Failure on Many Levels
Goldman Sachs buys and sells securities for customers and also trades for its own book. It’s the world’s biggest derivatives dealer. CEO Lloyd Blankfein told a British magazine in late 2009 that they were “doing God’s work.” Now we know what that entails.
At an April 27 Senate subcommittee hearing, Carl Levin (D-MI) quoted from Goldman e-mails that referred to securities they were selling to clients as “junk” or “crappy” or “sh-tty.” Senator Levin added, “You are betting against the same security you’re out selling.” On April 16, the SEC sued Goldman Sachs for civil fraud. Could cheating be a major profit center for Goldman? The SEC alleges that one client paid Goldman $15 million to be allowed to design a security to fail—which Goldman then sold to other Goldman clients without disclosing that the security had been designed to fail. Within a year the security performed as it was designed: The first client made one billion dollars, and the others lost the same amount. The major loser was Royal Bank of Scotland, which led British Prime Minister Gordon Brown to call Goldman “morally bankrupt.”
The SEC lawsuit also introduced the general public to something called a synthetic collateralized debt obligation (CDO). The mechanical details were astonishing; the outline of the deal took 65 pages. Before you can have a “synthetic” CDO, you have to have an actual CDO. What’s that? First, a poor credit risk takes out a mortgage he can’t pay. Second, thousands of such mortgages are collected into a security—a mortgage-backed bond. Third, those bonds are collected into another security called a collateralized debt obligation. Then the CDOs are sold to investors.
A “synthetic” CDO refers to an actual CDO but doesn’t own any asset—it is a bet. Like any bet it requires two sides: a “long,” who is betting housing will go up; and a “short,” who is betting housing will go down. The short bettor, by means of a credit default swap, agrees to pay the interest payable on the referenced CDOs to the long bettor. In return, the long agrees to pay the principal of the referenced CDOs if they default. Goldman is the bookie who puts the bet together. Rube Goldberg would have blanched at such a grotesque construction.
Winning or losing the bet depends on the quality of the CDOs that are referenced. Amazingly, Wall Street had no consistent practice to outline how the bookie was to select the CDOs and what duty, if any, the bookie owed to the bettors.
The SEC complaint states that IKB, a German commercial bank, told Goldman in late 2006
that it was no longer comfortable investing in the liabilities of CDOs that did not utilize a collateral manager, meaning an independent third-party with knowledge of the U.S. housing market and expertise in analyzing RMBS.
Goldman, in marketing ABACUS 2007-ACI, represented that the “reference portfolio” was “selected by ACA Management LLC . . . , a third-party with experience analyzing credit risk in RMBS.” Fabrice Tourre, a junior employee charged by the SEC along with Goldman, e-mailed: “One thing that we need to make sure ACA understands is that we want their name on this transaction. . . . this will be important that we can use ACA’s branding to help distribute” the securities.
Goldman did not disclose that it was paid $15 million by John Paulson’s hedge fund, which wanted to “short” the housing market, to allow him to handpick reference CDOs for the synthetic CDO. The SEC concludes:
In sum, GS&Co arranged a transaction at Paulson’s request in which Paulson heavily influenced the selection of the portfolio to suit its economic interests, but failed to disclose to investors . . . Paulson’s role in the portfolio selection process or its adverse economic interests.
The European banks who took the long bet, according to the New York Times, thought they were picking up a little revenue ($7 million) without any real risk, but ended up losing $841 million.
Goldman maintains it had no obligation to tell the long bettors that the short interest had selected the reference CDOs. It argues that the long bettors were “sophisticated investors” who should have done their own due diligence. Goldman may have a legal defense, but selling a security that is designed to fail is appalling. As simple wagers, the “synthetics” have no social utility.
Almost certainly, were Goldman to fail tomorrow, the government would label it “too big to fail” and bail it out. Why is the taxpayer guaranteeing the bets at a casino? “Can we reasonably continue with a financial system,” Paul Volcker recently asked, “that, implicitly or explicitly, relies on a firmly held expectation that major financial institutions will be protected from failure in the face of financial crisis?”
This article first appeared in the June 2010 issue of Chronicles: A Magazine of American Culture.
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Isn't this the way high finance and high criticism has always worked? Or as we like to say about scandals: Who knew what, and when did they know it?
I am never shocked that men engage in all the deadly sins, but what is rather shocking is this current belief that the government, more laws, more lawyers, more "honest" congressmen, more judges, more hearings, more congressional oversight committees, etc. is the key to solving these sins. Why can't we admit to ourselves what is almost universally observed about our current culture,"The more of the truth about man and his destiny a journalist or author proclaims—that is, the greater the threat he poses to the tranquility of the collective amnesia—the less popular he can expect to be. Conversely, the more popular he wishes to be, the more of the truth he will have to pass over in silence as he climbs toward the vertices of public life that the oligarchs control."
What Clyde Wilson has called the New View and the Old View in another post is quite relevant here as well. Unfortunately, the NV is all the rage and the OV is a small diminishing influence in all the major avenues of handing on what one has been given. I suspect Chronicles will grow in importance as the NV continues to metastasize from the single cell of the suicidal principle of nihilism it is founded upon.
"A “synthetic” CDO refers to an actual CDO but doesn’t own any asset—it is a bet. Like any bet it requires two sides: a “long,” who is betting housing will go up; and a “short,” who is betting housing will go down. The short bettor, by means of a credit default swap, agrees to pay the interest payable on the referenced CDOs to the long bettor. In return, the long agrees to pay the principal of the referenced CDOs if they default. Goldman is the bookie who puts the bet together. Rube Goldberg would have blanched at such a grotesque construction."
What grotesque construction? No seriously, what's the big deal?
I am simply amazed how badly regarded those of us working in the financial field are, for absolutely no reason. Especially for the kind of things we have been doing for 150 years, long before people showed such outrage over newfangled activities of capital allocation.
This is just another kind of interest rate swaps. It is similar in the sense that interest rate swaps just have a "notional principal" - it is assumed that one man lends to another who lends back to him, so no actual principal need be exchanged. What happens is that one party pays a fluctuating interest rate and another party pays a fixed interest rate. This way, if they both had borrowed loans from other parties on which one was paying a fixed interest rate and another was paying a fluctuating interest rate, then can change it by entering into the swap with each other, so the fixed rate becomes fluctuating for one guy, and fluctuating becomes fixed. Everybody gets what they want.
It also works like a repo agreement, where you sell some securities to a person who loans it back to you - hence, you are given money by somebody on sale of those securities, and then you keep paying him interest after he loans it to you.
This synthetic CDO is just a combination of repo and swap. It's not betting - it's a way of dealing with an uncertainty (housing prices) that otherwise still causes huge losses to financial institutions. They simply offset those losses with this so called bet, and if they lose money on this plan, it is offset by the rise in housing prices. In short, such agreements just make the future situation more certain for financial institutions by removing both upside and downside gain. The opposite of gambling, if anything.
The reason Goldman Sachs is an intermediary here is because they can handle the giant amount of legal documents involved in filing such complex transactions, and because companies can quickly establish a coincidence of wants for such mutual transactions by contacting an institution which is in contacts with various other companies, instead of contacting them directly.
The last I checked, there were various scholars of law here. There is a little thing of contract law called Caveat Emptor. And behind it, the purpose of law is to make people independently honest and careful and dealings, and not nanny them. There is nothing in Goldman Sach's dealings with its clients that indicates that it was to guarantee them returns. The clients are responsible for their own money and to be careful what they do with it. Goldman Sachs was just an intermediary. The worst you can accuse Goldman Sachs of is of being unkind to clients. So should we now bring criminal cases against any company unkind to clients? Is there a deliberate crime against another person here?
No, the real reason behind the crufixion of Lloyd Blankfein and the "highly underregulated over the counter derivatives industry" (which has existed in Chicago since 1870s without regulation) on the basis of a court case involving one employee that occurred way before the financial crisis (a financial crisis that did not involve a derivatives crisis nor was caused by derivatives) is this: Lloyd Blankfein was among the only people - THE ONLY PEOPLE - who called the Bush administration out for its terrible economic polices. Lloyd Blankfein criticized the government for its policy of monetary and credit expansion that was bound to create bubbles that would result in crisis. Blankfein rebuked it not once, but several times since 2002. When he was not listened to, his company instead prepared hedge itself against the coming crisis. When the crisis happens and Goldman Sachs is not as hurt, and happens to be the very company which turned out right in its criticism of the government's little adventurous disaster in creating asset bubbles. And now, the establishment must use all weapons against this organization which had become a threat to its credibility.
And it works, because they are slowly trying to put a public wrecking ball to this dissident company. But who trusts Goldman Sachs? Warren Buffett - notorious for excessive honesty. Son of Omaha Congressman Howard Buffett - even more notorious for excessive honesty. And that these excessively honest people who never invest in dishonest companies have trusted Goldman Sachs since the 1950s. Could it be that anybody who understands how Sachs actually works and has worked for the past 50 years knows that it is a brutally honest company? How about this: Goldman Sachs is the most honest company on Wall Street. You heard this from me. It's so honest, that it called the government out on the bubble it was creating.
And taxpayers guaranteeing Goldman Sachs? That is a lie. Goldman Sachs never took taxpayer's money. It was insured by AIG, which was taxpayer-bailed admittedly. Would it have made much difference? Sachs lost money only in one department, and still largely did well in most. Goldman Sachs has always been generous to employees, paying even bottom level grunts with six-figure salaries. That's because those people bring them several times the returns in the future. It's not unjustified. When we consider that Goldman Sachs reported huge profits for its shareholders a year after having declared such high bonuses during the crises, it stands as a company that has been consistently kind and fair to its shareholders, employees, and even most of its clients.
The financial markets are not some zero-sum game where only Goldman Sachs makes money, and Goldman Sachs being rich does not mean it did so only at the expense of everybody else.
I worked on the Street, too, and I can vouch for the accuracy of the general impression that it's a cesspool of greed, corruption, and moral contagion. That some quant who makes a living complicating the obvious, and whose lunch pail of financial formulas are now known to be essentially useless to the extent they quantify the unknowable, that he goes to such great lengths to justify and rationalize the sheer duplicity of GS is unsurprising, given the unreal world of unmerited wealth he inhabits. Goldman Sachs is reported to control up to 70% of all equity trades at times, turning a market that's supposedly overseeing the rational allocation of scarce financial resources into a con so rigged only fools sidle up to the table.
Please pass the Kool-Aid.
Yea sure Mr. Sanjay, I believe you. Goldman Sachs makes money the old fashioned way, like the late Senator Byrd from West Virginia, THEY GET IT FROM THE GOVERNMENT!! Here is a little piece from the May 17 issue of the New Yorker on how independent of public regulation Goldman Sachs and their competitors would like to remain.
"Goldman Sachs laid plans for a new headquarters on the New York side. It fixed on a plot in Battery Park City, one block northwest of Ground Zero, which had been a parking lot for years. At the time, there was not a lot of development going on in lower Manhattan, and Goldman’s plans appear to have sent city and state officials into giddy ecstasy. They quickly agreed to give the company a hundred and fifteen million dollars in tax breaks and cash grants to build the new tower. More singular still, state and local governments decided to give the firm another big subsidy by letting it use $1.65 billion in tax-exempt Liberty Bonds, intended to stimulate economic development after 9/11, to cover part of the building’s $2.1-billion cost. Last month, Goldman announced that it had made a profit of nearly three and a half billion dollars in the first quarter of this year—enough to have paid for the entire building, in cash, in a couple of months, without any help from taxpayers."
Perhaps some of us should refer back to Tom Fleming's comments about what free trade actually means instead of how it sounds --- the role Government plays, both big and small, in fostering outcomes "the government" deems desirable.
I believe you are correct, Mr. Sanjay, that Goldman Sachs probably did nothing illegal. I also believe that if you play another man's game, you had better be prepared to lose. But as I understand it a fair share of the money that was lost "betting long" belonged to pension funds, the savings accounts of millions of financially ignorant working folk.
The big sale is that everybody has to play the game or they are suckers. So the money changes hands and the sharp and the lucky walk away whistling. And the losers feel stupid because they lost, and angry because they feel is wasn't quite fair.
The point is that when the professionals play high stakes games among themselves with fortunes won and fortunes lost, nobody minds so much. When large numbers of the less astute get burned they feel differently. They might look to get even. Even if they are suckers. Perhaps Goldman Sachs is being set for a fall. But they knew the rules, the rules concerning suckers and sharps.
@Dan
70% of equity trades? Bold figure. Very bold. Financial markets are huge, and involve trillions of dollars in investments; even a multibillion dollar Goldman Sachs is a small part of it. To say Goldman Sachs can alone run the market is like saying George Soros can singlehandedly crash the currencies of several western European nations - which can exist only in very sensational fiction.
@robert
Yeah, city and state governments have a regular habit of subsidising all kinds of development, to ensure that large rows of giant commercial buildings come up to make the city look beautiful and modern. I don't fully support it. It's arguably wrong to have spent bonds on having big companies build large buildings they can anyway afford in order to stimulate local growth, but at least those bonds went to a long-term use of large scale development after 9/11, instead of funding short-term consumption needs. If those city and state governments believe that such bond-fuelled development will increase future tax revenues as a whole and bring in more employers, then more power to them.
That still has nothing to do with how Goldman Sachs serves its clients, whether it broke the law, and whether its work is gambling.
@Neil
On a long-term perspective, you have increasingly higher record returns from such activities in the financial markets. That a moment came when a big loss came only meant that the risk was always there. Would activities that show good returns across long periods be unjustifiable for that one moment, whose risk was always there, finally ends up occurring? There is no risk-free activitity. The computer on which I type could explode in blue smoke.
Now, those working folk may be financially ignorant, but the documents they sign would have a capital letters warning that says: "Our pension fund is subject to market risks", and just about all of us get the general idea that when there is a boom, everybody might remain okay, and when there is a bust, our money is going to get hit.
I must emphasise that the reason financial professionals are paid so much is because they have more at stake. A salary of a million dollars to get the best possible executive might not be so alarming when it makes a difference of billion dollars, and financial institutions by definition have more money at stake. We can't use class warfare arguments. He is rich, not because he deserves it, but because it makes a difference. A soccer player, basketball player,.etc, paid in millions, makes hundreds of millions of dollars of a difference in revenues to his employer. It's too one-sided to say that those greedy rich financial professionals walk away with money while us ordinary folk get burned.
Mr. Sanjay, I don't think I know as much about the finacial world as you do. However, I believe you are missing the point of Professor Quirk's article (and series) which is that these stakes are extremely high and don't seem to actually create anything valuable in the process.
The details of the rules for this penthouse game of tiddly-winks played by these self-appointed few who have found themselves in the middle of a centralized system of wealth and power that no one has directly asked for are dwarfed by the impact of the outcome of the game.
Letting slip a little colored language against Goldman Sachs despite their complex camouflage is much needed as the main stream press is largely still dumbfounded by the larger Wall Street message.
Think like Occam; simpler is more beautiful and more likely true.
Mr. Sanjay, I do not dispute that the financial services artisans do not provide economic value. Their traditional role is that of conduit, channeling society's financial resources to their highest and best uses. I believe in general they are among the most financially astute individuals in the society. They are able to keep cool and make important decisions in the presence of money.
However, in the case of the real estate bubble I believe asset prices were not increasing because entrepreneurs with higher use projects were bidding them up. As I understand it, the asset prices were increasing because greedy individuals of all stripes and with dreams of great riches were leveraging their assets long to profit from the climbing prices. Thus the nominal increase in price represented a fictional increase in value.
The end result was horrendous malinvestment, consequent crash, millions of Americans seriously injured financially, and our Government stepping in to possibly make things worse. The billions of dollars that were made came in part from sectors of the economy where real capital was being formed, but the return was not high enough to please those investors. Were the Wall Street financiers innocent crowd pleasers in this fiasco? Were they just performing their jobs to order, trying to create value for a stronger economy and more wealth for all? If so, then why did these men of keen acumen continue to help pump the bubble, until it burst?
Hmmm...
Whatever I have followed of these events, I know this much. Greed alone does not explain careless actions when there is a known danger involved. If I were greedy enough to rob a bank, I'd be still scared by the thought of police shooting me down.
Why were these greedy people leveraging assets to profit from rising prices? What gave them the guts? Why were they certain of no danger?
Because they thought prices would not fall. Why?
Because they thought that low interest rates would allow people to afford high priced housing. Why?
Because all major banks were lending at low rates. Why?
Because they were loaned to full capacity. From whom?
The central bank. How?
By getting loans from the government at such low interest rates, that these interest rates were lower than the very minimal inflation rate of the consumer price index of the early 2000s.
We have seen the Federal Reserve conduct monetary and credit expansion so excessively that they could bid up prices of assets, and anybody affiliated with them could profit quickly. If they lost money, the cost is borne by the central bank, not by them. No danger.
Where does Goldman Sachs fit into this? Goldman Sachs was the company condemning this practice. Goldman Sachs predicted a massive bubble. Goldman Sachs managed to save its own skin by seeing this bubble.
To be a bear is a dangerous thing. Nobody listens to bears. And when the bear profits from shorting everybody else's stupidity, everybody calls to put a stop to the bear's practices. And Goldman Sachs is the one big bear that must be punished.
Mr. Sanjay. Good job! Would you happen to know by how much the money supply increased over the last decade? Also, is it fair to say that all the government deficit spending is currently financed by treasury bonds and that they have not started monetizing the debt yet? If we don't accept the premise of the article, (class warfare) then how do we play the blame game?
Mr. Bailey. I checked here: http://www.federalreserve.gov/releases/h41/
Reserve funds supplied were $688 billion on January 2, 2002.
Reserve funds supplied were $2387 billion on June 23, 2010.
That's an increase of 15% per annum in supply of reserves. It's a 247% increase over the past 8.5 years.
Also, I don't know how to answer the second part of your question, but government securities held with Federal Reserve have increased from $555 billion to $777 billion only in the same period.
"The computer on which I type could explode in blue smoke." I just received a recall notice from HP warning about a problem with the batteries in some of their computers. Fortunately, I removed the battery from mine long ago because I use my laptop like a desktop model. (I still need to check to see if the battery pack sitting on a shelf in my family room is one being recalled.) I avoided this potential risk because I did not run my computer on battery power when I didn't need to. How could one have avoided the economic risks described in this article and the reader responses?
All the discussion is interesting but it leads back to one question/observation: The financial "industry" is not at all an "industry". It is a support function to actual industry which produces actual products which can be bought, sold, traded and national economies benefit from therein. The financial paper pushers only raison d'etre is to ensure money flows ("liquidity") to those productive sectors to keep the production moving. They and their companies - the producers of real products - are what actually creates jobs and wealth. The rest of this financial "activity" is a net wash, and in the last decade a net loss, to the "economy". This recently invented notion of "financial products" is total nonsense...a distraction to real wealth creation...a drain on resources...a con...something, most of which, we can make illegal and do without....and not miss at all.
Eagle @ 15:
You are exactly right.
No Mr. Piatak and Eagle, this is wrong. Especially the "recently invented" part.
It's called treasuring.
Many of those manufacturing corporations, from General Motors to Toyota have a large amount of cash that has to be put some place. They hire treasurers who take that cash, long a position on various commodities. The ones who short that position on the other side are also other manufacturers, sellers, and exporters, who hedge the goods they sell. Since that excess cash can be put to use somewhere, it's used to absorb the risks of price falls in goods to be sold that other manufacturers can't take. If prices rise, both benefit. If prices fall, both limit their losses. It makes life more predictable.
Derivatives markets in a nutshell.
This idea that financial sector plays a zero-sum game where the honest manufacturer loses out and fake paper pushers do non-jobs is just a result of a reactionary blame game in the recession world.
These financial products are not new. Derivatives trading has been going on since the 1870s. It was a large and well-performing sector then too. Except that the generally soaring progress of United States for 135 years before this recent recession happened makes people ignore them. But come this recent recession, and what they have been doing for 140 years is somehow responsible for what happened in the past 4 years.
If I understand you correctly, Mr. Sanjay, derivatives markets provide insurance products for other markets. Fine, insurance is considered by many to be a valuable product. The problem may be one of scale.
If ever increasing portions of total capital wealth are being shoveled into the purchase of insurance products to minimize risk, what effect will this have on economic growth as a whole? These are funds that could instead be applied to R&D, or some other form of "real" capital growth. I am concerned by the fact that the satisfaction of risk aversion appears to have become a primary industry in our economy, rather than a secondary or even tertiary industry.
And to add to Mr. Templeton's excellent comments...
In my capcity having worked in Corporate Finance ("corporate" meaning interests that produce something tangible) everytime a company was in trouble it often had too many complicated hegdes and other fancy financial products. The cure was always, in my experience, for treasurers to pull out of these agreements as fast as possible as part of stablizing a company's financial position. Insurance is insurance. Derivatives that rocket scientists cannot even make sense of are worse than a bet on the craps table.
To me it appears that the risks inherent in the "insurance" exceed the risks that are being insured against. The way to avoid the risks is to not play the game. Invest your time and treasure in more productive endeavors.
Is it really primary? In a nation with annual GDP of $14 trillion?
Banking, financial intermediation, and insurance all combined form just 13% of total business revenues in the United States.
Remove banking of demand deposits and insurance writing, and then financial intermediation forms an even smaller share.
Of which, the derivatives trading market itself a small part, especially compared to the two giants of the common stock market and the bond market.
So if derivatives serve a small function, it would only seem that they actually do have a small presence. People confuse the $600 trillion figure as the amount traded on the over-the-counter markets. It's actually the value of the assets based on which the derivatives are based, not the derivatives contracts themselves, which are just a few tens of billions of dollars in revenues, and are handled by a select few institutions that are able to understand them (just 975 in all).
And here's an interesting fact - British derivatives market is much older, much more complex, and much larger than the entire American derivatives market. Tiny Britain has a larger derivatives market than huge United States.
So it comes back to this - how can a tiny derivatives market be responsible for harming the American economy as a whole?
Does it really hurt American wholesale trade - 22% of all American business revenues? Does it really hurt American manufacturing - 18% of American business revenues? Does it really hurt retail trading - 16% of American business revenues? Manufacturing and selling physical goods counts for 54% of American business.
And back to high salaries in finance - only 6% of total payments to employees go to people in finance. And like I said before, a $100,000 paycheck is given to an employee who makes $200,000-$600,000 of a difference the company. And the $50 million paycheck to the few highest paid financial executives is interesting when you compare it to $100 million paid to A-minus list movie stars or sports players.
So, then we can eliminate the derivatives market without any significant impact on the U.S. economy.
After eliminating the derivatives market, we need to do something to prevent banks and other financial institutions from getting "too big to fail."
Agreed, Mr. Van Sant. It's called enforcing existing anti-trust laws. Would have helped in the auto industry also. Chrsyler's demise would not have been a big deal (and thereby required a government rescue) if Dodge, Nash, and Hudson were not taken down with it. But of course we can expect the uninformed howls about economies of scale which are wrong.
Mr. Van Sant, would there be a need to eliminate derivatives? There has been no derivatives crisis or a crisis caused by derivatives.
Also, you can't avoid risks. Your money in productive endeavours is still put to risks.
Why does everybody hate us in finance?
Even those of us who had nothing to do with government ventures in subprime lending?
Why do we need to keep derivatives if they represent such a small portion of economic activity? Are you saying that it is OK for a business to design financial instruments to fail and not inform the buyers of that fact?
I agree that you cannot completely avoid risks, but you can eliminate some risks by making some financial activities illegal.
And by all means we need to prevent the government from forcing businesses to make bad loans.
"Are you saying that it is OK for a business to design financial instruments to fail and not inform the buyers of that fact?"
There is no proof. Nobody has proof.
The opinions of a few employees indicates that they thought it was junk. Nowhere does it say that they designed it to fail.
So you agree that it is not OK for a business to design financial instruments to fail and not inform the buyers of that fact. You don't believe that happened.
If the current regulations allow a business to design financial instruments to fail and not inform the buyers of that fact because there are no specific restrictions forbiding it, do you think regulations should be implemented to forbid it? Do you think the derivatives market requires additional regulation to prevent unethical behavior? Do you think anything is ethical if it is not illegal?
I think people should learn to have greater caution, and know whom to and not to trust. Ethics never enters into the question.
Now, individual person might be bound to put their money with some doubletalking hedge fund manager who loses them all their money and still takes a hefty commission for it. And then the individual might be wiser for it.
When a big bank, like RBS or IKB, doesn't take that discretion, of course it will be humiliating. Normally, they are the ones who take the most legal caution, but then again, also pay the most for moments when they don't take caution. So under such humiliation, they'd press charges of fraud.
But what kind of fraud? A fraud is not the same thing as the intent to deceive. If RBS and IKB had all the powers of verifying more information from Goldman Sachs, then mere negligence can not be excused as deceipt. If RBS and IKB could have themselves seen that this was a bad security, they should not have put their money. Goldman Sachs was just a mere intermediary, and just given the job of doing whatever they can that the client demands of them. If something was not disclosed, it was all still RBS's or IKB's responsibility.
And you ask why everyone does not like people in finance. Ethics enters into every question. Mr. Sanjay - I don't think you recognize what is and what is not important. As Plato said in Republic:
"It is rediculous, isn't it, to strain every nerve to attain the utmost exactness and clarity about other things of little value and not to cosider the most important things worthy of the greatest exactness?" (504d)
And as Chesterton said in his introduction to All Things Considered:
"In the end it will not matter to us whether we wrote well or ill; whether we fought with flails or reeds. It will matter to us greatly on what side we fought."
Mr. Sanjay, who says there wasn't a derivatives crisis? The whole mortgage lending crisis was wrapped into a derivatives trading crisis, wasn't it?
I go back to my previous statement: unless it helps create liquidity for the actually productive parts of teh economy it is a pointless part of teh financial sector and therefore get rid of it.
"The Chinese want a gateway into Europe," said Theodoros Pangalos, deputy prime minister. "They are not like these Wall St ****s, pushing financial investments on paper. The Chinese deal in real things, in merchandise. And they will help the real economy in Greece."
"The Chinese want a gateway into Europe," said Theodoros Pangalos, deputy prime minister. "They are not like these Wall St ****s, pushing financial investments on paper. The Chinese deal in real things, in merchandise. And they will help the real economy in Greece."
http://www.telegraph.co.uk/news/worldnews/europe/greece/7869999/Chinas-new-Silk-Road-into-Europe.html