Goldman Director resigns and lets it all hang out

[clifp]

There is theoretically an oversight entity that makes sure we don't get "goldman sached" too much, but I imagine this oversight entity only serves to make sure they get the kickbacks from the i-bank relationship instead of my gooberhead coworkers.

We also staff the top jobs at the Fed and Treasury with former GS executives, which helps insure that Uncle Sam doesn't get Goldman Sacked too badly and reserves the worst shafting for little towns in Scandinavia, the Chinese, the Saudi's and other oil rich countries.

As a country, we should be grateful that GS did such a fine job in dumping our toxic financial assets outside of the country. Just like the US exists as place for the Chinese to dump their toxic toothpaste, pet food, and dry wall least it affect the domestic market. The rest of the world is a a terrific market for America's "best" financially engineered products. What Mr Smith didn't seem to get is that he worked for GS's foreign operations, aka the landfill.

 

[ERD50]

It's been pretty obvious to me over the last 50 years that it's become more common, examples all the time from first hand experiences and in our culture - TV & other media. The woman who won a $1MM lottery, kept taking food stamps and didn't see anything wrong with it - really? How common stealing mp3's online or copying CD's and DVD movies became about 10 years ago, millions of people didn't see anything wrong with it. Two of hundreds of examples, but I suspect we'll disagree anyway.

If you want "data" read the chapter on "Honesty" in Coming Apart. Fortunately it's still a minority, just much larger than generations ago.

I don't see where 'agreeing' or 'disagreeing' has a place in this. Would we 'disagree' on the recorded high temperature at ORD on a certain date? It either is X or it isn't. 'Lying, cheating & stealing are far more common now than they were when most of us were kids, no comparison...', or they weren't. Our perceptions might be different, but the facts can't be.

It's obviously not as easy to measure as temperature, but when you say there is 'no comparison' that seems to say it ought to be obvious to anyone. I'm not so sure it is.

We could trade anecdotes till the cows come home, but there is no value in that.

But taking your one example, stealing mp3s - well, I recall plenty of people copying/swapping purchased LPs to Cassette tape. And that took physical access to the LP, a connection with a person willing to allow it to be copied (I sure wouldn't loan my precious LPs to someone with a crappy, dirty, worn needle that tracked at 10 grams!), a cassette recorder and phono with the proper line in/out connections, and it took time.... slower than real time, with the pauses, miscues, plus trying to figure out if you can fit that next song on that side of the tape (base 60 math anyone?), and oh wait - it clipped, go back and re-record at a lower level, ooops, it skipped, try that track again. And then, (oh horrors) you have to manually write the titles of the tracks on that little cover sheet in the case.

Now, compare that with stealing an mp3. Many households already have everything they need. Click, and a minute later you've got it, complete with all the song info. And you can play it on something that fits in your pocket. No physical access, no one-on-one contact, one person makes it available to millions. EZ. Quick. No social skills required. No getting your hands dirty. Start it and go off and have a cola. EZ.

So was it wrong for the teens in the 60's and 70's to tape and then share LPs? Yes. Was it as easy as today? No. Would the teens in the 60's and 70's steal more music if it was easier? It seems obvious to me that they would. More than today's teens? Who knows? But I don't think it is obvious that they'd act differently, and I see no reason to think they would.

Now, I don't steal something just because there is an easy opportunity. But if we look at a big group, some will be on the edge, and easy will pull them over the edge.

Does the Coming Apart book have real data? If so, I may take a look. But there are so many books/articles written to tell some group of people what they want to hear, I'm always a bit skeptical.

-ERD50

 

[Gone4Good]

The government entity I work for consumes a fair amount of i-bank services and professional investors wouldn't accurately describe any of my gooberhead coworkers.

I'm intriqued. What products and services does this government entity feel are so important to have but not important enough to hire people who can understand them?

Maybe it's important to note that in most transactions, an Investment Bank is not a financial advisor. It is normally just acting as a middle-man bringing a buyer and a seller together. If we want the I-Bank to have a fiduciary responsibility to it's clients, to which client does that responsibility point: the buyer or the seller? It can't be both because buyers and sellers interests are in direct conflict. And yet they're both clients at exactly the same moment in time.

 

[MichaelB]

Maybe it's important to note that in most transactions, an Investment Bank is not a financial advisor. It is normally just acting as a middle-man bringing a buyer and a seller together. If we want the I-Bank to have a fiduciary responsibility to it's clients, to which client does that responsibility point: the buyer or the seller? It can't be both.

An investment bank works for the company that wants to raise capital by providing advice and strategy. When it engages in other businesses, such as trading for its own account or providing investment advise to others, it risks conflict of interest.

 

[Gone4Good]

An investment bank works for the company that wants to raise capital by providing advice and strategy. When it engages in other businesses, such as trading for its own account or providing investment advise to others, it risks conflict of interest.

The industry is indeed rife with conflicts. But underwriting securities for firms (which I guess Mr. Smith would be surprised to learn is a relationship business) requires a sales force to sell those securities and a trading desk to support and provide liquidity for it.

The underwriter has an obligation to perform due dilligence and provide adequate disclosure. It dosen't have an obligation to believe the security is a good investment and it doesn't have an obligation to do the buyer's homework for him. Again, the I-Bank is just a middle man bringing a buyer and seller with conflicting interests together.

 

[okapi]

I think today more folks are hip to the fact that more narcissists and psychopaths work in this sector than most others.To each his own as far as who someone invests with."Snakes In Suits" is a good read about this topic.

 

[MichaelB]

The investment bank does not have a fiduciary duty but it is contracted and paid by the seller and has contractual obligations to that party only. It very much is not a neutral intermediary. This in no way relieves the buyer of the need for due diligence.

 

[lhamo]

I can't help wondering if he shorted the stock before he published that op-ed. Could that get him indicted for insider trading?

 

[ChiliPepr]

I can't help wondering if he shorted the stock before he published that op-ed. Could that get him indicted for insider trading?

Not for insider trading per se, but it is illegal.

Also, if you work at Goldman, all your trades need to be approved by and executed though Goldman. So, I would be very surprised if they would allow an employee to short the stock.

When you work in the investment industry, your trading is heavily regulated. For example, I am not allowed to buy any stocks at all and can only sell stocks I owned before I started working here. I cannot buy any ETF's that are not based on broad based indexes.

 

[Gone4Good]

The investment bank does not have a fiduciary duty but it is contracted and paid by the seller and has contractual obligations to that party only. It very much is not a neutral intermediary. This in no way relieves the buyer of the need for due diligence.

True. But this brings up an important point missed in Mr. Smith's Op Ed: investment banks play many roles. Underwriting securities is one, M&A advisory another, risk management, prime brokerage, etc. etc. Many of these roles are relationship driven. You're not going to find investment bankers talking about "ripping the face off" of a CFO whom they want to win underwriting business from.

What we've been talking about here is mostly about a specific division; sales and trading. If Mr. Smith were more senior, or even more observant, he'd know that not every division works like sales and trading does. And not many other businesses in the world are zero sum games like trading is.

 

[ChiliPepr]

What we've been talking about here is mostly about a specific division; sales and trading. If Mr. Smith were more senior, or even more observant, he'd know that not every division works like sales and trading does. And not many other businesses in the world are zero sum games like trading is.

And people should realize that firms like GS often trade against themselves... One side of the bank may be buying a security while another is selling it.

There are walls between parts of the bank where no information is communicated through. I-Banks are one of the very few industries where it is illegal for one part of the company to tell another part what they are doing and know.

 

[tryan]

So FIRST they look after themselves; SECOND they look after the shareholders; THIRD they look after the clients.

That's EVERY business .... what's the problem?

 

[FUEGO]

I'm intriqued. What products and services does this government entity feel are so important to have but not important enough to hire people who can understand them?

Welcome to government hiring...

Save a couple bucks by paying diddly squat (or in my entity's case eliminating our CFO and his position) and spend (maybe) millions or tens of millions too much for i-bank services.

I am very much on your side in regards to consumers of i-bank services needing to do their due diligence to ensure they are getting a fair bargain for the services provided. But I don't know that all of these consumers are "professional investors". Those consumers that are savvy enough (and not too egotistical) to realize they are not professional investors could solicit outside advice to ensure they are getting a fair bargain. But it doesn't always happen. That is the consumer's fault in my opinion.

 

[ChiliPepr]

Save a couple bucks by paying diddly squat (or in my entity's case eliminating our CFO) and spend (maybe) millions or tens of millions too much for i-bank services.

I have seen that issue before, also with endowments... They would have a portfolio manager outperforming the market to the tune of a $100 million and when they pay the guy $10 million, all the alumni come out of the woodwork complaining that s/he is paid too much... So what happens? The portfolio manager starts her/his own hedge fund and makes $30 million, the endowment hires a below average portfolio manager for $ 1 million, and the the endowment under performs the market.

But, you don't have to explain why you paid your PM $10 million!

 

[FUEGO]

I have seen that issue before, also with endowments... They would have a portfolio manager outperforming the market to the tune of a $100 million and when they pay the guy $10 million, all the alumni come out of the woodwork complaining that s/he is paid too much... So what happens? The portfolio manager starts her/his own hedge fund and makes $30 million, the endowment hires a below average portfolio manager for $ 1 million, and the the endowment under performs the market.

But, you don't have to explain why you paid your PM $10 million!

I just did some quick math and if our entity had a CFO that could make our financing operations more efficient by 1 basis point, that would pay his total comp package. Penny wise pound foolish (of course I don't get paid to think like this - yet!). I have been instructed to wait till after the election to see how things settle out before rocking any boats...

 

[Gone4Good]

Save a couple bucks by paying diddly squat (or in my entity's case eliminating our CFO and his position) and spend (maybe) millions or tens of millions too much for i-bank services.

I am very much on your side in regards to consumers of i-bank services needing to do their due diligence to ensure they are getting a fair bargain for the services provided. But I don't know that all of these consumers are "professional investors". Those consumers that are savvy enough (and not too egotistical) to realize they are not professional investors could solicit outside advice to ensure they are getting a fair bargain. But it doesn't always happen. That is the consumer's fault in my opinion.

Part of what I was driving at is that there are different parts of an I bank, and what "products" you're buying depends on whether you're facing someone who wants to "rip your face off" or someone who wants to build a long-term relationship.

Professional investors are generally dealing with the face ripping folks. CFO types or their equivalent are generally not. Although I admit that the proliferation of derivatives probably does blur the old lines.

 

[Gone4Good]

I just did some quick math and if our entity had a CFO that could make our financing operations more efficient by 1 basis point, that would pay his total comp package. Penny wise pound foolish (of course I don't get paid to think like this - yet!). I have been instructed to wait till after the election to see how things settle out before rocking any boats...

Your rationale is also why some of these "less sophisticated" small pension managers exist. A couple of guys and a bloomberg can mirror a market index pretty cheaply. As long as there are tight controls on what they can buy there isn't really much chance of them getting badly abused.

 

[Midpack]

FWIW

It either is X or it isn't. 'Lying, cheating & stealing are far more common now than they were when most of us were kids, no comparison...', or they weren't. Our perceptions might be different, but the facts can't be.

We could trade anecdotes till the cows come home, but there is no value in that. Rest assured, we won't...

But taking your one example, stealing mp3s - well, I recall plenty of people copying/swapping purchased LPs to Cassette tape. And that took physical access to the LP, a connection with a person willing to allow it to be copied (I sure wouldn't loan my precious LPs to someone with a crappy, dirty, worn needle that tracked at 10 grams!), a cassette recorder and phono with the proper line in/out connections, and it took time.... slower than real time, with the pauses, miscues, plus trying to figure out if you can fit that next song on that side of the tape (base 60 math anyone?), and oh wait - it clipped, go back and re-record at a lower level, ooops, it skipped, try that track again. And then, (oh horrors) you have to manually write the titles of the tracks on that little cover sheet in the case. Copying/swapping purchased LPs to tape was among friends, stealing mp3's was worldwide among people who didn't know each other at all, hardly the same scale, however...

So was it wrong for the teens in the 60's and 70's to tape and then share LPs? Yes. Was it as easy as today? No. Would the teens in the 60's and 70's steal more music if it was easier? It's possible, but not obvious to me. It seems obvious to me that they would. More than today's teens? Who knows? I have 2500+ mp3's on my iPod, every single one legally purchased. I doubt I would have been any more tempted when I was a teen than now. I guess you could ask here, since almost everyone here was a teen two generations ago.

Does the Coming Apart book have real data? Yes, that's why I mentioned "data" in my post. If so, I may take a look. But there are so many books/articles written to tell some group of people what they want to hear, I'm always a bit skeptical.

 

[ERD50]

I have 2500+ mp3's on my iPod, every single one legally purchased. I doubt I would have been any more tempted when I was a teen than now. I guess you could ask here, since almost everyone here was a teen two generations ago.

But that is the answer to a different question. You are answering the question: 'Were people who are honest now less honest when they were teens?'. Doesn't really have anything to do with your assertion that there is no comparison between the level of dishonesty today and that of 50 years ago. I guess the only relevance would be if a significant percent of responders said that yes, they would steal music today, but would not when they were teens, and that the 'ease of use' had nothing to do with it. That would indicate that people are more dishonest today, but even that is questionable as we would need to adjust for age. To a degree, your response counters your assertion - at least for your sample of one, people are not any more/less dishonest than 40/50 years ago. Which is what I would lean towards, but I'm open to information to the contrary.

Copying/swapping purchased LPs to tape was among friends, stealing mp3's was worldwide among people who didn't know each other at all, hardly the same scale, however...

Not sure what that has to do with honesty/dishonesty. Lack of opportunity does not make one 'honest'. Doing the right thing when no one is looking is a better definition.

Does the Coming Apart book have real data? Yes, that's why I mentioned "data" in my post.

Well, maybe I'll see if they have it in our library. But I purposely made the distinction between 'real data' (unbiased, let the numbers tell the story kind of data), and 'data' ('here are some numbers I cherry picked that I know my intended audiance will lap up like thirsty dogs' kind of data). Seems that the majority of books have the latter kind - it sells books.


OFF TOPIC: I can't help but rant a little on mp3s. The music companies are doing themselves no favors with people like me (I'm a minority, so it is what it is). I've rarely paid for an mp3 (but I don't steal them either), because in this day and age of advanced technology, I should expect a sound quality level of 16bit/44.1KHz sample rate (CD quality) as a minimum. And they only offer compressed files of lower quality. So that means that for me to even get 16/44.1, I need to buy a CD, and then rip it myself to use on my home media player (HDD based). Now I've got a piece of hardware (the CD), that I don't need, taking up space (I could go and sell it, but that does not seem totally honest, but it would be pretty easy to 'rationalize' as they don't offer what I really want, so made me do extra work - so maybe I should recover some cost for my time and inconvenience?). I have DL'd and paid for music from magnatune (they offer 16/44.1, and pay the musicians a reasonable cut), but they have a pretty limited catalog. /end OFF TOPIC rant

-ERD50

 

[Midpack]

We disagree, happens all the time...

 

[ERD50]

We disagree,...

No we don't. (cue Monty Python!)

Seriously, we don't disagree because I never took the opposing view. But you made a strong statement that there is just no comparison between the level of dishonesty today and in our past. I questioned your basis for such a strong statement, that's all.

ERD50 said: I don't know if you are right or wrong, but what do you base that on?

In my experience, many people tend to filter the past through rose-colored glasses, their perceptions are not in alignment with reality. So I am skeptical when I hear about the 'good old days'. Geez, I sure recall my own Father trying to fill me in on the many different ways people would be trying to 'gip' me (actually, that might be 'gyp' from 'gypsy'? - probably not PC today, but my Father certainly wasn't PC, even for the time!). Even Mayberry couldn't escape it - remember when Barney bought a car that was only driven by a little old lady to church on Sunday (and the transmission was filled with sawdust to quiet the worn out gear box, and the odometer turned back)? A reflection of the times.

ERD50 said: Personally, I kinda doubt that thousands of years of human nature has changed much in just 50 years,

Maybe I'm wrong, maybe the book you referenced will shine some light on it. But in discussions like these, I'm reminded of that old quote:

"The children now love luxury; they have bad manners, contempt for authority; they show disrespect for elders and love chatter in place of exercise. Children are now tyrants, not the servants of their households. They no longer rise when elders enter the room. They contradict their parents, chatter before company, gobble up dainties at the table, cross their legs, and tyrannize their teachers.

ATTRIBUTION: Attributed to SOCRATES by Plato, according to William L.
Patty and Louise S. Johnson, Personality and Adjustment, p. 277
(1953)."

-ERD50

 

[MichaelB]

No we don't. (cue Monty Python!)

-ERD50

One of my favorite sketches

Argument Clinic - YouTube

 

[Midpack]

No we don't. (cue Monty Python!)

Seriously, we don't disagree because...<snip>

Thanks for your post, it was amusing...

 

[clifp]

Well since the thread has been jacked....

I very much agree with ERD that there is strong tendency for people to view the past through rose-colored glasses. I think if anything the data suggests Millennial's/generation Y are actually more law-abiding honest than either Gen X or Boomers. Drug use, teen pregnancy, and crime rates are all at at record low levels going back to 30 to 50 years. Personally I think they have more in common with the Greatest Generation having been through a decade of war and an almost depression.

That said I think Midpack is right in the respect for intellectual property is very low and most people (especially young people) don't view downloading a song or movie as stealing. Eventhough there is very little difference between walking out of a store with a CD and downloading a bunch of MP3. Mmost everybody thinks the first is stealing and wrong, but for most young people the second is the equivalent of jaywalking at empty street.

 

[Texas Proud]

OFF TOPIC: I can't help but rant a little on mp3s. The music companies are doing themselves no favors with people like me (I'm a minority, so it is what it is). I've rarely paid for an mp3 (but I don't steal them either), because in this day and age of advanced technology, I should expect a sound quality level of 16bit/44.1KHz sample rate (CD quality) as a minimum. And they only offer compressed files of lower quality. So that means that for me to even get 16/44.1, I need to buy a CD, and then rip it myself to use on my home media player (HDD based). Now I've got a piece of hardware (the CD), that I don't need, taking up space (I could go and sell it, but that does not seem totally honest, but it would be pretty easy to 'rationalize' as they don't offer what I really want, so made me do extra work - so maybe I should recover some cost for my time and inconvenience?). I have DL'd and paid for music from magnatune (they offer 16/44.1, and pay the musicians a reasonable cut), but they have a pretty limited catalog. /end OFF TOPIC rant

-ERD50

Just wanted to point out that if you rip your music, it is legal because you still have the original one you purchased on CD... however, if you sell your CD you no longer have the right to possess that copy...