marcus phoenix Wrote: ------------------------------------------------------- > Hmmm…the last time I checked it wasn’t > congressmen handing out subprime loans like > Candy. > > BTW it was the Senators not Congressmen asking the > questions. It wasn’t GS giving out subprimes either. And I learned in grade school that Congressman incorporated the House and the Senate. Maybe I’m wrong.
informed_delusionist Wrote: ------------------------------------------------------- > http://www.zerohedge.com/article/full-annotated-ll > oyd-blankfein-testimony > > We could argue the legal technicalities and the > political motivations behind the case, but I agree > that Goldman Sachs’ conduct was morally bankrupt. > > And where is the CFA Institute in all this? Stony > silence… The Institute should be on the front > foot and be looking into whether any CFA members > were involved in this concept of putting the > interests of Goldman and themselves ahead of that > of their clients. > > “The Code of Ethics and Standards of Professional > Conduct are the ethical cornerstone of CFA > Institute. They are essential to our mission to > lead the global investment profession and critical > to maintaining the public’s trust in the financial > markets.” - CFA Institute Website. > > If the above means anything in the real world its > time the Institute and its members stepped up to > the plate, and start attacking the clearly > unethical individuals in our industry (and perhaps > among the ranks of CFA charterholders) head-on. When the SEC and US Congress are involved, CFAI is overmatched. I’m sure they will incorporate this into future ethics sections.
marcus phoenix Wrote: ------------------------------------------------------- > Here’s my take on the dog and pony show today: > > 1.) Most of the senators do not understand what > they are talking about. > 2.) Goldman’s selection of Paulson was possibly > unethical, but not illegal. The assets were the > assets and they were in plain view. > 3.) There is no hard evidence except for a few > emails that are up for interpretation. > 4.) If you buy GE stock, is the person you bought > it from responsible if the price falls? No. > 5.) If this was truly fraud, then Goldman’s > institutional clients will stop doing business > with it. They won’t, because it wasn’t. > 6.) This was political grandstanding, nothing > more. > 7.) Goldman ran wild in a poorly regulated system. > The system crashed. That doesn’t mean they > committed a crime. > 8.) Goldman will be acquitted. > 9.) Only proper regulation will prevent this in > the future. > 10.) The GOP are idiots if they prevent this > regulation. They are lieing when they say it will > cause more bailouts. 1. Best analysis so far. 2. What the hell was levin talking about with the AIG bailouts, he kept saying they took tax payer money and didn’t go to the insurance company, wasn’t that the purpose of TARP. So that people wouldn’t have to go to the insurance companies and put AIG into default. I don’t think he ever understood what blankfein was trying to tell him. 3. Was it unethical, I really can’t tell, if they were advising clients to take the deal maybe, but what if the clients were asking for something that would pay outsized returns if the housing market Kept going up, if so then they should have probably taken the deal and that would have been good advice for the clients risk tolerance regardless of what GS thought about it. 4. Senators should not question everything, they should have had a panel of either academics who understood (longshot) or other market participants ask the questions and they just listen as a jury does.
Clearly it was all for show. You bet against your clients!!! Market makers have no fiduciary duties to their clients. Had this been in an advisory role, GS would already be getting sued by their clients. If large institutional hedge funds listen to investment advice from market makers, they are breaching their fiduciary to their own clients by being completely incompetent. But obviously the majority of people don’t know anything about what actually happened and will just watch as GS’s name is dragged through the mud.
There really isn’t an issue here, other than Levin’s love of his own voice. They could have condensed that 12 hours into three question IMO… 1. Did Paulson & Co have an informational advantage about the structure of the CDOs compared to ACA Management? 2. Was ACA aware that Paulson & Co was taking the other side of products they helped structure? 3. Was Paulson & Co marketed by Goldman Sachs to be an “unbiased third party” to the other investment group (can’t remember their name)?
My rough understanding of Goldman Sachs’ business model: 1. Creating big balls of s***, selling it. and then shorting it. 2. Frontrunning client’s trades. 3. Leveraging 1 and 2 to the hilt. 4. Filling government with ex-goldmanites to ensure the firm gets bailed out when the s*** hits the fan. Legal yes. But clearly this adds no value to society. I agree with marcus phoenix and djpetway… and that the senators are in over their heads. But what disgusts me is the lack of debate and critical questioning from WITHIN our profession. Instead we have idiots like John McCain trying to argue the ethical issues on our behalf. Why can’t the CFA Institute release a statement that lists some questions that must be asked of Goldman Sachs? Why can’t the Institute enter the public debate in a meaningful way? Is it a case of not wanting to bite the hand that feeds you?
marcus phoenix Wrote: ------------------------------------------------------- > Here’s my take on the dog and pony show today: > > 1.) Most of the senators do not understand what > they are talking about. > 2.) Goldman’s selection of Paulson was possibly > unethical, but not illegal. The assets were the > assets and they were in plain view. > 3.) There is no hard evidence except for a few > emails that are up for interpretation. > 4.) If you buy GE stock, is the person you bought > it from responsible if the price falls? No. > 5.) If this was truly fraud, then Goldman’s > institutional clients will stop doing business > with it. They won’t, because it wasn’t. > 6.) This was political grandstanding, nothing > more. > 7.) Goldman ran wild in a poorly regulated system. > The system crashed. That doesn’t mean they > committed a crime. > 8.) Goldman will be acquitted. > 9.) Only proper regulation will prevent this in > the future. > 10.) The GOP are idiots if they prevent this > regulation. They are lieing when they say it will > cause more bailouts. +10. Well put.
informed_delusionist Wrote: ------------------------------------------------------- > Why can’t the CFA Institute release a statement > that lists some questions that must be asked of > Goldman Sachs? Why can’t the Institute enter the > public debate in a meaningful way? Is it a case of > not wanting to bite the hand that feeds you? Very good questions. Is the Institute’s concern about ethics for real or for show? I agree with the consensus opinion here that it would be extremely difficult to prove Goldman did anything illegal (even if they did), but from what I’ve read the company’s actions look unethical. One group is packaging and selling these products, and another group is trading against them. I find it hard to believe that no information was shared between these groups. Furthermore, if I recall my Code of Ethics correctly, steps should be taken to avoid even a potential conflict of interest. (Oh, and somewhere down the road, questions will be asked of the rating agencies, otherwise known as “Conflict of Interest City”.) Lots of posters here are laughing at the senators who were asking questions, but the senators probably didn’t look stupid to the people on Main Street. I can easily understand the distaste the public might feel about our field, and honestly the industry - some parts more than others - has no leg to stand on regarding future regulation. If the industry were on the whole more ethical in its business practices, maybe stringent regulation wouldn’t be so necessary.
Paul comes to me and wants to stage a football game on which he can bet. I ask around and Hans is willing to bet on football too. I find a pool of ex-college players and hire Alan to separate them into teams. Paul provides a list of players that he would like on his team and the players he would like to stick Hans with. Hans provides a list of players he would like on his team also. Alan takes the lists into account and fulfills some, but not all of Paul’s wishes. The team rosters are furnished to both Paul and Hans along with all past statistics and injury reports. I set a line on the game. Hans bets $100 with me on team A. Alan bets $70 with me on Team B. To cover the $30 difference, I bet 30 in Vegas on team A. Both Paul and Hans know what players are on each team, and both know the line. What did I do unethically?
Should it be a illegal for a broker to sell you a stock/allow you to sell a stock if the firm’s research department has a sell/buy rating on the stock?
I think the problem here is that people feel that this is just the tip of the iceberg. Many other firms may have engaged in unethical/ fraudulent activities and this may be many more to come in the near future.
Am I the only one who thought Blankfein sounded like an idiot ? He sure isn’t, otherwise he wouldn’t be where he is, but I found him inarticulate and ignorant of what goes on in his own firm. I watched maybe 15 mns of it, and all I can remember are painful and repetitive: " I…I…I…I don’t have the answer to…Once again, I mean, I am not aware of…I…I…I…Senator, again, I…I…" Meh.
Viceroy Wrote: ------------------------------------------------------- > Am I the only one who thought Blankfein sounded > like an idiot ? > > He sure isn’t, otherwise he wouldn’t be where he > is, but I found him inarticulate and ignorant of > what goes on in his own firm. > > I watched maybe 15 mns of it, and all I can > remember are painful and repetitive: > > " I…I…I…I don’t have the answer to…Once > again, I mean, I am not aware > of…I…I…I…Senator, again, I…I…" > > Meh. Take his answers in context. Clearly those were very loaded questions. As someone said in another forum (or maybe this one), the questions sounded sort of like this: “Yes or no answer, did you think it was wrong that you were beating your wife?”
why are they not investigating those that actually HAD a fiduciary duty to mom and pop? They keep complaining that although not technically illegal they were shady- but there are rules in place to protect the common man. If its a private placement or any type of sophisticated deal its going to be limited to accredited investors. These mutual funds, etc. are LEGALLY required to complete their fiduciary duties on behalf of their clients and ensure that they fulfill prudent investor logic, etc. Although much more complex- this is analogous to a RIA telling you to buy some cr@p penny stock and you going after scottrade for executing it. Some of the comments from the congressman (i also was under the impression that BOTH senators and rep’s are congressman) were really dumbfounding. How would a market maker be required to give up the contra to every trade? How is that fulfilling the responsibility to the other client? And disclosure of short positions? All market makers manage their inventory through short selling- its a requirement of liquidity in the market. Thats why options liquidity impoved so much in the options market when the uptick rule was removed. Mom and Pop may not understand how it works- but there is always another side of the trade. I also enjoy how they pull all the emails of peoples opinions of these products. Has anyone here worked for an asset manager? Have you never had a situation where there are people vehement polar opposites as to the quality of an investments. Its part of the process- you scream as loud as you can to get the final decision your way- but often times the ‘team’ decision will go against you. But thats not much relevant here since they were not paid to advise the buyer. Bottom line these were all big boys with equal information. The assets were fully disclosed and left to each parties interpretation and as some of the emails noted- some clients were simply ‘smarter’ than others. Of course it could have gone the other way. marcus phoenix Wrote: Re: ------------------------------------------------------- > Hmmm…the last time I checked it wasn’t > congressmen handing out subprime loans like > Candy. Actually it was congress that thought ALL Americans needed to own a home and changed requirements for freddie/fannie elligibility. Without their appetite and low rates the # of subprime mortgages issues would not have as great. Remember- a gov’t backed mort. portfolio back then was thought of as equally safe as a t-bill. There is a market demand for them and since our protectors in congress and their agency (who was arguable politically pressures to have these weak restrictions) decided to buy them up and insure them they definately had a place in creating this mess. Yeah- Goldman brokered a lot of deals- but if they didn’t have a buyer it would not have gotten so out of hand. They also were not the ones actually meeting with Bill and giving him a 600k mortgate on a 60K income. THOSE rules need to be fixed. The actual mortgage brokers suffer 0 risk compared to Goldman and collectively were much more destructive IMHO. There is a long chain here and no one part could have done it alone. All require some responsibility for the mess- the buyers/mortgage brokers/ banks/ investment banks/ gov’t agencies and the rulemakers. Of course its easier for the big heads to go after Goldman vs US Homebuyers or a million mortgage brokers.
AnotherLurker Wrote: ------------------------------------------------------- > Both Paul and Hans know what players are on each > team, and both know the line. What did I do > unethically? Pahlease, of course there’s fraud going on here. Goldman simply got buddy buddy with Paulson & Co. What rational investor would take the other side of a billion dollar bet involving a product structured by the short party? Do you really think the Paulsons, Falcones, and Teppers of the world average 130% returns over the past few years because they are somehow smarter (or luckier) than everyone else? No; they have an informational advantage thanks in large part to their collusion with institutions such as Goldman Sachs, who market their involvement as an “unbiased third party” during the underwriting process. I say, again, pleeaase.
Does anyone plan on writing a letter to the CFA Institute to know what their official position is on this issue? For the reputation of the program and credibility of its ethics section, I feel some sort of statement is required (whether it’s pro Goldman or not, anything to give us some kind of guidance).
?? what? This is how it works with synthetic products. Thats a know fact. These underlying are EXISTING securities that have already been vetted via issuance rules (ie prospectus and the such) and all material information regarding them is available. If asset manager (or hedge fund manager) has exposure and wants to hedge or simply wants to create some risk exposure they call up a GS and say look I’ve got 65b in exposure to X so I want to structure a synthetic security to transfer the risk- you go find me a buyer. So GS puts together the deal and sells it. The buyer KNOWS there is another side to the trade- what matters is what the reference portfolio is and that is fully disclosed. If the seller has some fraudulent contol over the performance of those securities is another story- but the process is expected. When your FI Fund enters into interest rate swaps to change their risk exposure or just get some without buying/shorting the actual underlying there is someone on the other side who has an opposite view of how they will perform. Inherently one will be right and one will be wrong. When you buy 20 AAPL in your E*Trade account citadel is likely the one selling them. Do you now think that you were bamboozled because you would never enter a trade opposite to the Griffin’s team’s strategy? No because it is the underlying that matters. Unless of course the other party is manipulating the actual underlying- but that is a whole other argument.
volante99 Wrote: > What rational investor would take the other side > of a billion dollar bet involving a product > structured by the short party? > Markets are all about opposing viewpoints. Without them, there would be no transactions. Why would a short party invest in a product where the longs had a say in selection? Because they did their due diligence on the investment product on its own merits. 1) It wasn’t structured by the short party, the short part provided suggestions and the independent party was responsible for ultimate selection. It is my understanding the long party (IKB) had input as to the securities selected as well. Even still, this had no bearing on the ultimate performance of the product. 2) The performance of the structured product is not dependent on the person doing the selection. The performance of the product is strictly a function of the performance of the referenced securities. 3) Even if Paulson had chosen 100% of the securities included, rational, institutional investors should not care. They have a fiduciary responsibility to evaluate the product and make investment decisions based on their own due diligence. If they chose to invest or not invest based on the identity of counter-parties , I say that is a dereliction of their duties. Investment decisions should be based on solid analysis of the investment, not the other investors (aside from counter-party credit risk). 4) Bottom line, there is only fraud if material information was omitted. The only material information needed to evaluate the investment is the terms/structure of the investment and the securities included. The long investors were wrong in their analysis of the sub-prime market as a whole, and lost money because of it. It wasn’t because someone structured a product “designed to fail”, it wasn’t because somebody had inside an informational advantage, it was because their analysis was wrong. Shorts didn’t cause the sub-prime market to collapse.
former trader Wrote: ------------------------------------------------------- > Does anyone plan on writing a letter to the CFA > Institute to know what their official position is > on this issue? For the reputation of the program > and credibility of its ethics section, I feel some > sort of statement is required (whether it’s pro > Goldman or not, anything to give us some kind of > guidance). I would imagine they would be hesitant to take a position unless a trial is held, all relevant facts become known, and decision rendered.
i’m pretty sure GS lied/misled their clients in the whole Abacus/ACA/Paulson saga… certain it’s a CFAI violation if someone wants to pursue it (and of course if any were CFAI’s) I do not approve of the entire bull/bear market housing/sub-prime witch-hunt against GS. generally they were very smart.