In the Senate chamber yesterday, our elected officials grilled reps from Goldman Sachs. The Senators illustrated, I think, the outrage felt by Americans over bailout dollars that turned into banker bonuses. Even if—Senator Carl Levin (D-Michigan) trash-talked like shock-jock Howard Stern:
“You knew it was a shitty deal and that’s what your e-mails show,” he said. “How much of this shitty deal did you continue to sell to your clients?”
I wonder if the FCC fines Senator Levin.
The Senators scored big on outrage. They fared less well on Abacus 2007-AC1, CDOs, and Goldman’s business practices. Specifically, productive dialogue broke down over the discussion of “market makers.” And at times, I felt like the two sides were speaking different languages. Here’s a video that captures the essence of the exchange:
Senator Susan Collins (R-Maine) kept asking whether Goldman had a duty to act in the best interests of its clients. Fabrice Tourre of Goldman became so exasperated he threw up his hands and said:
Mūsų pareiga klientams parodyti jiems kainos sandoris jie prašo kainas. Mes ne konsultantams investicijų klausimams.
Our Senators added zero clarity to what should be done about financial reform. It bothers me. And even though I’ve been critical of financial institutions, I believe Goldman’s executives furthered the discussion in a more productive manner than representatives from Capitol Hill.
Specifically, several Goldman executives endorsed: 1) hard caps on how much financial institutions can borrow; and 2) higher reserve requirements on illiquid assets. Said more simply, they recommended additional collateral as a requisite for hard-to-sell assets.
Tuesday’s proceedings demonstrate, in my opinion, the need to include the financial sector in all discussions about financial reform. Otherwise, it won’t work. What do you think?