Goldman Sachs

[ZondaMark]

Fittster said:

If a firm can't be allowed to fail ... should it be allowed to exist in the first place. Surely private enterprise should be able to stand or fall without the involvement of the state.

Not arguing there, but AIG wasn't really a typical dealer.

[ZondaMark]

Durruti said:

Don't point out silly things like that.

These big bad bankers that scream free enterprise and buyer beware and free markets and all the other big boy phrases that they learnt from Michael Douglas in Wall Street don't like being reminded that their first reaction to loosing a few quid was to run to mummy government crying for money else they would scream and scream until they were sick and make sure that everyone else was jolly well sick too......

Communist bds.

Are you being serious there or just trolling?

[NoelWatson]

SmoothRB said:

ZondaMark said:

The banks, who are merely intermediaries, structure products to satisfy the strategies of their clients. The clients on one side of the deal are always going to lose out as values can't go in favour of both sides, and there's little here to suggest anything out of the ordinary or untoward here.

One set of clients thought they were buying products supported by AAA debts is the thing though. GS etc packaged up lead as gold.

Are you saying that the clients weren't told what the underlying was? This seems unlikely

[Fittster]

anonymous said:

[redacted]

Should it simply be a case of telling the public "If you put money into a commercial organisation your money is at risk". If there is a run on bank, tough luck.

The idea that we will leave in a risk free, no downside world needs to be stamped on.

[Mermaid]

NoelWatson said:

SmoothRB said:

ZondaMark said:

The banks, who are merely intermediaries, structure products to satisfy the strategies of their clients. The clients on one side of the deal are always going to lose out as values can't go in favour of both sides, and there's little here to suggest anything out of the ordinary or untoward here.

One set of clients thought they were buying products supported by AAA debts is the thing though. GS etc packaged up lead as gold.

Are you saying that the clients weren't told what the underlying was? This seems unlikely

But surely this what it turns on, BBB sold as AAA. Akin to an OPC selling a dressed up 964 Carrera 2 as a 964RS. And the saleman all sniggering as the customer buys it in good faith, and betting within the firm how much the mug is going to lose when he tries to sell it on himself to a specialist independent like JZ, 911, Malton etc. Have I got the essence of it?

[NoelWatson]

Mermaid said:

NoelWatson said:

SmoothRB said:

ZondaMark said:

The banks, who are merely intermediaries, structure products to satisfy the strategies of their clients. The clients on one side of the deal are always going to lose out as values can't go in favour of both sides, and there's little here to suggest anything out of the ordinary or untoward here.

One set of clients thought they were buying products supported by AAA debts is the thing though. GS etc packaged up lead as gold.

Are you saying that the clients weren't told what the underlying was? This seems unlikely

But surely this what it turns on, BBB sold as AAA. Akin to an OPC selling a dressed up 964 Carrera 2 as a 964RS. And the saleman all sniggering as the customer buys it in good faith, and betting within the firm how much the mug is going to lose when he tries to sell it on himself to a specialist independent like JZ, 911, Malton etc. Have I got the essence of it?

Not in my experience.

[Rocksteadyeddie]

Mermaid said:

NoelWatson said:

SmoothRB said:

ZondaMark said:

The banks, who are merely intermediaries, structure products to satisfy the strategies of their clients. The clients on one side of the deal are always going to lose out as values can't go in favour of both sides, and there's little here to suggest anything out of the ordinary or untoward here.

One set of clients thought they were buying products supported by AAA debts is the thing though. GS etc packaged up lead as gold.

Are you saying that the clients weren't told what the underlying was? This seems unlikely

But surely this what it turns on, BBB sold as AAA. Akin to an OPC selling a dressed up 964 Carrera 2 as a 964RS. And the saleman all sniggering as the customer buys it in good faith, and betting within the firm how much the mug is going to lose when he tries to sell it on himself to a specialist independent like JZ, 911, Malton etc. Have I got the essence of it?

Not sure that a lot of this stuff was even BBB. Certainly hasn't priced anything like BBB in a long time...

The point is that these ratings were given "independently" by the rating agencies who, to my mind, have escaped the majority of the st flying around trying to find a home.

Having watched the GS boys yesterday pm, they need some serious body language coaching, and lessons in how to look, and sound, contrite. It's almost as if they've never done it before. Irrespective of blame, contrition would be a good idea when the regulator is out to get you.

[NoelWatson]

Rocksteadyeddie said:

The point is that these ratings were given "independently" by the rating agencies who, to my mind, have escaped the majority of the st flying around trying to find a home.

Agreed

[SmoothRB]

Mermaid said:

NoelWatson said:

SmoothRB said:

ZondaMark said:

The banks, who are merely intermediaries, structure products to satisfy the strategies of their clients. The clients on one side of the deal are always going to lose out as values can't go in favour of both sides, and there's little here to suggest anything out of the ordinary or untoward here.

One set of clients thought they were buying products supported by AAA debts is the thing though. GS etc packaged up lead as gold.

Are you saying that the clients weren't told what the underlying was? This seems unlikely

But surely this what it turns on, BBB sold as AAA. Akin to an OPC selling a dressed up 964 Carrera 2 as a 964RS. And the saleman all sniggering as the customer buys it in good faith, and betting within the firm how much the mug is going to lose when he tries to sell it on himself to a specialist independent like JZ, 911, Malton etc. Have I got the essence of it?

Possibly. I mean it is easy to apply caveat emptor to cars since you can go and have a look yourself, ototh complex derivatives and financial products...can you the buyer go and audit every mortgage holder, every debt which underlies said product?

[munky]

anonymous said:

[redacted]

Er.. playing off a buyer vs a seller? Isn't that what any broker, or intermediary, or second hand car dealer does? This is not a conflict of interest, this is called a market. Chinese walls do not apply. Chinese walls are to prevent price sensitive information that isn't public getting from the advisory side of the business to the trading side, to prevent insider trading. And more recently to prevent analysts from recommending a stock (say) to their clients, in order to win advisory business from the company that issued that stock.
GS had a client wanting to buy something. GS found a seller wanting to sell it. That's not the issue. The issue is whether GS purposely told the buyer that the seller was actually a buyer, which they weren't. And, separately in a different example about whether they sold a product after they had described it among themselves as crap. Nothing inherently wrong with that of course, otherwise it would be illegal to sell a second hand Allegro. Caveat Emptor..

[munky]

SmoothRB said:

Mermaid said:

NoelWatson said:

SmoothRB said:

ZondaMark said:

The banks, who are merely intermediaries, structure products to satisfy the strategies of their clients. The clients on one side of the deal are always going to lose out as values can't go in favour of both sides, and there's little here to suggest anything out of the ordinary or untoward here.

One set of clients thought they were buying products supported by AAA debts is the thing though. GS etc packaged up lead as gold.

Are you saying that the clients weren't told what the underlying was? This seems unlikely

But surely this what it turns on, BBB sold as AAA. Akin to an OPC selling a dressed up 964 Carrera 2 as a 964RS. And the saleman all sniggering as the customer buys it in good faith, and betting within the firm how much the mug is going to lose when he tries to sell it on himself to a specialist independent like JZ, 911, Malton etc. Have I got the essence of it?

Possibly. I mean it is easy to apply caveat emptor to cars since you can go and have a look yourself, ototh complex derivatives and financial products...can you the buyer go and audit every mortgage holder, every debt which underlies said product?

Yes - if they want to. And in this particular case, the buyers (especially ACA) chose a lot of what went into the product. Let's not forget that one of the two buyers of Abacus 2007-AC1 was IKB - a German state-owned bank that has a knack of making very bad investment decisions.

If GS purposely misled the buyers then yes they should be accountable for that. If not then what's the problem? There's the issue of wrapping up crap and calling it AAA rated, but that's as much an issue for the ratings agencies that provided those ratings, the regulators for not doing anything about it, and the buyers for believing such a rating (everyone knows who pays the agencies to do the ratings - here there is a conflict of interest, but a widely known one). In many cases these securities were guaranteed by "monoline" insurance companies in order to get the AAA rating, without too much investigation by anyone into the soundness of these monolines, and how much they could afford to pay out on guarantees before they themselves went bust.
ACA - one of the buyers - is themselves an insurance company I believe, so they should have known better.

It's not that GS are blameless (that is to be decided by the civil court case) it's that people are missing the point on what it is they may have done wrong. Plus the fact that the court of public opinion has judged them guilty (they get paid a lot therefore they must be bad) before the evidence has been heard, and the fact that this senate investigations committee, rather than being a sensible discussion behind closed doors is actually a media circus, designed more for show and public humiliation than to actually determine anything.

Would ACA be making such a fuss if they had made money on the deal? If I choose to buy some shares and they go down, I don't go and blame the broker. Or complain that they had another client that was a seller of those shares - of course they do! Otherwise I wouldn't be able to buy them!

some interesting background info here..
http://www.businessweek.com/news/2010-04-17/abacus...

[SmoothRB]

munky said:

Plus the fact that the court of public opinion has judged them guilty (they get paid a lot therefore they must be bad)

There may be some truth to that. They are a big overhead on the real economy and have made future taxpayers poorer. Perhaps they are a useless elite in the Marxist sense and history should bin them?

[fido]

Fittster said:

Ace, Goldman bashing. How about:

"Hank Paulson, took the usual Goldman senior alumni route into government, "critics feasted om the connection", says Time. All the more so when Paulson was found to have putno fewer than 24 calls through to Blankfein when deciding whether to pump $85bn into the rescue of AIG: a bail-out that ensured Goldman got $12.5bn out of the firm."

Not sure what your point is .. Barclays, that well known US bank, also got $9/10bn billion out of AIG .. it wasn't so much AIG that got bailed out - it was the system that it was underwriting & continuing influence/dominance of the US in the financial markets. Same thing nearly happened to Lloyds in the 80s - if they hadn't paid up - what do you think would happen to the reinsurance business in London?

Edited by fido on Wednesday 28th April 10:15

[Trommel]

SmoothRB said:

the real economy

You keep banging on about that.

As for the witch-hunt - GS sell what you say you want to buy. A couple of GS people let their egos carry away via email. What you've bought loses money. End of. Don't then come back crying that you didn't know what you were buying.

[Fittster]

fido said:

Fittster said:

Ace, Goldman bashing. How about:

"Hank Paulson, took the usual Goldman senior alumni route into government, "critics feasted om the connection", says Time. All the more so when Paulson was found to have putno fewer than 24 calls through to Blankfein when deciding whether to pump $85bn into the rescue of AIG: a bail-out that ensured Goldman got $12.5bn out of the firm."

Not sure what your point is .. Barclays, that well known US bank, also got $9/10bn billion out of AIG .. it wasn't so much AIG that got bailed out - it was the system that it was underwriting & continuing influence/dominance of the US in the financial markets. Same thing nearly happened to Lloyds in the 80s - if they hadn't paid up - what do you think would happen to the reinsurance business in London?

Edited by fido on Wednesday 28th April 10:15

Point A. Goldman has considerable political influence.

Point B. What happens in any private industry (as long as legal) should be of no interest to the state.

[fido]

Fittster said:

Point B. What happens in any private industry (as long as legal) should be of no interest to the state.

Rolls-Royce, a leading engine maker, bailed out by the Heath (Conservative) Government in 1971. I think most people would agree this was a good company to bailout. Do you not agree?

Edited by fido on Wednesday 28th April 10:44

[ZondaMark]

SmoothRB said:

munky said:

Plus the fact that the court of public opinion has judged them guilty (they get paid a lot therefore they must be bad)

There may be some truth to that. They are a big overhead on the real economy and have made future taxpayers poorer. Perhaps they are a useless elite in the Marxist sense and history should bin them?

But they aren't/haven't - Goldman made the US taxpayer a tidy sum. Financial institutions facilitate the activity of the real economy anyway.

[anonymous-user]

ZondaMark said:

Goldman made the US taxpayer a tidy sum.

http://bailout.propublica.org/main/list/index

[Murcielago_Boy]

ZondaMark said:

Murcielago_Boy said:

Weren't these "subprime" securities rated AAA by the rating agencies based on what banks, that were doing the securitisation, were telling them?

No, not really (certainly not as flippantly as you imply), but what's that got to do with anything here?

Murcielago_Boy said:

IMO - these banks were mis-selling junk. Part of the blame lies with greedy fund managers - definitely! However some must also lie with the banks.

As said before, it's not Joe Public saving for his retirement on the other end of these trades. The large, sophisticated, institutional investors who were involved have their own research teams, risk managers etc, and they know exactly what they're letting themselves into as they can see exactly what they're investing in. Whilst not exactly professional, whatever they'd been told Paulson's interest was it doesn't change what they were investing in (Paulson wasn't even regarded as a big mortgage player anyway, because he wasn't). Fixed Income markets follow the rule 'Caveat Emptor' (buyer beware), after all.

The banks, who are merely intermediaries, structure products to satisfy the strategies of their clients. The clients on one side of the deal are always going to lose out as values can't go in favour of both sides, and there's little here to suggest anything out of the ordinary or untoward here.

Murcielago_Boy said:

Blankfein called his mate Paulson and said:

B: "hello mate -you're going to sort out our $10bn via AIG right?"
P: "yeah"

Goldman was hedged against AIG. The thing is, if AIG is bailed out to keep their other counterparties sweet, Goldman's hedges don't pay out. Would it really be fair to penalise their prudence?

Murcielago_Boy said:

B: "nice one mate - I'll short their stock - wont anyone notice?.

So what if they did?

Murcielago_Boy said:

P: "No - everyone needs AIG - ref shorting their stock, yeah do it - I've got $1bn in GS stock still which I'll need when i'm not working in the treasury so we could do with GS making back some money.

Paulson had to liquidate all of his holdings before taking his position at the Treasury, so he had no financial incentive. It was only half a billion anyway .

Edited by ZondaMark on Tuesday 27th April 21:45

Understood - what you're saying is:

1. These are "professional investors" so GS can talk a whole load of 5hit about quality of the underlying revenue streams which support these securities to sell them. Professional right? So F**K 'em. They should do their due diligence. Their problem.

2. We KNOW that these securities are junk so we'll take positions accordingly, while our clients (the "PROFESSIONALS") can hang themselves based on our salespitch.

3. We're going to base our hedging strategy on a government bailout of a counterparty - AIG which we know will happen because of our inside connections (Hank Paulson).


Can someone explain to me how
a) this is ethical based on the assumption that they supposed to be providing SOUND advice to their clients?
b) why it is considered fair to use inside government connections that can advise my company early, of impeding government decisions upon which I can then maximise the profits unfairly.


Finally, my understanding is that Paulson actually had his holdings put in trust and he had to liquidate nothing.

[Fittster]

fido said:

Fittster said:

Point B. What happens in any private industry (as long as legal) should be of no interest to the state.

Rolls-Royce, a leading engine maker, bailed out by the Heath (Conservative) Government in 1971. I think most people would agree this was a good company to bailout. Do you not agree?

Edited by fido on Wednesday 28th April 10:44

I don't agree. It shouldn't be for the state to make that call.

Why not bail out woolworths, ship builders, mines, rover or any other business which failed. Who knows which businesses would fail or recover?