I’ve been extremely critical of Goldman Sachs. The bonuses, funded by taxpayer bailouts, teed me off. And back on January 2, I asked, What does $22 billion in Goldman bonuses buy? Now, I have a different concern:
Is the prosecution of Goldman Sachs going too far?
Federal prosecutors are considering a criminal case against employees. This isn’t about fines. This is about hard time behind bars. It’s not clear, though, whether the firm broke rules other than fair play. Here’s what President Clinton says:
“I’m not at all sure they violated the law, but I do believe that there was no underlying merit to the transaction and that’s what I think we need to look at,” he said yesterday about the Securities and Exchange Commission suit filed earlier this month alleging Goldman Sachs misled investors in a mortgage-linked investment.
Has discussion swung from financial reform to zero-sum politics, where Democrats and Republicans are always reaching for new ways to club each other?
Creating zero-value-added instruments like “synthetic CDOs” is one thing. Putting people in jail for “toxic waste” is another. Call me cynical. But the DOJ’s involvement seems like a politically-timed salvo to further financial reform when bipartisan politics are undermining productive discussion.
Yikes. That last sentence was a mouthful. Said more simply—Democrats and Republicans don’t talk to each other. Why introduce criminal charges when the foundation for a civil suit may be shaky?
What’s the cost of piling on Goldman Sachs?
For all the bad behavior at Goldman Sachs and/or other firms, Wall Street plays an essential role. Businesses can’t grow without capital. There are unintended consequences when emotions swing too far in one direction and anger clouds productive thought.
Maybe Uncle Sam is too big to do the right thing. What do you think?
The New York Times describes my novels as “money porn,” “a red-hot franchise,” and “glittery thrillers about fiscal malfeasance.” Through fiction I explore the dark side of money and the motivations of those who have it, want more, and will steamroll anybody who gets in their way.
Even this Administration will have difficulty bringing CRIMINAL charges if no laws have been broken. (They do still employ actual attorneys in the DOJ, don’t they?) But let’s not allow silly details like htat to impede the grandstanding.
Since they are not capitalists, the Administration will miss the fact that capitalism is self-correcting. Goldman will suffer mightily from all the bad PR / bad karma that Feckless Fab and the gang have generated. Taking their place in the pantheon alongside DLJ, Drexel Burnham, First Jersey Securities and others will be punishment enough.
BTW I am dying to know if Fab’s girlfriend / email buddy has dumped him yet. Can you imagine introducing that loser to your parents and friends?
Thanks, Quack. I still don’t understand why Goldman released Tourre’s personal e-mails last Saturday.
Goldman’s capital managers knew more about what was about to happen (market would tank) than others and knew how to capitalize on it (placed costless trades). Its trading success is staggering.
Goldman knew more about what was happening because of its clients trades, right? Or was it because pays well and hires astute proprietary traders?
Would this make Goldman’s clients think twice about placing its trades through or prime brokering with Goldman? Seems not, given Goldman’s obvious trading success in the past decade and the growth in its own trading over the same period of time.
The NYT reported today that GS has lost $21 billion in market cap since the SEC filed charges. To me, this suggests that the market believes GS will lose clients.
But I agree with you, Chris. It’s almost like the world feels a need to trade with GS. But I just can’t imagine taking the opposite side.