Tag Archives: Wall Street

A big resignation at Goldman

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A very senior Goldman official announced today why he is resigning. Worth a full read.

Excerpt:

To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.

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The end of Wall Street?

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Well, we can hope.

But there does seem to be a fundamental change going on. The full article is a must read.

The crash four years ago was shocking enough to the financial class. But what is happening on Wall Street now is even more terrifying. No doubt the economy itself—the crisis in Europe, the effects of the tsunami in Japan, America’s sputtering recovery—has played a large part in the financial industry’s struggles. But even the most stubborn economies improve eventually. The bigger issues are structural. The Dodd-Frank financial-­reform act, much maligned, has already begun to change the shape of the financial system—even before a number of its major provisions are proposed to go into full effect this coming July. Banks are working hard to interpret Dodd-Frank’s provisions in a way most favorable to them—and repealing Dodd-Frank is a key piece of Mitt Romney’s campaign platform.

To comply with the looming regulations, banks have begun stripping themselves of the pistons that powered their profits: leverage and proprietary trading. In the wake of the crash, Morgan Stanley and Goldman Sachs converted to bank holding companies to tap the “discount window,” the Fed’s pipeline of cheap funds that gave the banks an emergency source of liquidity. That move seemed smart then, but the stricter standards required of banks have now left them boxed in.

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Bailout quote of the day

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Disdain for the uber-rich was unthinkable until —

It wasn’t the crash of 2008 that led to their fall from grace, nor exposure of the greed and stupidity that required a massive public rescue. It was their graceless reaction to the bailouts: no apologies, remorse or gratitude — even faked; just more arrogance, bonuses, takeovers, foreclosures. Wall Street begged to be occupied. The Unrepentant Financier could have been Time’s Person [of the Year].

- Rick Salutin, The decline of deference, Toronto Star, Thursday, Dec. 29, 2011.[via Quotation of the Day Mailing List]

Economics quotes of the day

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I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.

– Thomas Jefferson

Property monopolized or in the possession of a few is a curse to mankind.

– John Adams

It’s class warfare, my class is winning, but they shouldn’t be.

– Warren Buffett, CNN interview, May 25, 2005.

We are long on pepper spray

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Excellent “memo” from Michael Lewis.  Read the whole piece.

We have identified two looming threats:

The first is the shifting relationship between ambitious young people and money. There’s a reason the Lower 99 currently lack leadership: Anyone with the ability to organize large numbers of unsuccessful people has been diverted into Wall Street jobs, mainly in the analyst programs at Morgan Stanley and Goldman Sachs. Those jobs no longer exist, at least not in the quantities sufficient to distract an entire generation from examining the meaning of their lives.

Our Wall Street friends, wounded and weakened, can no longer pick up the tab for sucking the idealism out of America’s youth. But if not them, who? We on the committee are resigned to all elite universities becoming breeding grounds for insurrection, with the possible exception of Princeton.

The second threat is in the unstable mental pictures used by Lower 99ers to understand their economic lives. (We have found that they think in pictures.)

For many years the less viable among us have soothed themselves with metaphors of growth and abundance: rising tides, expanding pies, trickling down. A dollar in our pocket they viewed hopefully, as, perhaps, a few pennies in theirs. They appear to have switched this out of their minds for a new picture, of a life raft with shrinking provisions. A dollar in our pockets they now view as a dollar from theirs.

Fearing for their lives, the Lower 99 will surely become ever more desperate and troublesome. Complaints from our membership about their personal behavior are already running at post-French Revolutionary highs.

The Big Lie

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Barry Ritholtz writes that Wall Street is promulgating a “Big Lie” concerning the economic collapse that began in 2007. Their Big Lie is that the collapse was caused by government policies.

A Big Lie is so colossal that no one would believe that someone could have the impudence to distort the truth so infamously. There are many examples: Claims that Earth is not warming, or that evolution is not the best thesis we have for how humans developed. Those opposed to stimulus spending have gone so far as to claim that the infrastructure of the United States is just fine, Grade A (not D, as the we discussed last month), and needs little repair.

Wall Street has its own version: Its Big Lie is that banks and investment houses are merely victims of the crash. You see, the entire boom and bust was caused by misguided government policies. It was not irresponsible lending or derivative or excess leverage or misguided compensation packages, but rather long-standing housing policies that were at fault.

Indeed, the arguments these folks make fail to withstand even casual scrutiny. But that has not stopped people who should know better from repeating them.

The Big Lie made a surprise appearance Tuesday when New York Mayor Michael Bloomberg, responding to a question about Occupy Wall Street, stunned observers by exonerating Wall Street: “It was not the banks that created the mortgage crisis. It was, plain and simple, Congress who forced everybody to go and give mortgages to people who were on the cusp.”

I have outlined previously why the Big Lie is indeed a lie. I won’t repeat it here, but I agree with everything Ritholtz writes in this article. But read the full article as it outlines even more problems with this Big Lie.

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Couldn’t have said it better myself

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(Caution: language NSFW)

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(via Nothing To Do With Arborath)

Jackass quote of the day

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It was not the banks that created the mortgage crisis. It was, plain and simple, Congress who forced everybody to go and give mortgages to people who were on the cusp. Now, I’m not saying I’m sure that was terrible policy, because a lot of those people who got homes still have them and they wouldn’t have gotten them without that.

But they were the ones who pushed Fannie and Freddie to make a bunch of loans that were imprudent, if you will. They were the ones that pushed the banks to loan to everybody. And now we want to go vilify the banks because it’s one target, it’s easy to blame them and congress certainly isn’t going to blame themselves. At the same time, Congress is trying to pressure banks to loosen their lending standards to make more loans. This is exactly the same speech they criticized them for.

– New York Mayor Michael Bloomberg.  Federal policy did not force the banks to create billions in collateralized debt obligations that sliced-and-diced mortgage pools into fictional “AAA-rated” debt.  Federal policy did not force the banks to make “liar loans” with no documentation of income or ability to pay. Nor did Federal policy force the banks to make huge bets against their own customers without disclosure.

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Jackass quote of the day (updated)

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I, like you, get a little incensed when you think about how much good all of you do, whether it’s volunteer hours, charitable giving we do, serving clients and customers well.  You ought to think a little about that before you start yelling at us.

– Bank of America’s CEO Bryan Moynihan, speaking to a townhall meeting of his bank’s employees.  He is “incensed” by the criticism of his bank? A bank which was knee deep in the CDO collapse that was a core cause of the economic collapse? A bank which has been being challenged by multiple state attorneys general for failing to provide reasonable service to mortgagors seeking help or information? A bank that has deployed fleets of robosigners? A bank that charges checking account customers $5/month for the privilege of allowing BofA to hold their money? A bank that has performed this poorly in the stock market?

I am incensed that he is incensed.

Update: It now appears that BofA is at least reconsidering its $5/month fee to use debit cards for shopping.

Economics quote of the day

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More than three years after the crisis and the accompanying bailouts, the six largest American financial institutions are significantly bigger than they were before the crisis, having been encouraged to snap up Bear Stearns and other competitors at bargain prices. These banks now have assets worth over 66 percent of gross domestic product — at least $9.4 trillion, up from 20 percent of G.D.P. in the 1990s. There is no evidence that institutions of this size add sufficient value to offset the systemic risk they pose.

– Jon Huntsman, GOP candidate for President, inveighing against “too big to fail” financial institutions.

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Wrong people arrested on Wall Street

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From the Borowitz Report:

NYPD spokesman Frank Hannefy explained the controversial decision to arrest Occupy Wall Street protesters while leaving the people who had brought the nation’s economy to the brink of Armageddon unmolested.

“As far as soulless individuals pillaging the country for their personal gain, that’s none of our business,” he said.  “But we’ll be damned if we’re going to let people march on newly seeded grass.”

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I’ll believe it when I actually see it

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Check out this statement from Treasury Secretary Tim Geithner:

You’ve seen very, very dramatic enforcement actions already by the enforcement authorities across the U.S. government, and I’m sure you’re going to see more to come. You should stay tuned for that.

My first reaction is to ask for specifics on the “very, very dramatic” enforcement that has already occurred. Is he referring to a better-late-then-never prosecution of Bernie Madoff? A one-off prosecution of a mid-level Goldman employee? Did I miss something else?

Second, I promise to “stay tuned” but all I see right now is a test pattern on the screen.

Arrogant quote of the day

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Who do you think pays the taxes? Financial services are one of the last things we do in this country and do it well. Let’s embrace it. If you want to keep having jobs outsourced, keep attacking financial services. This is just disgruntled people.

– an unnamed longtime money manager, complaining about the Occupy Wall Street protestors. How can anyone involved in money management claim that our banking industry performs well, while we are still in the midst of a financial collapse caused directly by the financial sector taking unacceptable levels of risk? The arrogance, coupled with incompetence, is stunning.