Goldman Hysteria: Part II

by: Wendy Fried

In my last post, I suggested that the ranting in Congress over Goldman Sachs’ practices was a tad overdone, and thus gleaned some interesting personal insults from Goldman-hating Seeking Alpha readers.

Guys, ya got me; Lloyd Blankfein bribed me to write that post.

Just kidding. Which is really too bad, because I imagine that a Goldman bribe would be the kind of dough that could put all of Octomom’s kids through college and grad school, with enough cash left over to bail out Greece.

Anyone who's spent any time on The Big Do-Over (or my old blog, Proxyland) knows that I’m not in the habit of writing anything that would inspire Goldman Sachs to send me even one ugly firm-logo tote bag. But I always strive to be fair. And I just think that the portrayal of Goldman’s behavior by Senator Levin, and by much of the media, is becoming an unhelpful mash-up of:

- the SEC’s allegations in the Abacus case, which are plenty ugly, but are about a fraudulent failure to disclose, not about the firm's trading practices;

- the belated discovery that there’s no law on the books giving investment banks a fiduciary obligation to clients;

- genuine misunderstandings about industry lingo and the difference between the institutional and retail markets;

- some vague notion that shorting in itself is evil; and

- the never-ceases-to-amaze-us reality that so many people got insanely rich doing stupid, venal, sleazy deals that we taxpayers then had to bail them out of. And that much of it was legal. And that they rarely show any remorse or gratitude. And that they’re still getting those huge goddamn effing bonuses.

Shucks. There goes my bribe.

But I’ll say one thing for Mr. Levin’s hearing. By forcing an investment bank to explain how its business works - in detail and on TV - he’s given us a nice clear sight line into the Street’s short-termist, greed-driven business model. As Tom Brakke of The Research Puzzle said recently, "the firms act as if there is an inexhaustible supply of gullible clients."

Well, maybe there is, and maybe those clients will keep signing up for deals and paying the fees that feed The Great Big Wall Street Compensation Machine. But maybe not. Cynicism and distrust are spurting into the markets these days like ash from an unpronounceable volcano, and they might turn out to be our best friends.