Greg Smith, who publicly resigned in a scathing op-ed, says the investment bank’s unethical culture threatens the firm’s future. Anderson Cooper reports. Smith is a conflicted character and his motivation is most certainly self-serving, but this discussion is revealing all the same. Especially the bits about how pension managers have been buying financially suicidal derivative securities in desperate attempts to juice their performance returns. This is the financial world’s version of illegal doping to try and garner a performance advantage and it is inherently dangerous to the beneficiaries they are hired to serve. Their actions are the opposite of what fiduciary duty requires of ethical risk managers. Here is a direct link.
As we watch, I offer this timeless quote from the Pecora Commission (held 1932-1934) report of the Senate banking and currency committee. The more things change…
“The deplorable consequences to the American investing public, with their misplaced reliance upon and confidence in the competency and integrity of purpose of the investment trustees, is woefully exemplified by the Goldman-Sachs Trading Corporation.” –Senate banking and currency report, June 1934
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In light of current events, that’s a spectacular quote about GS by the Pecora Commission. It shows that (surprise, surprise) Goldman and their ilk have always been corrupt. But student of financial history already knew this. The more things change…
In the 60 minutes story, even the apologist professor characterizes GS as a “mafia.” Smith truly broke the code of omertà just as egregiously as any wise guy who testified against the Gambinos or the Genoveses. We need more Greg Smiths on Wall Street. Even if he was partly motivated by revenge-seeking, that does not exculpate GS and Wall Street.
I watched the Levin sub-committee hearings. I can tell you that IMO these GS crooks are even more guilty than they seemed. It was obvious from their testimony that cheating clients is at the core of their business model.
Good quote…..and so it goes.
Plutocrats do what Plutocrats do, but what about the fiduciary duty of the pension funds or any asset manager. Is it not their responsibility to understand what they are buying? It is not good enough to attempt to juice the returns with assumptions and fairy tales at the ultimate expense of the names.
Derrivatives are not an investment they are a bet with an expiration date.
The fascination with brainy, young gun slingers with new fresh MBA’s and zero experience with the real world will end and it will not be pretty, but not just yet.
The pig will be kept in the air for a while yet but the longer the carcass floats on the methane that continues to be pumped up it’s @#$ the worse the smell will be when it ultimately deflates.