Thoughts on the grandstanding.
So… he thought that GS is not in it for the money?
He wasn’t saying GS should be losing money. He’s saying that GS needs to make money “by helping its clients make money.”
I have no way to judge if his accusations about GS are true, but if they are, his logic is sound.
Following one’s conscience is easier when you have a bundle of money in the bank (albeit not GS’s bank) to fall back on.
It isn’t always smart to publicly call out people with multiple millions of dollars at their disposal, however. It does raise the chance of dying a mysterious quiet death.
The problem is that if you’re on the sell side, you can’t make a lot of money by being on your client’s side. Every dollar you make is at the expense of your client. On one hand, this encourages you to take advantage of the “muppets” who don’t have the same knowledge as you. On the other hand, if you traded with GS and they take your money, that’s your own fault. They can’t force you to execute a trade, but you can sue them for inadequate disclosure.
Not all financial institutions are bound by fiduciary duty. If your only purpose is to facilitate markets, you are not morally or legally responsible for your trading counterparty’s losses.
What are the odds that Greg loaded up on put options and released this statement timely before options expire this Friday?
i disagree that if you’re on the sellside you can’t make a lot of money by being on your clients side…in the long run, i reckon you will make more…
the problem is, the incentive is skewed towards the short term…
its almost always in your interest to do well by your client…not many companies can do well overtime without serving their clients well …
inadequate disclosure. like when GS sells you packaged loans and doesn’t tell you that Paulson handpicked the loans to be included in there (aka: the ones most likely to fail) while taking the other side of the trade : )
Well, clearly you can’t *always* give people a bad deal. No one would do business with you if that were the case. However, you can apparently get away with giving people bad deals with somewhat higher frequency than your competitors. Goldman Sachs would not be so profitable if that were not the case.
Also, very often, your counterparties never realize the true cost of the trades. For instance, you might sell a credit derivative at a significant premium to your hedging costs. However, your counterparty might not have the same modeling capability as you, so they will not be able to break down the price to hedgeable components. Since you have superior information, the trade seems like a bad deal for the “muppet” counterparty. However, the counterparty continues to be oblivious or does not care about these implicit costs. This is essentially what Greg describes when he mentions “opaque” structures.
Clearly, GS or other banks don’t always provide adequate disclosure. When they do not provide adequate disclosure, they should rightfully pay damages.
Adam Smith is reported to have said that “Any product where demand for the product must be manufactured along with the product should be treated with extreme suspicion.”. I can’t seem to find the source, though.
I respect the dude.
Well, contents of the letter aside, I don’t really believe that his conscience was his motivation for writing that piece. It’s hard to believe that it took him 12 years to realize what GS is doing. So, it’s fine to work there for over a decade without complaining about the culture - but once they stop paying you (as reported by WSJ), you throw a fit, quit and contact NYT to write a scathing criticism of your former employer. Even if you agree with the contents of the letter, it seems like this was sour grapes, rather than him suddenly having an enlightened moral moment.
+1
This guy is done, he’ll never work for another bank…
+1
This guy is done, he’ll never work for another bank…
Being done and never working for another bank are two separate things.
He’s not done. He’s just done working for banks.
Actually, I wonder what he was thinking when he wrote that letter. What is he going to do, now that he is a pariah among financial institutions? It doesn’t seem like he has enough money to just want to retire - he’s only in his mid 30s. Does he already have an exit opportunity?
Also… turns out that I know someone who knows this guy. So, he is “a friend of a friend”. Sigh,
The guy was a VP according to the Blankfein response, which not too high in the food chain. I can’t imagine he has stay rich money after only 12 years with that title.
Also, what’s up with his bragging about winning a table tennis tournament in Isreal – what a douche.
but when he joined GS in 2000, the moral integrity was high and noble, trustworthy advisors selflessly guided their clients through the perilous stormy seas of investing. when did it all go so wrong? 
I have nothing to add to the discussion that hasn’t already been said, except that I support the use of the word muppets. I literally can’t not laugh when I hear someone say that word.
Seriously, who calls someone a muppet? That kills me. I’m laughing just typing this.
Muppets lolololol