A provocative discussion of Goldman Sachs

[bigbadwolf]

A riveting article about Goldman Sachs by Matt Taibbi in Rolling Stone.

 

[Pulco]

Yesterday, I was discussing with a friend about goldman, and I was asking him why goldman

was making so much money whereas most banks were still in bad shape. Basically, he told me

the same thing that was in this report, they are completely "insided" in a lot of things.

 

[bigbadwolf]

... they are completely "insided" in a lot of things.

The United States is a corrupt nation. There is a revolving door between high finance and top government jobs. The state apparatus is used to support an entrenched financial oligarchy. High finance has almost become the state, and one can't easily distinguish one from the other. The sham of a democratic process does not affect this in the slightest -- it doesn't matter who gets elected. In other places we call this crony capitalism; here we say it's the best democracy money can buy.

 

[Andy Nguyen]

This does make GS look like the law firm in The Devil's Advocate. As far as I tell from the article, the author didn't suggest anything illegal, just unfair advantages. And the fact that this has been going for a long time suggests it will not change anytime soon.

 

[bigbadwolf]

This does make GS look like the law firm in The Devil's Advocate. As far as I tell from the article, the author didn't suggest anything illegal, just unfair advantages. And the fact that this has been going for a long time suggests it will not change anytime soon.

The country never was innocent. The gasps of outrage come from people who look back at some golden age of innocence and honesty -- which never existed. But it still needs to be said that for about forty-five years -- roughly from Roosevelt's era to the late '70s, the power of finance capital was curtailed, was deliberately limited. Populist sentiment had some impact on policy.

if you're powerful enough, you make the laws. And even if you contravene what's on the statute books, it becomes a moot point. since power trumps everything else. At the moment finance capital has political power. Until populist sentiment can be rallied and make its influence felt -- probably outside regular channels -- which are completely dominated by capital -- this corruption will continue.

If by "unfair advantage" you mean GS versus other firms in the same business, yes, that's correct. But if you mean GS and other such connected firms against common people, it's not even a competition, let alone one of unfair advantages. They literally control the state apparatus and write the rules of the game to suit themselves. They cannot lose. Heads they win, tails everyone else loses.

What needs to be pointed out is the hypocrisy of masquerading as a free enterprise system on the one hand and the sordid reality of a politically dominant financial oligarchy on the other, which crushes everyone else underfoot.

 

[Stefan Zota]

Article is 100% subjective, classical political activism. This follows the style of the author.
http://en.wikipedia.org/wiki/Matt_Taibbi

Some facts are presented in the framework of inquisition. Everyone knows 90% of the events in the article, the author does not bring anything new. Only thing that sets it apart is the rage directed at one company.

Opinions on the thread are normal. The wolf uses this opportunity to attack the "utopia" of democracy, free-market and capitalism. Another user mentions a discussion with a friend as argument.

The truth is that all is speculation, feelings rather then evidence. "Inside information" is nothing new and certainly U.S. is not the worst market in this respect. Goldman Sachs is a powerful bank, but Morgan Stanley, Citigroup, UBS, Credit Suisse, Deutsche Bank, Bank of America are stronger or at same level. And yet, only GS is the bad bank because they emerged better from the crisis. This is simply not true.
Credit Suisse, Deutsche did just as well, Morgan Stanley is not very far.

GS has done better than Citi or BofA due to its business model. For instance, GS focus on private banking. Still parts of Citi/BofA conglomerates produced significant profits.

 

[bigbadwolf]

The truth is that all is speculation, feelings rather then evidence. "Inside information" is nothing new and certainly U.S. is not the worst market in this respect. Goldman Sachs is a powerful bank, but Morgan Stanley, Citigroup, UBS, Credit Suisse, Deutsche Bank, Bank of America are stronger or at same level. And yet, only GS is the bad bank because they emerged better from the crisis. This is simply not true.
Credit Suisse, Deutsche did just as well, Morgan Stanley is not very far.

GS has done better than Citi or BofA due to its business model. For instance, GS focus on private banking. Still parts of Citi/BofA conglomerates produced significant profits.

Mostly I agree but I should point out that there seem to be more GS people in senior government positions than any other bank. I don't know what other "evidence" is needed of corruption other than the massive amounts of money presented to large financial institutions with the flimsiest of excuses. Surely doing this is not going to jump-start the economy -- the ostensible raison d'etre for the exercise -- is it? Why are they supposedly too big too fail? Why not let them go under and start something afresh? The hundreds of billions -- surely this money could go to common people and would be more effective in reviving the moribund economy, would it not? But the large financial institutions have the political clout.

 

[Pulco]

Here are the reasons of the success of Goldman Sachs :

- Strong business model
- They hire the best
- Strong alumni group. This may be interpreted as some form of insiding.

 

[bluechimp]

Why are they supposedly too big too fail? Why not let them go under and start something afresh? The hundreds of billions -- surely this money could go to common people and would be more effective in reviving the moribund economy, would it not? But the large financial institutions have the political clout.

Tough question. Stability of financial systems is an interesting subject to study, although it's nowhere presented as elegantly as mathematical finance equations. I think the biggest problem is how the large financial institutions are tightly joined at their hips -- systemic risk. The failure of one can create many other failures, and thus risking breaking the whole system.

Of course, like you mentioned, one alternative is to break everything altogether and start anew. But this process can be very costly: no financial intermediaries to make markets, move capital from endowments to projects, advise financial decisions etc. Letting Goldman fail will definitely deepen the current recession, which is not a politically advisable thing to do. Whether or not it's intrinsically correct to let everything fail is beyond me, but I think the government learned several things during the Great Depression -- the interventionist policies we see today is a residue of that experience.

Not sure how all the common people will make all the rescue money work without the existence of strong, stable financial institutions.

 

[Andy Nguyen]

The hundreds of billions -- surely this money could go to common people and would be more effective in reviving the moribund economy, would it not? But the large financial institutions have the political clout.

My understanding is that many of these big banks didn't want to receive these so-called cursed money in the first place. First, they didn't want to be perceived by the market as vulnerable and secondly, they don't want to be limited under the TARP rules. Just see how fast they try to return this money. The fed literally had to force the big banks into this TARP thing, according to the recent reports.

This is going off topic so let me get back to Goldman Sachs. GS has a certain halo to its brand and it's hard to deny. If every bank on Wall Street is playing dirty to some degree, I wouldn't mind working for the best of them. I'm sure a career at GS would open more future doors than others.

 

[bigbadwolf]

Of course, like you mentioned, one alternative is to break everything altogether and start anew. But this process can be very costly: no financial intermediaries to make markets, move capital from endowments to projects, advise financial decisions etc. Letting Goldman fail will definitely deepen the current recession, which is not a politically advisable thing to do. Whether or not it's intrinsically correct to let everything fail is beyond me, but I think the government learned several things during the Great Depression -- the interventionist policies we see today is a residue of that experience.

Not sure how all the common people will make all the rescue money work without the existence of strong, stable financial institutions.

I'm not saying I'm right (or that you're right). It's the absence of any frank and critical discussion of the bailout that worries me. "Deepen the current recession" -- for whom? If you've lost your job, had your house foreclosed on, and have scant prospects of finding another job, then all this academic discussion of how deep and how long the "recession" will be is rather moot. You're interested in your next meal, a roof over your head for the night. And I don't see how helping the biggest culprits is any kind of enduring solution. The intertwined complex of giant financial interests and federal government is trying to keep aloft a failed and unsustainable financial system that I argue works against the interests of ordinary people and works for the benefit of a tiny entrenched elite. This corrupt and inefficient status quo has to be swept aside, demolished utterly. As far as the ordinary man is concerned, it can't be worse than what's already occurring.

The decline of the country continues unabated. The dollar is losing its de facto reserve status. The hemorrhaging of jobs is continuing unabated. Yet because many of the primary culprits -- or at least beneficiaries of an unsustainable financial capitalism -- have a lock on political influence, the suicidal movement of the country towards the abyss continues. The bailout package is not doing anything to revive the country's economic fortunes. it is not bringing back jobs.It is not correcting deep-seated flaws in the country's economic profile.

 

[bigbadwolf]

My understanding is that many of these big banks didn't want to receive these so-called cursed money in the first place. First, they didn't want to be perceived by the market as vulnerable and secondly, they don't want to be limited under the TARP rules. Just see how fast they try to return this money. The fed literally had to force the big banks into this TARP thing, according to the recent reports.

Yes, I've heard this. I want to go off-topic for a moment. What exactly is the government's economic policy? Does it have one? Or is just a hope and a prayer? This is not a self-correcting crisis. The financial crisis is merely a symptom of deeper-seated economic problems that have been festering and growing for decades.

 

[Weidong]

The United States is a corrupt nation. There is a revolving door between high finance and top government jobs.

Oh boy, I don't think you can find any major powers less corruptive than the U.S. Going over my list again: China? Russia? India? France? EU? Japan everyone?

 

[Andy Nguyen]

Goldman Sachs Likely to Post Huge Profits, Analysts Say

By GRAHAM BOWLEY and JENNY ANDERSON
Most of Wall Street, and America, is still waiting for an economic recovery. Then there is Goldman Sachs.

Up and down Wall Street, analysts and traders are buzzing that Goldman, which only recently paid back its government bailout money, will report blowout profits from trading on Tuesday.

Analysts predict the bank earned more than $2 billion in the March-June period, thanks to its trading prowess across world markets. If they are right, the bank’s rivals will once again be left to wonder exactly how Goldman, long the envy of Wall Street, could have rebounded so dramatically only months after the nation’s financial industry was shaken to its foundations.

The obsessive speculation has already begun, along with banter about how Goldman’s rapid return to minting money will be perceived by lawmakers and taxpayers who aided Goldman with a multibillion-dollar cushion last fall.

“They exist, and others don’t, and taxpayers made it possible,” said one industry consultant, who, like many people interviewed for this article, declined to be named for fear of jeopardizing business relationships.

Startling, too, is how much of its profits Goldman is expected to share with its employees. Analysts estimate that the bank will set aside enough money to pay a total of $18 billion in compensation and benefits this year to its 28,000 employees, or more than $600,000 per employee. Top producers stand to earn millions.

Goldman Sachs Likely to Post Huge Profits, Analysts Say - NYTimes.com

 

[Andy Nguyen]

Goldman Sachs Likely to Post Huge Profits, Analysts Say

By GRAHAM BOWLEY and JENNY ANDERSON
Most of Wall Street, and America, is still waiting for an economic recovery. Then there is Goldman Sachs.

Up and down Wall Street, analysts and traders are buzzing that Goldman, which only recently paid back its government bailout money, will report blowout profits from trading on Tuesday.

Analysts predict the bank earned more than $2 billion in the March-June period, thanks to its trading prowess across world markets. If they are right, the bank's rivals will once again be left to wonder exactly how Goldman, long the envy of Wall Street, could have rebounded so dramatically only months after the nation's financial industry was shaken to its foundations.

The obsessive speculation has already begun, along with banter about how Goldman's rapid return to minting money will be perceived by lawmakers and taxpayers who aided Goldman with a multibillion-dollar cushion last fall.

"They exist, and others don't, and taxpayers made it possible," said one industry consultant, who, like many people interviewed for this article, declined to be named for fear of jeopardizing business relationships.

Startling, too, is how much of its profits Goldman is expected to share with its employees. Analysts estimate that the bank will set aside enough money to pay a total of $18 billion in compensation and benefits this year to its 28,000 employees, or more than $600,000 per employee. Top producers stand to earn millions.

Goldman Sachs Likely to Post Huge Profits, Analysts Say - NYTimes.com

 

[IlyaKEightSix]

One thing that always gets to me is how GS is always in control of the government...here's why:

At Goldman, as far as I've heard, in order to be a true Goldman superstar, you can't just stay in the bank and make money. You have to go into public service.

Yes, this does hold some unintended consequences, if you want. However, what's stopping other banks--Deutsche Bank, Credit Suisse, MS, BofA, etc... from sending their guys into government? When was the last time a non-Goldman banker even tried to run for a public service position?

And why would they? WHo wants to give up the millions of dollars in salary, to go and deal with all of the red tape, with a bunch of Joe The Plumber Americans, etc...?

As for America being in decline...America is hardly in decline. It's the rest of the world on the rise. And a great deal in part because of American companies. India owes much of its prosperity due to American software firms.

As for Russia, it has some of the smartest people in the world. However, corruption is rampant, and freedom of speech is a fantasy.

But going back to GS, it's easy to take pot shots at the best of breed. If other firms want to send their best and brightest to government, I'm all for it.

I frankly feel safer with GS people as our elected officials than someone like Sarah Palin. GS people are brutally intelligent. And I'd rather have that intelligence in our government than a bumbling politician peddling snake-oil.

As for buying elections and making the laws...

This is the downside of capitalism. What system would you rather have? The stagnation of European socialism? China's command and control communism?

It's easy to make comments from the peanut gallery. For everyone who has a criticism, I'd like them to suggest a better alternative.

 

[bigbadwolf]

Analysts predict the bank earned more than $2 billion in the March-June period, thanks to its trading prowess across world markets. If they are right, the bank's rivals will once again be left to wonder exactly how Goldman, long the envy of Wall Street, could have rebounded so dramatically only months after the nation's financial industry was shaken to its foundations.

The obsessive speculation has already begun, along with banter about how Goldman's rapid return to minting money will be perceived by lawmakers and taxpayers who aided Goldman with a multibillion-dollar cushion last fall.

There seems to be a disconnect between financial firms like this and what is happening on Main Street, USA. And the US government seems to be extremely partial to the former but indifferent to the latter (of course since the government is partly constituted of executives from financial firms, the reason is clear).

 

[IlyaKEightSix]

There seems to be a disconnect between financial firms like this and what is happening on Main Street, USA. And the US government seems to be extremely partial to the former but indifferent to the latter (of course since the government is partly constituted of executives from financial firms, the reason is clear).

Your quote reminds me of a nice quip from the late George Carlin:

"Think about how stupid the average person is. And then realize that half of them are dumber than that."

The disconnect in prosperity, I believe, stems from a disconnect in culture. Some people want things more than others.

 

[doug reich]

Your quote reminds me of a nice quip from the late George Carlin:

"Think about how stupid the average person is. And then realize that half of them are dumber than that."

The disconnect in prosperity, I believe, stems from a disconnect in culture. Some people want things more than others.

Very astute. Most people are extremely low ambition and want nothing more than a hole in the ground to sit in. The average person will accept a dull stick and dig himself a hole. Maybe two holes.

 

[alain]

The disconnect in prosperity, I believe, stems from a disconnect in culture. Some people want things more than others.

This reasoning is extremely flawed to say the least. Some people want it so much that they are willing to kill and steal to get what they want.

BTW, since you are always saying that you have had it pretty hard, that you and your family are not as prosperous, does it mean you don't want it as much as other people?