Goldman Sachs- Our congress just doesnt get it

[Jarhead]

The told their customers that they were triple A rated.

They lied to their customers and preetending they would not lie to them is just silly

They did not lie to their customers. Please show me where they lied.

 

[Claudette]

Ditto.

Thats just about what I heard as well.

Seems to me GS and companies that invest in the high risk deals are playing a game of oneupmanship among themselves. Seeing if they can say I gottcha.

Doesn't make sense that they would risk their investors to play such a game.

Anyone have anything on this????

It is basic investing logic.

If you invest in an opportuity with a potentially high return, it is becuase it is a HIGH RISK opportuntiy.

Anyone who believed they would get a high return with no risk is only a victim of their own greed.

GS would not jeopardize their client base for one or two years worth of windfall. They may make bad decisions, but that is not a crime nor is it unethical.

I think your Oh So Right my friend. No investors, No money. Not going to kill the golden goose.

Wonder if the Clowns on the panel have figured that out yet??? LOL

 

[uscitizen]

Congress is bent out of shape over the "conflict in interest" as it pertains to Goldman Sachs and its service to it's client base. "You make money even if your client loses money" was the premise many used during their "15 minutes of fame" speeches. "That is a conflict of interest and must put you in a position to decide to poorly advise if your profit is larger than if you properly advise" was the unfounded conclusion many of them wanted us, the people to deduce from their premise.

There is a basic fundamental philosophy used in a free market economy; and nearly all businesses follow it. The ones that dont, usually go out of business in a short period of time. And this philosophy is why a conflict of interest is a faulty premise. To summarize this philosophy:

"whereas I may be able to make more money by offering less quality, my goal is to retain and increase my customer base over a period of time so I should do my best to ensure customer satisfaction"

For example, Burger King can maximize profits by using some additive in place of 25% of the beef. They dont becuase they would lose their client base.

I dont know what is more disturbing. The fact that our law makers are so clueless as to how business works or the fact that over half the country votes them in.

Oh they got it all right, campaign contributions and jobs for relatives and cronies.
Lobbying jobs after they left office, etc.

 

[Truthmatters]

During the Bush years there was an ANYTHING goes atmosphere created.

GS were just a part of this mess.

 

[Jarhead]

During the Bush years there was an ANYTHING goes atmosphere created.

GS were just a part of this mess.

During the last decade or so, people liked the idea of their money making big money for them.

We saw it with the dot com craze. (The Clinton years to use your partisan crap)

We saw it with derivitives. (Clinton AND Bush years)

I blame the investors for wanting to make easy money.

You seem to want to give their greed a pass and put the blame on those that capitalized on their greed.

I dont agree with that kind of thinking.

 

[jillian]

For example, Burger King can maximize profits by using some additive in place of 25% of the beef. They dont becuase they would lose their client base.

I dont know what is more disturbing. The fact that our law makers are so clueless as to how business works or the fact that over half the country votes them in.

yes, but if burger king goes out of business, the world's economy doesn't fail. the point made yesterday was that they were selling garbage to their clients and then placing 'side bets' that those deals would fail.

they were asked if they believed they should have to disclose that type of conflict of interest... they said no.

a baseball player would be tossed for gambling on baseball (ask pete rose, he'll tell you).

attorneys have to disclose even potentital conflicts of interest or things that even if not conflicts would create an appearance of impropriety. why not bankers?

a financial advisor shouldn't be betting against his clients.

that said, what i found most interesting was the senator from, i think it was north dakota, sen. dorgan, said in 1999 that you shouldn't allow investment firms to merge with banks because their operation, objectives and perceptions were totally different. he was one of the few senators who voted against tearing down that wall. had the others listened to him, we wouldn't have had the meltdown in 2008.

 

[boedicca]

Goldman didn't balk at taking a hundred cents on the dollar taxpayer bailout of their bad trade with AIG.

I also am not supporting Goldman. But as was covered at length in the hearing yesterday, they had insurance coverage which would have paid them off if AIG had gone under.

The fact that the Feds bailed out AIG was a government decision. GS had a legal and fiduciary responsibility to its shareholders to collect money that was owed. As no attempt was made in the AIG deal to renegotiate lower amounts (which is odd, why didn't the Feds require that, hmmmm?), GS' obligation was to collect in full.

 

[Truthmatters]

During the Bush years there was an ANYTHING goes atmosphere created.

GS were just a part of this mess.

During the last decade or so, people liked the idea of their money making big money for them.

We saw it with the dot com craze. (The Clinton years to use your partisan crap)

We saw it with derivitives. (Clinton AND Bush years)

I blame the investors for wanting to make easy money.

You seem to want to give their greed a pass and put the blame on those that capitalized on their greed.

I dont agree with that kind of thinking.

So wanting to make money is BAD????

BUT lying to your customer and telling them the thing you are selling them is triple a rated when its rigged to explode on purpose is just fine?

You really do love those Ayn Rand cardboard cutout heros huh?

 

[Jarhead]

For example, Burger King can maximize profits by using some additive in place of 25% of the beef. They dont becuase they would lose their client base.

I dont know what is more disturbing. The fact that our law makers are so clueless as to how business works or the fact that over half the country votes them in.

yes, but if burger king goes out of business, the world's economy doesn't fail. the point made yesterday was that they were selling garbage to their clients and then placing 'side bets' that those deals would fail.

they were asked if they believed they should have to disclose that type of conflict of interest... they said no.

a baseball player would be tossed for gambling on baseball (ask pete rose, he'll tell you).

attorneys have to disclose even potentital conflicts of interest or things that even if not conflicts would create an appearance of impropriety. why not bankers?

a financial advisor shouldn't be betting against his clients.

that said, what i found most interesting was the senator from, i think it was north dakota, sen. dorgan, said in 1999 that you shouldn't allow investment firms to merge with banks because their operation, objectives and perceptions were totally different. he was one of the few senators who voted against tearing down that wall. had the others listened to him, we wouldn't have had the meltdown in 2008.

The meltdown of 2008 had to do with the credit collapse. It had to do with high risk lending practices.

And whether you want to believe it or not, betting against the client is not at all abnormal in the investment world. It is not unethical either.
Take a look:

You want to buy that investment for the potential 25% return? It is a high risk, but go for it. I will buy it for you.
But I am betting that it will fail and buy in for a lower return; the bet that you are wrong.

What exactly is wrong with that?

As for your analogy. It is only applicable if you are claiming that GS was able to manipulate the outcome. Pete Rose was subject to making mangerial decisions based on his gambling and that is a true conflict of interest.

Do you believe GS was able to manipulate outcomes?

 

[Jarhead]

During the Bush years there was an ANYTHING goes atmosphere created.

GS were just a part of this mess.

During the last decade or so, people liked the idea of their money making big money for them.

We saw it with the dot com craze. (The Clinton years to use your partisan crap)

We saw it with derivitives. (Clinton AND Bush years)

I blame the investors for wanting to make easy money.

You seem to want to give their greed a pass and put the blame on those that capitalized on their greed.

I dont agree with that kind of thinking.

So wanting to make money is BAD????

BUT lying to your customer and telling them the thing you are selling them is triple a rated when its rigged to explode on purpose is just fine?

You really do love those Ayn Rand cardboard cutout heros huh?

I again ask you to show me where they lied.

The derivitives sold becuase the investor KNEW IT WAS HIGH RISK with a great return. You claim GS lied to them. Do you have proof? If so, why are they at hearings and not in court?

 

[Truthmatters]

Goldman didn't balk at taking a hundred cents on the dollar taxpayer bailout of their bad trade with AIG.

I also am not supporting Goldman. But as was covered at length in the hearing yesterday, they had insurance coverage which would have paid them off if AIG had gone under.

The fact that the Feds bailed out AIG was a government decision. GS had a legal and fiduciary responsibility to its shareholders to collect money that was owed. As no attempt was made in the AIG deal to renegotiate lower amounts (which is odd, why didn't the Feds require that, hmmmm?), GS' obligation was to collect in full.

Now prove that the insurance company would have honored the policy.

You know as well as anyone they would have found a way out of paying the claim.

 

[uscitizen]

During the last decade or so, people liked the idea of their money making big money for them.

We saw it with the dot com craze. (The Clinton years to use your partisan crap)

We saw it with derivitives. (Clinton AND Bush years)

I blame the investors for wanting to make easy money.

You seem to want to give their greed a pass and put the blame on those that capitalized on their greed.

I dont agree with that kind of thinking.

So wanting to make money is BAD????

BUT lying to your customer and telling them the thing you are selling them is triple a rated when its rigged to explode on purpose is just fine?

You really do love those Ayn Rand cardboard cutout heros huh?

I again ask you to show me where they lied.

The derivitives sold becuase the investor KNEW IT WAS HIGH RISK with a great return. You claim GS lied to them. Do you have proof? If so, why are they at hearings and not in court?

Hey now lets not forget the ratings agencies fabricating low risk ratings for the high risk packages.
But somehow their ratings are protected by freedom of speech???
How fracked up is that?

 

[Jarhead]

Goldman didn't balk at taking a hundred cents on the dollar taxpayer bailout of their bad trade with AIG.

I also am not supporting Goldman. But as was covered at length in the hearing yesterday, they had insurance coverage which would have paid them off if AIG had gone under.

The fact that the Feds bailed out AIG was a government decision. GS had a legal and fiduciary responsibility to its shareholders to collect money that was owed. As no attempt was made in the AIG deal to renegotiate lower amounts (which is odd, why didn't the Feds require that, hmmmm?), GS' obligation was to collect in full.

Now prove that the insurance company would have honored the policy.

You know as well as anyone they would have found a way out of paying the claim.

What makes you think they wouldnt? Does Lloyds of London, or any reinsurance firm have such a reputation? Would they still be in business if they did?

You are using conjecture to make a point.

 

[Jarhead]

So wanting to make money is BAD????

BUT lying to your customer and telling them the thing you are selling them is triple a rated when its rigged to explode on purpose is just fine?

You really do love those Ayn Rand cardboard cutout heros huh?

I again ask you to show me where they lied.

The derivitives sold becuase the investor KNEW IT WAS HIGH RISK with a great return. You claim GS lied to them. Do you have proof? If so, why are they at hearings and not in court?

Hey now lets not forget the ratings agencies fabricating low risk ratings for the high risk packages.
But somehow their ratings are protected by freedom of speech???
How fracked up is that?

And thus why many of us are wondering why the two entities that gave the data for the rating agencies to use are not at all being investigated; Fannie and Freddy.

How fracked up is THAT?

 

[boedicca]

I am not supporting Goldman Sachs as it pertains to their "bailout". Heck, I dont even know if Goldman is innocent of wrong doing. But we are looking into it.

But that has nothing to do with my concern.

I was very much taken aback by the lack of business saavy of our congress. Their premise is very naive. If they believe it, we should all be concerned. If they dont believe it, we should all be concerned that they are showboating while ridiculiong the intelligence of the American People as they try to convince us of such an absurd premise.

(Agreed on the lack of business sense and knowledge on the part of our Congress. Most have never worked in the private sector.)


It might help to actually look at who was buying these instruments. They were not sold to novice retail investors. What the GS staff tried to explain, not very effectively, was that the buyer was very involved in the process and selection/evaluation of assets. They wanted subprime, the riskier the better.

"IKB was still buying strong in early 2007, but they were very specific about the collateral they wanted in the CDO's. They had a big research team of 20 guys and would inspect the asset quality outside of what any rater was saying about the bond. They wanted subprime paper," said a trader at Deutsche Bank who worked with IKB. Other Deutsche Bank employees who requested anonymity confirmed IKB's hunger for subprime collateral.

IKB would approach banks with a request for a specially tailored CDO that matched their investment strategy of seeking out exposure to the riskiest bonds, because these came with the highest yields. And according to bank staffers involved in these transactions, which included not only Goldman but its German rival Deutsche Bank, they paid tens of millions of dollars in fees to get into these deals.

IKB may have been driven to this risky strategy because it was already somewhat distressed. Like many conduits, IKB's Rhineland and Rhinebridge funds depended on the short term commercial paper market for funding. They would borrow short term debt on the commercial paper market in order to fund their purchases of mortgage bonds and CDOs. The difference between the costs of borrowing and the yield on the investment assets was the source of their profits. The assets of the conduits served as collateral for the short-term loans, which meant lenders to Rhineland and Rhinebridge would be entitled to their assets if they couldn't make good on their debt.


Goldman's 'Victim' in SEC Case Was a Yield Chaser - Business - The Atlantic

 

[Jarhead]

I am not supporting Goldman Sachs as it pertains to their "bailout". Heck, I dont even know if Goldman is innocent of wrong doing. But we are looking into it.

But that has nothing to do with my concern.

I was very much taken aback by the lack of business saavy of our congress. Their premise is very naive. If they believe it, we should all be concerned. If they dont believe it, we should all be concerned that they are showboating while ridiculiong the intelligence of the American People as they try to convince us of such an absurd premise.

(Agreed on the lack of business sense and knowledge on the part of our Congress. Most have never worked in the private sector.)


It might help to actually look at who was buying these instruments. They were not sold to novice retail investors. What the GS staff tried to explain, not very effectively, was that the buyer was very involved in the process and selection/evaluation of assets. They wanted subprime, the riskier the better.

"IKB was still buying strong in early 2007, but they were very specific about the collateral they wanted in the CDO's. They had a big research team of 20 guys and would inspect the asset quality outside of what any rater was saying about the bond. They wanted subprime paper," said a trader at Deutsche Bank who worked with IKB. Other Deutsche Bank employees who requested anonymity confirmed IKB's hunger for subprime collateral.

IKB would approach banks with a request for a specially tailored CDO that matched their investment strategy of seeking out exposure to the riskiest bonds, because these came with the highest yields. And according to bank staffers involved in these transactions, which included not only Goldman but its German rival Deutsche Bank, they paid tens of millions of dollars in fees to get into these deals.

IKB may have been driven to this risky strategy because it was already somewhat distressed. Like many conduits, IKB's Rhineland and Rhinebridge funds depended on the short term commercial paper market for funding. They would borrow short term debt on the commercial paper market in order to fund their purchases of mortgage bonds and CDOs. The difference between the costs of borrowing and the yield on the investment assets was the source of their profits. The assets of the conduits served as collateral for the short-term loans, which meant lenders to Rhineland and Rhinebridge would be entitled to their assets if they couldn't make good on their debt.


Goldman's 'Victim' in SEC Case Was a Yield Chaser - Business - The Atlantic

Exactly. The investor saw an opportunity to make a killing; but at the high risk of losing.

And they lost. ANd GS on the other hand preferred to bet the other way.

I see nothing wrong with that.

Just as I see nothing wrong with someone betting on the no pass line in craps. The guy that taught me to play craps plays the no pass line all the time. My choice is to play the field.

My choice. My loss if I am wrong.

 

[jillian]

The meltdown of 2008 had to do with the credit collapse. It had to do with high risk lending practices.

And whether you want to believe it or not, betting against the client is not at all abnormal in the investment world. It is not unethical either.
Take a look:

You want to buy that investment for the potential 25% return? It is a high risk, but go for it. I will buy it for you.
But I am betting that it will fail and buy in for a lower return; the bet that you are wrong.

What exactly is wrong with that?

As for your analogy. It is only applicable if you are claiming that GS was able to manipulate the outcome. Pete Rose was subject to making mangerial decisions based on his gambling and that is a true conflict of interest.

Do you believe GS was able to manipulate outcomes?

banks operate in the public trust. investments houses have no such stated obligation although they should. allowing them to be one and the same was a huge failing.

high risk lending isn't what crashed the market. that was only one teeny, tiny, part of it. what crashed the market were trash derivatives bundled up in little packages until no one knew what they were buying or betting on.

the lending practices that were problematic is that banks didn't care about risky investments. they told people to keep re-financing and suck out the equity from their homes. then promised they would re-fi when the ARM hit. however, when the ARM hit, the properties were already devalued and because there was no equity, they couldn't get a re-fi. the fault for that type of thing was the banks, the mortage brokers (who both made huge fees for every re-fi) and people borrowing on their mcmansions because they thought the bubble would never burst. i know, i closed a lot of those re-fi's for people. and each time i did it, i said to myself, i would NEVER take on that type of obligation.

and everyone else was running around with cash in their hands thinking it would never end.

 

[uscitizen]

I again ask you to show me where they lied.

The derivitives sold becuase the investor KNEW IT WAS HIGH RISK with a great return. You claim GS lied to them. Do you have proof? If so, why are they at hearings and not in court?

Hey now lets not forget the ratings agencies fabricating low risk ratings for the high risk packages.
But somehow their ratings are protected by freedom of speech???
How fracked up is that?

And thus why many of us are wondering why the two entities that gave the data for the rating agencies to use are not at all being investigated; Fannie and Freddy.

How fracked up is THAT?

Moodys employees have admitted that they just made up their ratings, they had no historical evidence to base them on. But were getting lots of money to rate them and if they did not give a favorable rating they issuers would just go and give another agency the millions of ratings fees money.

 

[HUGGY]

I am not supporting Goldman Sachs as it pertains to their "bailout". Heck, I dont even know if Goldman is innocent of wrong doing. But we are looking into it.

But that has nothing to do with my concern.

I was very much taken aback by the lack of business saavy of our congress. Their premise is very naive. If they believe it, we should all be concerned. If they dont believe it, we should all be concerned that they are showboating while ridiculiong the intelligence of the American People as they try to convince us of such an absurd premise.

I don't think their issue was buying and selling financial instruments and making a commission. It seemed to be more of Goldman setting up shaky derivitives and then making money when they failed

I need to correct something you said. You referred to those derivitives as "shaky". That is inappropriate as there is no such thingt as "shaky" when you invest.

Shaky implies corrupt; or not sound or unethical etc.

Those derivitives were known as "high risk" investments. Anyone who invested in derivitives were aware that they were high risk. The allure was the return if they were successful. But the liklihood of being successful is not as great as a low risk investment, but thus the greater return.

Now, as I see it GS did not want the risk so they sold out. Many of their clients opted for the risk with the hope of a high return. What is wrong with that?

Again, maybe they lied and manipulated. We will find out. But if they didnt, then exactly what is wrong with what they did?

A triple "A" rating is high risk? .. The fact that Goldman was playing long AND short without full disclosure is the issue sparky. Not to mention the bogus ratings they were peddling.

 

[Jarhead]

The meltdown of 2008 had to do with the credit collapse. It had to do with high risk lending practices.

And whether you want to believe it or not, betting against the client is not at all abnormal in the investment world. It is not unethical either.
Take a look:

You want to buy that investment for the potential 25% return? It is a high risk, but go for it. I will buy it for you.
But I am betting that it will fail and buy in for a lower return; the bet that you are wrong.

What exactly is wrong with that?

As for your analogy. It is only applicable if you are claiming that GS was able to manipulate the outcome. Pete Rose was subject to making mangerial decisions based on his gambling and that is a true conflict of interest.

Do you believe GS was able to manipulate outcomes?

banks operate in the public trust. investments houses have no such stated obligation although they should. allowing them to be one and the same was a huge failing.

high risk lending isn't what crashed the market. that was only one teeny, tiny, part of it. what crashed the market were trash derivatives bundled up in little packages until no one knew what they were buying or betting on.

the lending practices that were problematic is that banks didn't care about risky investments. they told people to keep re-financing and suck out the equity from their homes. then promised they would re-fi when the ARM hit. however, when the ARM hit, the properties were already devalued and because there was no equity, they couldn't get a re-fi. the fault for that type of thing was the banks, the mortage brokers (who both made huge fees for every re-fi) and people borrowing on their mcmansions because they thought the bubble would never burst. i know, i closed a lot of those re-fi's for people. and each time i did it, i said to myself, i would NEVER take on that type of obligation.

and everyone else was running around with cash in their hands thinking it would never end.

Being in settlemet law, (bank attorney), I am aware of what caused the issues in the ledning market. And you are spot on. "Dont worry about it. When the teaser rate expires you will refinance". The advice was valid ONLY if real estate values continued to rise or drop insiginificantly.

However, the derivitives selling had nothing to do with the bank meltdown whatsoever. Yes, it affected themarket, but sell-offs is a common practice when an idea bursts. Like we saw in the late 90's with the dot com bubble.

But investors know this. It is a chance they take. Jill, investing is nothing more than having money make money for you. You do not work for it. You decide if you want to take the chance and you do it; BY CHOICE. With the hopes you will make easy money.

I see no victims here. I see gamblers gambliong and casinos making money on the desire of the investors to make easy money. And many do by the way.