Goldman Sachs: The Illusion Is Over -- Nothing More Than a Hedge Fund Managed by Traders?

[Joanne98]

DUBAI--I spent a good deal of the night watching with absolute disbelief the "dialogue" between the Senate Committee and Goldman Sachs leaders. There was a clear disconnect between the members of the committee and the Goldman Sachs management. Congress thought they were questioning the leaders of an investment bank about their fiduciary duty vis-à-vis their clients.

What became completely obvious for all the world to see is that Goldman Sachs is a hedge fund dressed up like a client business and that they are absolutely not interested in clients except to use them as screen for their own proprietary trading activities. As a hedge fund, Goldman Sachs is just a group of astute risk managers, brilliant market strategists who managed during the crisis to weather the storm. Their claim that they were not "directional" in their proprietary or principal business was absolutely disingenuous. Even in their origination business, the firm's interest went first.

Lloyd Blankfein is a trader: he does not really know what is in his balance sheet, cannot articulate one sentence to express an idea and is totally unaware of the way his firm dealt with rating agencies. When Senators were asking them questions about "selling" assets and "shorting" Lloyd did not even realize that what they had in mind is the primary sale of new issues. That is why he did not answer the basic question: "does Goldman Sachs have any sense of the need to disclose that they purposely created instruments that collapsed after a few months and sold to their clients with the sole intention to short them?"

Clients at Goldman Sachs are clearly not a priority: they do not even believe they should share their positions on the securities they sell, package and underwrite. The hearings on the rating agencies clearly indicated that they were using credit agencies models passed on to them by the agencies. Even origination was proprietary. Goldman's disregard for clients is represented by outrageous emails that the CFO had to be pushed to admit that they were "unfortunate."

http://www.huffingtonpost.com/georges-ugeux/goldman-sachs-a-hedge-fun_b_555073.html

[The Wizard]

1. Strip them of their assets

and send them to a maximum security prison.
Their assets have to be sold to others with better records of operating in the clients' best interests.
Jail or a public horse whipping will send a message to others with the same proclivities.

[Po_d Mainiac]

2. And the mollusk saw/sees nothing wrong

with originating a bond that their sales desk moves as investment grade while shorting the Hell out of it.

What a Sach of Shit :puke:

[change_notfinetuning]

3. The whole thing - Casino de Wall Street -has become a fraud on Americans.

These days, the interests of the financial industry are not necessarily the same as those of the American people or non-multinational, American businesses. When they are the same, it is purely coincidental. This is a fact and needs to be addressed if we are to turn things around. Fine tuning, and a slap on the wrist every now and again, is not going to change or fix a damn thing.

[unblock]

4. the problem is that it both facilitates the issuance of new securities & takes proprietary positions

these actions should be segregated into entirely different companies.

one company dealing with issuance should find counterparties or hedge their positions as effectively as possible.
the other company should not issue but should be free to take the proprietary positions it cares to.

the problem is, of course, in the definitions and enforcement. few hedges are perfect, so the question is, how imperfect does the hedge need to be before the issuance company is deemed to have taken a proprietary position.