May As Well Hire The Best
link Timothy P. Carney: Goldman rallies for Obama in Wall Street ‘reform’ | Washington Examiner.
This will be interesting. The general media will not understand that this is the story of the year, bigger than Tiger and yes, even bigger than Kate Gosselin on Dancing with the Stars.
It appears that Goldman Sachs will be HELPING the administration with reforming Wall St practices!! They are coming out in favour of restrictions on capital use, of use of leverage and certain activities that would place banks in conflict with customers.
!!!
You can’t make this stuff up. Goldman has long been the gold standard on the street, always making the most profit, being involved in the best deals and having the most connected top level people. In fact the top finance people in the cabinets of many of the previous administrations look like an alumni roll call of ex Goldman people. All the other banks on the street emulated Goldman’s business models, to the degree that they could and when Goldman created a profitable market space, the others were soon to follow.
The big bonanza came when Goldman went public in the eighties which allowed not only much much larger pools of capital from which to lever their trading and investment positions, it also allowed the formerly careful partnership the ability to be less scrupulous about the degree of leverage employed in its banking activities. A prudent person may leverage their postion say, 5 to 1 in order to achieve returns. From accounts brought to light by books such as The Big Short, leverage was allowed to climb to 30 to 1 in some cases.
Not to say that this is neccessarily imprudent, because that would be Monday morning quarterbacking, but it was the asymetric risk reward aspect discussed in earlier pieces that led to the eventual damage to the financial system. As of now, it’s only speculation as to whether this was imprudence borne of benign management ignorance or recklessness resulting from questionable practices. In other words, they were either not smart enough, or TOO smart.
Either way, it appears illogical to engage them in searching for fixes. Why don’t they hire Bernie Madoff to advise them? He’s about as expert as anyone and we know he’s not doing anything for the next 25 years.