the bad guy? I don’t know you, but I have a feeling that I’m delighted to have made you upchuck
In response to another comment. See in context »I was following (with some amusement) your argument with Taibbi on the subject, and I thought that I understood the root cause of your disagreement- he clearly believes in The Physical Existence Of The Devil, and you don’t. Look, I don’t mean to go all supersticious on you, but evil is real, in the human world at least (a tsunami, or the Ebola virus, aren’t really evil- but I think we agree that murder is.) You seem to be a sweet person- I’m basing that assesment on the way you openly and kindly respond to all comments that are more coherent than a chimpanzee banging bricks together- but you also seem fairly wise, and should have considered that criminal behavior, or at least utterly anti-ethical behavior, had a place in this catastrophe. I won’t bore you with the story of how I learned the evil is real, and I won’t speculate where Taibbi learned it (although he must have seen enough of it in his time in Moscow in the 90’s), but you should have at least suspected it’s presence here. The Devil is a place in the human heart, and the smartest guy in the room is not immune. You do have a right to feel betrayed, though. We all were betrayed.
It’s incredible how well you understand me. You’re right — i don’t believe in absolute good or absolute evil. I do believe in evil acts. And i do believe that every company, every industry, every religion, has its share of rotten creeps, but that their existence does not necessarily taint the entire place. As I said in the post, I refuse to apologize for Jason Blair.
In response to another comment. See in context »But the fact is, I erred in thinking that the Goldman guys are even smarter than they are. I never pretended I didn’t think they did things I would consider unethical. Hey, I’m someone who thinks that going out and buying foreclosed homes, thus capitalizing on someone else’s catastrophe, is unethical. But not illegal.
Anyway, my assumption was that they were smart enough to figure out legal ways to make boatloads of money, thus not having to risk doing anything illegal. So I’m horrified on a million counts — they were unethical enough to lie to their own clients, and they were arrogant enough to think they wouldn’t get caught. Pretty stupid, if you ask me
I erred in thinking that the Goldman guys are even smarter than they are.
The truly smart crook is the one that doesn’t
!!
In response to another comment. See in context »get caught — in my estimation, GS, Blankfein, et al aren’t even ’smart’ because they HAVE been caught
Not buying foreclosed homes just makes the situation worse: boarded-up houses in decaying neighborhoods, house prices plummeting even more than if foreclosed houses were resold, and people who could actually afford a bargain-priced home forced to yearn for a full-priced one.
But need so many buyers be foreclosed on? Banks working with those mortgage-payers who still have jobs–reshuffling interest rates and payment terms, renegotiating principal of underwater properties, etc.–would have meant banks accepting a share of the general misfortune but might actually have led to lower losses than a Snideley Whiplash foreclose-em-fast policy did.
In response to another comment. See in context »I can’t argue with anything you say, Ivan. But there are things that I recognize are probably for the greater good, but that I still am (falsely?) proud to say I couldn’t do. It would probably be better for society if old people died, but I’m certainly not for withholding treatment to anyone who wants them. And it is certainly better for neighborhoods if people buy foreclosed homes — but there’s a karma attached that I don’t want to be part of. Nothing logical about this, purely emotional, but the idea of benefiting from someone else’s misfortune just sticks in my craw.
In response to another comment. See in context »[...] Kyle Bass, John Paulson, Greg Lippman, Steve Eisman, and others joined Burry in the trade of a lifetime. Lewis focuses on two guys from Cornwall Capital: Jamie Mai and Charlie Ledley. Before this trade, they were virtually unknown… Goldman, How Dare You! – Claudia Deutsch – The Bottom Line – True [...]
Ms. Deutsch,
According to Goldman-Sachs: “We certainly did not know the future of the residential housing market in the first half of 2007 anymore than we can predict the future of markets today. We also did not know whether the value of the instruments we sold would increase or decrease”.
How do you like that? The “Smartest Guys on the Block” offer up the “Schlemiel Defense”. I am sure that the Goldman-Sach prospectus on Abacus 2007-AC1 had that disclaimer on it. Who were the suckers? Another bunch “smart guys” who invested billions in a con game, the schlemazels. So much for the self-correcting power of the market-place, these putzes burned it down!
It is kinda funny when you think about it. In a funny sort of way, the whole thing has echoes of the Madoff scheme — even the sophiticated wealthy investors trusted Goldman so much that they didn’t bother to do their own due diligence on Abacus.
In response to another comment. See in context »As I recall, The Economist warned of a housing bubble a few times before 2007–about 2005, i think. It wasn’t a clarion call, more of a tap on the shoulder, one of their periodic comparisons of house prices versus rentals.
But there was another danger sign, obvious even to non-economists like me: if housing prices keep on rising far faster than incomes do, pretty soon, everybody’s priced out of the market unless they already have a house to sell. And without an influx of first-time buyers, the market dries up, or deflates enough–thud!– to make housing affordable again.
In response to another comment. See in context »total agreement — but not sure what it has to do with Goldman being sued for fraud. What am I missing here?
In response to another comment. See in context »One more thing, just in case my rushed effort to bonk your overeducated, naive head came off making me sound like a chimpanzee banging bricks.
Above all, no question, stupid consumers were most to blame for this, whether they looked at it their home purchase(s) as investments or simple home sweet homes. Smart people don’t buy bubbled things in a bubble. They just don’t. I wrote a piece in my old Portsmouth Herald (NH) column in 2005, for cripes sakes, about how stupid it was to pay such outlandish prices for a few walls and a working potty. Maybe I was the only smart one in the state, WTF. It’s like, employ some patience, use your head.
And whatnot. The point you’re missing, Deutsch, is that assholes like Goldman aren’t maybe necessarily evil, but they definitely think it’s totally frigging cool to pull scams like this on the purposely stupid. It’s their job. It’s fun for them to brag about crap like this within their circle. And that makes them assholes, and in some instances across the great killing field of this crisis, murdering criminals. The end.
Meanwhile, are you even reading Taibbi, like the rest of the sentient planet is? How on earth could you say “The question now is whether this is isolated to Goldman, or was pervasive throughout the financial industry”? I mean, what are you, dude?
certainly more reasoned than your last comment — I’m assuming the digestive spasm has passed.
In response to another comment. See in context »It is killing me to admit this, but we are very much in agreement. These guys are incredibly arrogant, and yeah, I think they brag about bilking the hoi polloi — even though the hoi polloi in their world are the super rich in mine.
And of course I think it is pervasive throughout the financial industry. But I decided many decades ago that I wasn’t going to state as fact anything that wasn’t proven, and I’m not going to start now. Not my style.
Beautiful! They only bilked the super rich. The unwashed working people of America weren’t hurt much, if at all? Your incredible elitist bias still shines through.
In response to another comment. See in context »I guess I can’t win. I’m agreeing with you. I’m saying they are bad people who bragged about bilking the peasants — and simply was making what I thought was an amusingly accurate observation that peasantry is relative. I did not suggest that what they did was right, or in any way mitigated by the wealth of their clients. (and yes, I know, many of the clients are huge pension funds that hold working people’s money)
In response to another comment. See in context »I don’t know why you seem to so thoroughly enjoy pigeonholing me as an elitist, even when I’m arguing your point. Maybe contrarianism is in your nature…
Well, I wouldn’t identify them as the super-rich. The buyers who were bilked in this scam were middle-management cube-droids and (in the case of Jefferson County) career-low-to-mid-level politicians who dreamt of being rich and probably only half-understood (if at all) precisely why they were getting kickbacks. I could be wrong. If so, maybe Taibbi could put down his bag of Cheetos and correct me.
From what I grok, the proper analogy would be a crew of used car salespeople: “Haw haw, this moron doesn’t know that the frammitz in the gearshaft is gonna croak just after warranty expiration, haw haw, pass the 50-dollar hooker.”
I have to caveat my last thing, though. A lot of home-sweet-homebuyers thought they couldn’t afford a lawyer to set them straight on their mortgage contracts, and they didn’t know they were being lied to by real-deal con men. That comes back to the car-dealer analogy, thus I can’t blame that particular set of homebuyers for the crisis.
What it boils down to is this: to my knowledge, not one industry pro who saw the bubble for what it was and who had done some shady deals hirself ever came forth to warn people. This was a crisis not only of finance, morality and ethics, but humanity.
In disclosure, I suppose it was my long experience in the collectibles trade that made me highly suspicious of all the crazy-talk overpricing in the housing market. Not trying to equate myself with Liz Warren or whatever, but as far back as 2004, probably earlier, I could clearly see that houses had become giant tulip bulbs and knew that someone was going to get a royal, all-night screwing. Of course, back then, even my editor, Cornell chick that she is, had no idea what the hell I was on about. But at least I tried warning people, for whatever it was worth.
And so my issue with your verbage on this topic is that your moral compass doesn’t seem to work until some shitty authoritarian power tells it it’s okay for it to work, savvy? There’s a reason people get paid good money to exterminate scorpions.
In response to another comment. See in context »Total agreement on the silliness of my rich folks comment — as I conceded to LeonKelly, I was trying to be funny, clearly didn’t work.
In response to another comment. See in context »And hey, I have used plenty of verbiage to express my contempt for the guys who were selling unconscionable mortgages to those who could neither understand nor afford them, or for the payday lenders, or for any of the others who were — legally, like your used car salesmen, or illegally, like a scam artist — getting hugely rich on other people’s misery.
I just don’t have lots of blanket categories. I’m not ready to say that all used car salesmen deliberately sell cars whose frammitzes are about to crack. And I’m not ready to brand all financiers as outlaws. However, I admit — and did in the first graf of my post — that I was wrong in saying that Goldman guys were legal scorpions, not crooks. That’s not a mistake of my moral compass — that’s simply judging a company by what I knew it to be 30 years ago. Cut me some slack here — if people didn’t make mistakes about character and such, we wouldn’t have such a high divorce rate
I could lie and say I’m literally LOLing, but that’d wake up the wife. I can say I’ve got a big smile right now though.
Stop being slippery, you. No one is crazy enough to say that everyone who works at Goldman Sachs is a potential baby-killer. I’m sure the secretaries and office managers are fine upstanding obedient drones who say 50 Hail Marys when they accidentally fuck the wrong spouse. But I can say for certain that anyone who sells crap derivatives, lemony cars or whole life insurance as an “investment vehicle” and who has a firm-enough grasp of what they’re selling is a complete fucking scumbag.
It’s snake oil, Ms. Slippery Q. Eel, and it’s criminal activity, no matter who’s selling it. Now stop being (a sweet and adorable) part of the problem this instant, young lady.
In response to another comment. See in context »Smart guys being taken reminds me of a hot crap table in Vegas…everyone wants to get in bet, everyone knows the streak will end (although I once saw seven sevens thrown), but there they are throwing money at the dealer.
yeah, and as you know, there’s a line beyond which gambling goes from high-risk behavior to scary addiction. That’s what happened, I think, to a lot of these guys
In response to another comment. See in context »Hi Claudia,
Like a lot of your other commenters, I’m having trouble understanding where you’re coming from on this. It’s almost as if you’re saying “Goldman took the money out of honest, hardworking people’s pension funds, and I was cheering them on. Then I found out they broke the law, and now I’m angry with them.”
Yes, I understand that they were working within the system, and that we should change the system if we don’t like the results it produces. I just don’t understand why you, a truth-loving, diligent, straightforward, and to-all-appearances nice person would have spent your time defending these psychopathic a-holes rather than banging the drum about how horrible the system is.
I don’t get what it was you were rooting for. Can you explain?
yep, i can indeed.
In response to another comment. See in context »I never defended them, any more than I defend scorpions. But to pretend that a scorpion will not sting when given a chance is silly. To pretend that a financier goes into business with the motives of a Mother Teresa is equally silly.
What I had always said is that the Goldman guys, as the smartest kids on the block, are legally gaming the system in order to line their pockets for doing absolutely useless work. Again and again, I said that it is silly to expect them to stop exploiting every loophole in the system, because it is in their nature to do so. what we had to do was change the darned system.
I still say that. I am very much for financial reform, for regulation, for restricting trading for their own account. But I still say, don’t appeal to their better natures or morality, build in better safeguards. We keep lions and tigers behind bars in zoos as well, we don’t trust on training them not to bite
Did you mention “conscience?” That rare, if not non-existent, attribute that few Americans seem to exhibit when dealing in matters of money and business. Just look at the hatred spewed by a great number of Americans who go ballistic when considering supporting public health that would save lives. Many are far more furious about that than they are about this Goldman Sachs’ sacking of Wall Street and indirectly America. Money isn’t everything someone once said (probably a Godman Sachs CEO) it’s the only thing. Money is the thing that created the great vacuum in our psyche where we used to nourish that rare essence – our conscience. We are not evolving, we are devolving to those days when the most meaningful mantra was “kill or be killed” – that’s surely is Wall Street’s mindset and for many Americans it represents their view of the world, family matters, business ethics, neighborhood relationships, and on and on. Just leave us alone with our guns and don’t make us pay taxes!
And we have money is at the root of all evil. Then again, we also have all’s fair in love and war — there are those who would say that as much violence has been done in the name of love as in the name of money.
In response to another comment. See in context »But I’m of course digressing from the argument at hand. I completely agree with you re: the selfish folk who do indeed believe in government services — the ones that help them, like police and fire and such — but hate the idea of one penny of their tax dollars going to the unfortunate. (Okay, some self-promotion — read my earlier post on the True Hypocrisy of the Tea Party)
But I simply refuse to throw up my hands and say that the gonifs and rogues have won, that the world is no longer a safe place for me and my kind. Yes, I’m horrified at what I’m seeing at Goldman; no, I do not believe that they are typical. I do think there are still consciences out there, even among the rich. Bill Gates and Warren Buffett are philanthropists as well as tycoons, after all
You did defend Goldman, Claudia.
Going back in your T/S blogging history to July 14, 2009 to this page:
http://trueslant.com/claudiadeutsch/page/41/.
You said:
“If it benefited from the AIG debacle, it did it legally — and hey, guys, that’s our capitalistic system, rewards as well as risks.
To me, Goldman’s robust second-quarter earnings — net profits of $3.44 billion, or $4.93 a share — is heartening on multiple levels. The most important one: If a well-managed company, taking realistic risks, can do this well, then maybe, just maybe, our financial system isn’t an unmitigated disaster at its core, and will be salvageable sooner than I had thought.”
Goldman did benefit, and according to the logic of your quote, it did profit legally. That is what you wrote. If that is not what you meant, then apologize for confusing us. Or please apologize for defending Goldman, that thoroughly nice and lovely company.
It is the nature of a fraud that the profits keep coming despite it’s unrealistic nature. If it’s too good to be true…
Our financial system is an unmitigated disaster at its core. You did not recognize it. What makes your writing dangerous, is your inability to recognize evil when its in your face.
You defended GS, and now you will not apologize, either for your flawed logic, if that is the case, or for your inability to recognize evil.
You said GS profited legally, and our financial system will be salvageable sooner that you thought.
An apology would be appropriate to your readers, and to Matt Taibbi, please. I
haven’t read an apology yet in your comments or in your latest blog. My apologies if its in there, and I am too stupid not to see it.
okay, I’m repeating myself ad nauseum here, but if I have to, so be it.
In response to another comment. See in context »(1) I have never said Goldman is acting for the good of society. I said it was acting legally within the system, and if we hated what it was doing, we had to change the system.
(2) I have admitted I was wrong, that in fact it was doing illegal stuff.
(3) I have said I do not think that Goldman Sachs has always been a heartless predatory company, and that Mssrs. Goldman and Sachs are probably spinning in their graves. That is quite the opposite of saying I think it’s a lovely company now.
(4) I have admitted I was wrong re: legality. I do not apologize for that. I was wrong for the right reasons.
Thank you Claudia for replying and quickly too.
In response to another comment. See in context »An apology begins with the words, “I apologize.” Just admitting you were wrong is not an apology. An apology is addressed to someone wronged. Its an expression of regret at having caused trouble for someone; “he wrote a letter of apology to the hostess.” -Google. I apologize to you for having to repeat yourself to the point of being physically sick.
You don’t have to apologize for admitting you were wrong. But please what are the right reasons for you being wrong? And we don’t have to repeat things already written ad nause(a)m unless quoting for clarification.
You were wrong saying GS was acting legally. What were the right reasons for saying that?
Your readers were wronged for the right reasons?
I am asking for an apology, please, for your readers for being mislead, and for Matt Taibbi for being right.
Thank you Claudia for replying and quickly too. An apology begins with the words, “I apologize.” Just admitting you were wrong is not an apology. An apology is addressed to someone wronged. Its an expression of regret at having caused trouble for someone; “he wrote a letter of apology to the hostess.” -Google. I apologize to you for having to repeat yourself to the point of being physically sick.
In response to another comment. See in context »You don’t have to apologize for admitting you were wrong. But please what are the right reasons for you being wrong? And we don’t have to repeat things already written ad nause(a)m unless quoting for clarification.
You were wrong saying GS was acting legally. What were the right reasons for saying that?
Your readers were wronged for the right reasons?
I am asking for an apology, please, for your readers for being mislead, and for Matt Taibbi for being right.
Well, we agree on one thing: The definition of an apology. I repeat: I do NOT apologize. No one was hurt by my mistake, I never suggested you rush out and buy Goldman stock or persuade your children to marry Goldman partners. I simply stated I thought the company was operating within the boundaries of law. Turns out I was wrong. What I meant by “for the right reasons” is that I’ve never fallen into the trap of assuming that by definition, rich people in general and financiers in particular are evil crooks. I was following innocent until proven guilty — and I’ve admitted I genuinely thought they were innocent. Wrong.
In response to another comment. See in context »I think I deserve some credit for not saying this deal is an exception. I’m admitting there probably is more systemmic corruption at Goldman than I ever suspected. But I still do not believe the firm is evil incarnate.
Claudia,
You are writing your opinion, attempting to influence the decisions of your readers. You are not innocent of wanting influence. Your writing is not ineffectual, it has purpose, and is supposed to be built on facts. This is after all, True/Slant.
Matt Taibbi took a set of facts, and called GS a vampire squid. You took your set of facts, including GS’s profit, and declared them the savior and heroes of our financial system. Matt’s opinion was right. You were wrong.
You don’t have to apologize to your readers for being wrong and misleading them, if you conclude your opinion is worthless and not worth considering.
If however your opinion is of value, and people use your opinion to make decisions, you have wronged them and you have wronged the messenger who got it right. This internet, the Web, is a true marketplace where full disclosure, your wares are on display. If you are trying to hide something, that fraud will be punished.
You gave the wrong conclusion to people who rely on you for information. If what you write is of any consequence, you owe your readers an apology.
If you are hiding behind the reasoning that your opinion doesn’t hurt anyone, or influence anyone, then the marketplace will soon prevail. You defend yourself by claiming your judgment is truly innocent, and nobody got hurt. That sounds an awful lot like Goldman Sachs. I doubt they will apologize, but that’s my opinion.
In response to another comment. See in context »I agree and there was no reason for the gov’t to pay out AIGs debts. In the other America where we live a different standard applies. If your tenant is out of work you dont get rent. If you supply a business and it goes broke you get pennies on the dollar if you are lucky. The govt paid out alot more money to GS in various programs, interest free loans and implicit too big to fail guarantees.
In response to another comment. See in context »This is fascinating — I posted a reply to opsimath’s last post. But it has not shown up. It’s disappeared into the ether. Hmmm…
Anyway, to best of my recollection, it went something like this:
Okay, opsimath, I bow to you. You say I called Goldman the saviours of our system, rather than the ones smart enough to exploit it. Fine. You say that Goldman has suggested that not of its actions ever hurt anyone? Fine, if you say so, it must have done so. You suggest that, if I do not apologize, it means i find my own opinion inconsequential? Hey, if those are my only two options, than I can be as self-serving as, well, as Goldman. I am truly, abjectly sorry. Opsimath, please forgive me, Matt, please forgive me, Mommy, please forgive me, God, please forgive me.
Are we friends now? And does my opinon count again?
Claudia,
In response to another comment. See in context »Your apology is accepted by me. I hope your readers do not detect a tone of cynicism in it. This conversation is on display, and it to my eyes is not looking good. And please don’t bow to me. Your apology should be of service to those who have been wronged. They should have some sense of vindication.
When we publish our views for all to see, we are in danger, yes taking a risk that at the least we will be seen as foolish, if not risking others around us. And because we are not alone in this world but live in a networked cloud, and everyone and everything is connected and vulnerable to other actions and thoughts, for you to be uncomfortable for a moment, and think about the consequences of your writing is a small price to pay I think for the process of getting truth an airing. I must have pushed some of your buttons.
Your last reply seems accusatory and attacking. Paraphrasing is always dangerous, and the implications of getting it wrong can get us off track. We all make mistakes, some more egregious than others. I am trying to get my thoughts down as clearly as possible for the benefit of the reader, not to aggrandize my ego. I am not trying to be the winner, or make anyone look bad for my benefit. Goldman Sachs thought they had that game down pat.
A bit of playful cynicism? Guilty as charged. But the following is a true, non-cynical apology: I did not mean to sound accusatory or attacking, and if I came across that way, I am genuinely sorry. You are I are having a good-faith disagreement. Every one of your comments has been respectful and intelligent. And if I dropped below that threshhold, then again, I apologize.
In response to another comment. See in context »Doesn’t mean I agree with everything you’ve said. I still don’t think I ever termed Goldman to be “good,” only that they had found a way to make a flawed system work for them, and that it was up to Washington to plug the loopholes in that system. And yes, at the time of that particular post, I was relieved that we weren’t going to see all of the big financial firms follow Lehman’s lead. The way I saw it (rightly or wrongly), it was the reverse of breaking eggs to make an omelet. If some bad eggs thrived but the net effect was that people still had omelets to eat, I saw it as an okay price to pay. But that was when I still (mistakenly) thought the rotten eggs were still a nanometer to the right side of the legal line.
(And I’m surprised that none of my conservative nemeses have accused me of convicting Goldman of charges that have not yet been proved. I’m cutting myself some slack here…I sure as heck think they are guilty)
You are Using the word ‘legal’ in a very narrow sense
If my company has the power to settle criminal and civil matters by paying a samll fine and admitting no guilt…it is legal
The details are kept secret ,the crimes are covered up,the injured parties remain ignorant
If I can get a secret letter from Chicago Board of Trading giving me permission to do something that is illegal for everyone else ..it is legal?
Are laws made in secret for one party legal?..no one in the world thinks so
If someone can get away with crimes it doesn’t mean it is legal..it means they got away with it.
If someone can fool the regulators it isn’t legal
Having friends in high places keeps you out of trouble but it isn’t legal
I don’t know why so many honest people spend time defending crooks
no, I’m not. I’m saying we cannot use unethical, immoral and illegal as synonyms. When a midsestern congressman attaches a rider to an important bill saying that my New York tax dollars will fund Medicaid in his district, it is not illegal. It should be. But the law must be changed before we can use the term crooked to describe those exploiting it. Unethical, yes. Immoral, yes.
In response to another comment. See in context »So, as for all your seemingly rhetorical examples — yes, in every one of those cases, it is legal. The laws making it so much be changed. The friends in high places must be drummed out of office, and explosed as charlatans. It gets back to my much-earlier arguments about the tax code. I think it’s unconscionable that coop owners can deduct taxes that their building is paying, but renters cannot deduct taxes their landlords pay, even though they are probably built into their rent. But does that make me a crook for taking the homeowners deduction on my return? I don’t accept that designation at all.
Mozart had his Salieri. Taibbi has his Deutsch. (Which is probably unfair to Salieri). It took SEC fraud charges to get you to change your tune in the face of a tsunami of evidence. New York and her sons and daughters (even the Cornell grads) are finally gonna get a dose of reality. And your man Shumer wants to lecture the Chinese (who actually produce something of use). Some balls!
funny you should mention — I had lunch with a fellow Cornell grad yesterday, and turns out she had done something I (luckily for me) had never done: She had such faith in Goldman’s prospects that she bought a boatload of its shares.
In response to another comment. See in context »AT least I’m being compared to someone who was played by the great Ian McKellan in Amadeus. I wonder how Matt likes being thought of as a short obnoxious crazed genius who died at an early age? Unfair to Salieri? More unfair to Taibbi.
Your are correct. So far, the only difference is Taibbi is Division 3 tall. The dying young part remains to be seen.
In response to another comment. See in context »Three words I never, ever, ever expected to see typed by you in response to me: “You are correct”
In response to another comment. See in context »I shall treasure this moment.
Why the surprise? You are an enormously accomplished writer. I’m just a “dude” that drive’s a pick-up truck. Nothing sounds better than the tail gate slammmin’ shut before you head down the road to “do some good”. Have a good week! Peace!
In response to another comment. See in context »once again, the software on this page decided that a particular comment thread is over, done, kaput, won’t let me continue. Bah humbug, I am not so easily thwarted.
esaeger, I infinitely prefer making you giggle to making you gag. And since no one is asleep in the other room, I am indeed LOLing — or, truth, smiling loudly. And of course quaking at your booming paternal authority, and shivering as I thwart it.
But, echoing the response of spoiled two year olds across the globe: NO!!!
“Complete f-in’ scumbags” are revolting people who I would happily sail past in my half-empty boat as I watched them drown. But our complete f-in’ brain-dead system is such that being a CFS is not illegal. Nor is selling snakeoil — the whole cosmetics industry would have been incarcerated long ago (remember the famous “we sell hope in a jar” quote?)
And peace to you, too, Leonkelly. Keep on truckin’! (man, I never thought I’d get a chance to use that expresssion literally!)
Claudia..
First, start with the fact that it is a claim, not a verdict. Then try to understand that Goldman wasnt buying something from a wholesaler and reselling it retail. Look at the post announcement commentariat (including the WSJ’s prescient quote of me!) that just maybe this SEC claim is a long shot, being a challenge to longstanding, widespread accepted practice.
These are tailored deals. One side says what it wants to do, Goldman finds a way to package that goal, and then finds counterparties
who hold different points of view. The sell isnt “sold” liek a penny stock being pitched.
Its terms are set forth in detail. What is NOT at issue is that the CDO, and its component bundle of riskes and promises, was neither misdescribed to nor misunderstood by the purchasers, who both knew their contraparty was betting that the CDO would gain or lose value. The buyer did not expect a loss event to occur so soon or to the degree that it did occur. The buyers accepted that “event risk” to get the higher returns the package offerred.
The lurid phrase “designed to fail” is nonsense. It was designed to create potentially larger returns because it was deliberately (under so understood by all) loaded with more risky underlying referenced mortgages. The fact that they did lose rating grade and value so quickly does not mean that Paulson had the gift of foresight. In fact until his success in 2008, he was not a well known maven for anything, muchless the housing mortgage market.
If the bubble had remained unburst, the buyers would be printing money and Paulson would have lost big bucks big time.
The ultimate deal is the result of (thru the intermediary) back and forth canoodling by the parties. That Paulson may have teed up underlying CMO candidates in neither improper nor surprising. What is important is that the ultimate assembler (ACA) rejected more than half of them and proposed others on its own, and therefore maintained its own independence and credibility.
Buyers look over (and should assess) the risk characteristics of the final (or proposed) product. They have been known to seek further fine tuning of the ultimate package. None of the component stuff is randomly selected like a lotto ball nor is the result an “off the shelf” product.
The area is competitive, so comparable activity
by say Deutsche, Morgan and Merrill should be assumed. Urging the SEC to take comparable actions against them begs the question: was Goldman doing something wrong or not. Its hard to label wrongful adult, group behavior that has occurred in daylight for years.
The SEC usually regulates by rule: a process where a perceived wrongful activity is set up for review and comment, with a rule being created (or not). “Regulation” by a years after the fact hindsight spanking is fundamentally unfair. That is why much of the recent commentary calls the lawsuit a long shot
and “chills” the marketplace since the case doesnt define what’s wrong (and cant) until a judge and an appeals courts say so. That’s years of uncertainty which should not happen.
Intermediaries are not required to report each side’s thinking or intentions to each other. Indeed that is one of the reasons intermediaries are used: do you think the guy running Harvard’s endowment when he places a big sale order understands that his broker is obligated to announce that Harvard has say two million MSFT for sale?
Just tisnt done !
Ah, finally — I’d commented at one point how surprised I was that none of my conservative nemeses had pointed out that Goldman has not yet been convicted of anything.
In response to another comment. See in context »And, in fact, even the SEC does not seem certain it can win the case. It may turn out I was right the first time around — Goldman is doing hugely immoral things, but it is remaining a nanometer to the right side of the legal line.
But you seem to think it hasn’t even done anything immoral, and that’s where we argue. If Goldman is asked by one client to put together a synthetic CDO that the client can bet against, that is indeed material information (if not legally, then ethically) that must be passed on to those to whom it is hawking the instrument. Buying from Goldman is not the same as buying potato chips off the supermarket shelf — they are advisors and specialists, allegedly people we trust.
I thoroughly trust my financial advisor, even though he makes commissions on anything he buys or sells for me. When he suggests that I buy something, it does not occur to me to ask whether a much wealthier (and thus more lucrative to him) client is selling it short. I truthfully do not know whether he would be doing anything legally wrong by not offering that information — but it is a moot point, because he is an ethical person who I trust to be acting in my best interests. Goldman clearly has breached that trust. And the “everybody’s doing it” defense you put forth is only more proof that the system has got to be changed radically.
You dont get it.
The people Goldman offered the deal to were under no illusion whatsoever that the other side might be “against” them in thought and economics. That was a given.
They had no expectation whatsoever that Goldman was their “adviser” and paid not a farthing for any “advice” from G who offered none. G displayed the prospective deal’s terms to any and all who might be interested.
Why do you assume the traditional warm and fuzzy “please help me here” role to a mega
bank in Europe trying to make a killing?
you gotta look behind the “headlines” !!
yours truly
M
In response to another comment. See in context »how unusual — we agree to disagree.
In response to another comment. See in context »Goldman doesn’t put its offerings on the public market. I don’t get to buy them. in fact, that’s one of their main arguments — we only deal with sophisticated investors who get to study the underlying mortgages, etc.
Of course every time I buy a stock I know someone else is selling it. Every transaction has parties and counterparties. But Goldman has a reputation among clients that if it offers something as an investment, it expects it to go up. And clients have an expectation that they will be told if the only reason the package was put together in the first place was to accommodate someone who wants to bet against it.
I’m sorry, Matt, but if this is acceptable behavior on Wall Street, then I’m ready to go back to my 1960’s free market=evil mentality.
you should go back to your 60’s penchant for demonstrating against any and everything.
I once dated a gal who was opposing the dewey decimal system !
NOBODY expects the contra party’s ID to be revealed. That’s a given. As more recent disclosures have made clear, the buyers had the ability to make any assessment they wished re the underlying mortgage CMO basket. The devil could have assembled that basket for all it mattered: it was what it was and both sides assessed its prospected…DIFFERENTLY.
at a time when both sides KNEW the other side was BETTING the other way.
That Paulson urged more risky underlying mortgage pools be included isnt wrong, its precisely the point. He wanted the riskiest that could be found. The buyer wanted the highest yield (aka riskiest) as well. Its just two pros with different opinions on a pool of securities that NO ONE has ever said was misdescribed….
Note all the recent commentary: where’s the fraud? now that the first blast from the SEC is being scrutinized.
In response to another comment. See in context »The way we described it, Matt, was “if it moves, protest it.” And if it protests dewey decimal, hack it into tenths.
We’re still never going to agree on this. I shall always say, if a salesman from a firm that I have been doing business with since forever comes and says to me, this is a really good investment, and I’m waffling on it, my faith in him and my prior good experiences with his firm will probably be the deciding factor. Maybe it will turn out that Goldman did nothing illegal; you will never persuade me that they did not act immorally and unethically.
this is NOT the standard your broker recommending something to you…
on the institutional side (aka the big boys)
the buyer KNEW that Goldman was not only working for the contraparty but packaging the deal FOR the contraparty(seller). There was absolutely no expectation on the buyers’ side that Goldman owed the buyer commentary, advice or looking out for.
Your “personal broker” context is not what this part of the business is about. All the buyers that Goldman pitched KNEW Goldman was selling someone else’s package. That’s why it was incumbent upon each potential buyer to make its own assessment.
Deals like this are done all the time. Its neither shady nor improper.
One party’s financial need or objective is packaged and then it offered to the universe of potentially interested contraparties.
In response to another comment. See in context »this is, of course, one of the points of fact that will be argued in the case. Did the buyers know that Goldman had put the package together at the specific request of someone who wanted to sell it short? Or did they think this was simply a package of synCDOs, put together by an allegedly impartial third party, that Goldman would then trot out to investors, letting them simply decide whether to go long, short, or sit this one out. SEC and disgruntled buyers say the latter; you are saying the former. My guess, as you know, is that the SEC has it right.
In response to another comment. See in context »