Conflicting Goals, My Ass

The NY Times:

Clients Worried About Goldman’s Dueling Goals

…While no one has accused Goldman of anything illegal involving WaMu, National City, A.I.G. or the other clients it bet against, potential conflicts inherent in Wall Street’s business model are at the core of many of the investigations that state and federal authorities are conducting. Transactions entered into as the mortgage market fizzled may turn out to have been perfectly legal. Nevertheless, they have raised concerns among investors and analysts about the extent to which a variety of Wall Street firms put their own interests ahead of their clients’.

“Now it’s all about the score. Just make the score, do the deal. Move on to the next one. That’s the trader culture,” said Cornelius Hurley, director of the Morin Center for Banking and Financial Law at Boston University and former counsel to the Federal Reserve Board. “Their business model has completely blurred the difference between executing trades on behalf of customers versus executing trades for themselves. It’s a huge problem.”

Goldman Sachs does not have dueling goals. Period. They have one goal, and one goal only.

Bonuses.

That is all they want. Bonuses. And they will do, or say anything to keep the bonuses rolling in. Bankrupting the country? No problem. Destroying Greece and the international economy. Cash money.

They don’t care about their clients, they don’t care about their community, they don’t care about their country. Their only goal is to make the deal and cash the bonus check.

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46 replies
  1. 1
    Ugh says:

    The Business of America is Bonuses.

  2. 2
    Ash Can says:

    Hey, if this is the legal hook that finally takes these yahoos down, it’s OK by me.

  3. 3
    Xboxershorts says:

    Glass-Steagall.

    Phil Gramm is a corrupt and lying sack of shameless dog shit. 3 of the 4 biggest recent financial scandals are HIS.

    UBS Tax Dodging for the rich.
    The Enron Loophole (his wife loved that one when she worked at Enron)
    And the repeal of Glass Steagall.

    If any single individual can be singled out for fucking over the American people, Phil Gram is the one who’s head should be prominently displayed on the Pike of justice.

  4. 4
    Comrade Javamanphil says:

    Heads they win, Tails you lose. Bad news.

  5. 5
    jayjaybear says:

    Yep. This is what naked capitalism looks like. It has no conscience and no ethics. It’s only goal is profit, and it doesn’t really care who it mows down on the way. I’m no communist (though I am a leetle bit socialist), but I’d be quite happy with a mixed economy that has some sort of rational division of labor for private and public services, rather than a ideological-capitalism-dominated economy that’s only just starting to recover from 50 years of Cold War hard-wired opposition to anything that even vaguely looks like it might have been favorably thought of by Marx, Lenin or Mao.

  6. 6
    jrg says:

    Communist.

  7. 7
    Culture of Truth says:

    Cornelius Hurley

    Is he on Lost?

  8. 8
    Culture of Truth says:

    Cornelius Hurley

    Is he on Lost?

  9. 9

    It was an inside job. The most telling quote was from the guy who said, the bankers made out okay, whether the deal fell through or not.

  10. 10
    MattF says:

    From Michael Lewis’ “The Big Short”:

    ——-

    When a Wall Street firm helped him to get into a trade that seemed perfect in every way, he asked the salesman, “I appreciate this, but I just want to know one thing: How are you going to fuck me?”

    “Heh-heh-heh, c’mon, we’d never do that,” the trader started to say, but Danny, though perfectly polite, was insistent.

    “We both know that unadulterated good things like this trade don’t just happen between little hedge funds and big Wall Street firms. I’ll do it, but only after you explain to me how you are going to fuck me.” And the salesman explained how he was going to fuck him. And Danny did the trade.

    ————

    One can assume that the “big Wall Street firm” was GS.

  11. 11
    DanF says:

    That is all they want. Bonuses. And they will do, or say anything to keep the bonuses rolling in. Bankrupting the country? No problem. Destroying Greece and the international economy. Cash money.

    I don’t think most folks truly grasp how corrupting the promise of even $1,000,000 can be. In abstract, most of us would like to think we could walk away from a million dollars if it required us to bend rules, or overlook an ethical lapse, but many of us would start to find ways to justify it (“I’ll give money to the homeless shelter and food bank; I’ll use it for the greater good!”). Wave $10 million under someone’s nose, and all bets are off for all but the most sainted (that’s $100,000 dollars a year for 100 years). Greed destroys people and institutions. These companies need to be regulated.

    I’m watching the NBA play-offs. All players on the court know the rules. The fans know the rules, the coaches know the rules, yet we have refs. Why? Because given the amount of money at stake, players and coaches would cheat and stretch rules to the point that the game is unwatchable. Our game is capitalism and these cock-suckers are destroying it.

  12. 12
    cleek says:

    ethics are for suckers

  13. 13
    Walker says:

    From Bloomberg:

    Goldman Sachs Group Inc. racked up trading profits for itself every day last quarter. Clients who followed the firm’s investment advice fared far worse. Seven of the investment bank’s nine “recommended top trades for 2010” have been money losers for investors who adopted the New York-based firm’s advice…

  14. 14
    Dismayed Liberal says:

    DanF,

    Keep using that analogy…it’s perfect. For my part, I’ve been using pro sport as an analogy as well (hockey). It makes the need for regulation very easy to understand. It doesn’t matter that the ref sucks at the game were they to play, and it doesn’t matter how good the players are. It doesn’t even matter how well-intentioned the players are. Left to their own devices, the players will devolve the game into something that no one enjoys watching or playing. It is not different with free market capitalism. Regulation is required for the financial system to produce outcomes that are tolerable, and it’s precisely because the actors in the system have desires to win that match that of any athletes at the top of their professions.

  15. 15
    Napoleon says:

    @Dismayed Liberal:

    Left to their own devices, the players will devolve the game into something that no one enjoys watching or playing. It is not different with free market capitalism.

    Rollerball!

  16. 16
    Violet says:

    Having worked in that industry and with those types, I can tell you that the goal isn’t bonuses. The goal is to win. Bonuses are how they keep score.

    If winning meant you got to wear a solid gold neck ring and the biggest winner had the most of them, they’d all start to look like that tribe that lengthens their necks by adding additional rings.

    All they want to do is win. The money is the scoreboard.

  17. 17
    Culture of Truth says:

    So invest with GS, but don’t follow their advice.

    Or to put it more bluntly, they get rich screwing their clients.

  18. 18
    EDantes says:

    How is this different from Madoff? We knew they were cheating, we just thought they were cheating in our favor. WAHHH. My sympathy for anyone willing to dance with the devil be goldman’s client is pretty much nil.

  19. 19
    comrade scott's agenda of rage says:

    This sounds dangerously like class warfare.

    I’ll get the pitchforks and torches…and assault weapons. Oh wait, can’t get the latter since they’re being stockpiled by the batshit, insane wingnuts.

  20. 20
    Culture of Truth says:

    If a Scotus nominee expresses an opinion about the Constitution and later a similar case comes before the court, that’s considered a conflict of interest, but investment banks can make money for themselves by financially ruining their clients.

    Huh.

  21. 21
    Xenos says:

    when just one bonus is enough to provide a comfortable middle-class lifestyle for the rest of your life, what do you expect people to do?

    Then after the first bonus, they realize that all their peers with a few more years at the firm have enough for a very comfortable life, or enough for their children to have a very comfortable life, or enough to create an estate to support their grandchildren, or enough to buy a really nice house, and so on. You can never be rich enough, and once you have sold your soul there is nothing other than getting even richer that can make you happy.

    And walk away so some schmuck with even lower morals can make the money you are now? Fuck that!

    This is Human Nature 101. To be expected, even if you regulate a lot of the profit out of the business.

  22. 22
    Xenos says:

    @Violet:

    All they want to do is win. The money is the scoreboard.

    That is a very good point. And look where they get these bankers… very often they are athletes from top-notch colleges. This is no accident but is how their recruitment works. Smart kids but not the top students, and with a serious competitive streak and a chip on their shoulders from going from alpha dog in High School to being treated as the quaint entertainment at Harvard or Amherst.

  23. 23
    EDantes says:

    @comrade scott’s agenda of rage: As opposed to what we’ve had the last 30 years from the Reagan agenda?

  24. 24
    El Cid says:

    @Xboxershorts: The more injurious of Gramm’s nation-destroying deregulation / anti-regulatory policies was, in my view, the Commodities Futures Modernization Act, shoved into the very last Clinton budget right after Bush V Gore, and so in the unlikely event of a Clinton veto, the government would run out of extensions and start to shut down.

    The CMFA, also known as ‘the Enron loophole,’ “open[ed] the door to unregulated trading of credit default swaps, the financial instruments blamed, in part, for the current economic meltdown.”

    He was and still is an evil, evil, nation-hating son of a bitch, a guy kicked out of the Democratic caucus for spying on Democratic budget discussions for the Reaganites, and then this was the guy John “I really learned from my personal role in destroying the Savings & Loan industry and saddling taxpayers with $300 billion in bailouts McCain used initially as his ‘economic adviser’. [Also, fuck all you “whiners” who thought the economy was in a serious recession.]

  25. 25
    Culture of Truth says:

    Phil Gramm is probably a reptilian space alien of some sort, sent here to prepare us for occupation.

  26. 26
    Culture of Truth says:

    He could also be an amphibian or a humanoid-turtle of some kind. I’m not ruling anything out.

  27. 27
    Comrade Dread says:

    Yeah, at least some of the robber barons of the old days actually gave a crap about the long term health of their company. Some of them actually were smart enough to realize that they also needed to keep the public on their side and if that meant donating money to improve society they did it. And some of them actually had patriotic feelings and didn’t mind paying taxes to improve the country.

    Their modern day equivalents are more like locusts.

  28. 28
    toujoursdan says:

    But the short sightedness of it burns me. They want the bonuses but don’t care that their actions are causing the U.S. dollar and economy to decline which erodes the purchasing power of their bonuses; schools and infrastructure to collapse which drives up business costs; taxes to be diverted to bail out companies and fight unnecessary wars which leads to greater deficits, etc. etc.

    There were huge class divisions during the 1920s era but the upper class felt some responsibility to care for the poor. The used their wealth to establish universities, public housing, etc. because they knew that it was good for business and if they didn’t, there could be revolution.

  29. 29
    Joshua says:

    What I don’t get is why this is even a revelation. I mean, it is. Nobody will say it, certainly not in the circle-jerking media club. But why is this not obvious to everybody?

    At least in the 80s, the Wall Street vermin would come out and just tell us that “greed is good”. They didn’t have to lie and pretend they wanted anything other than money. They didn’t have to get their trust fund buddies in the press to write navel-gazing articles about conflicting goals.

    In all of the previous decade’s 80s nostalgia, how is it that the one thing everybody forgot was the one thing they actually needed to remember?

  30. 30
    Shell Goddamnit says:

    Part of the cause dates back to before the actual deregulation. The erosion of the power of shareholders and the plague of interlocking directorships took the brakes off. The deregulation was the brick on the accelerator pedal. And the derivatives are the nitrous booster…

  31. 31
    russell says:

    All they want to do is win. The money is the scoreboard.

    There’s something to this, but my guess is that any old scoreboard won’t do. They definitely want to win, but they also want the money.

    when just one bonus is enough to provide a comfortable middle-class lifestyle for the rest of your life, what do you expect people to do?

    I expect them to not be greedy, anti-social fucks. If they can’t rise to that lofty standard, they should be prevented from playing with other people’s money.

    Yeah, at least some of the robber barons of the old days actually gave a crap about the long term health of their company.

    The old timers played with their own money. Big difference.

    The used their wealth to establish universities, public housing, etc. because they knew that it was good for business and if they didn’t, there could be revolution.

    And that was not an abstract or idle threat. Discussions between ownership and labor was occasionally conducted with firearms, and real, live bombs were thrown.

    IMVHO, this is actually class warfare, just without the ordnance. It would be in everyone’s best interest to keep the guns out of it, because who the hell wants to shoot anybody else, or get shot?

    But the financial sector guys have made it very, very clear that they are perfectly happy to do anything they can get away with if it means they can get, personally, rich. The richer, the better.

    There’s something to the idea that the money is just a way of keeping score, because the sums these guys allocate to themselves are more money than anyone can make practical use of in their lifetime or their kids’ lifetimes. But whether it’s all about the money or not, they sure as hell want the money.

    And it’s not their money. Investment bankers used to put their own capital at risk, which introduced at least some level of sanity and responsibility, even if only as a function of self-interest.

    But now they either work for publicly traded companies or hedges, and it’s other folks money they play with.

    The financial sector in the US has become toxically irresponsible and anti-social. They are *perfectly happy* to blow up the rest of the economy if it makes them wealthy, and they *don’t see anything wrong with that*. They think that’s the way it’s supposed to work, and they see their compulsive anti-social greed as a virtue.

    So, fuck them.

    Financial regulation at this point is a matter of self-defense. These guys will be delighted to see you out of a job, out of your home, and begging in the street if it means they can have another $10M. As far as they are concerned, that’s just the way the world works, if you didn’t want it to work out that way, you should have become a banker.

    The current way these guys work needs to be made illegal. If they continue to work that way, they need to have their toys and money taken away and they need to be sent to jail.

    Straighten up and fly right, or we take your stuff and prevent you from ever getting any more. That is the one and only thing they will understand.

    Even guns won’t work. They’ll just pay someone to shoot back.

    We need laws.

  32. 32
    Jim says:

    Now you’ve done it, some banker is going to read this thread and mow his own lawn.

  33. 33
    Michael says:

    They’re going to have to make up their minds. Do they want the ordinary schlep money in the play or not? Because if they can’t offer up a market that has a reasonably defined set of standards going toward some stability, then Homer Simpson will wise up and refuse to play anymore. At what point is a big rise or fall’s description as “investors are concerned/afraid of” going to be guffawed away as it should. At what point does taking analysts out and lining them up on a wall because they trash an entire country’s ability to borrow based on “concerns”, even though that country is current on obligations and has its entire industrial, agricultural and tourist base intact?

  34. 34
    Violet says:

    @russell:

    There’s something to this, but my guess is that any old scoreboard won’t do. They definitely want to win, but they also want the money.

    They’re intertwined. The money allows them to buy larger homes in the Hamptons, faster cars, bigger yachts and so forth. And owning those things shows they’ve “won.” Especially if their house, car, yacht, etc. is larger than their co-worker’s.

    These guys do work all the time. They’re exceptionally driven. So it’s not like they get to enjoy the fruits of their labor and loll around in the sun for weeks on end. They’re working when they’re on vacation, if they ever take one. Not so much because they have to, but because they’re afraid someone else might beat them in a deal.

    Winning is the only thing. Money is the scoreboard and it has the added advantage of being the scoreboard for the rest of the world, to a certain extent. Rich people can get away with a lot more stuff than poor people. More doors are open. It enables them to do more of what they want, or think they deserve, to do. So of course they want the money. It’s how everyone they know is judged.

    The sports games metaphor upthread is an apt one. They’ll do whatever it takes to win. That’s why the refs are necessary, to make sure everyone plays by the rules.

  35. 35
    El Cid says:

    @Comrade Dread:

    Yeah, at least some of the robber barons of the old days actually gave a crap about the long term health of their company. Some of them actually were smart enough to realize that they also needed to keep the public on their side and if that meant donating money to improve society they did it. And some of them actually had patriotic feelings and didn’t mind paying taxes to improve the country.

    Social Security was most strongly pushed at high levels by corporation owners in the 1920s who saw an entirely private pension system as unsustainable and leading to dramatic public poverty.

  36. 36
    russell says:

    some banker is going to read this thread and mow his own lawn.

    Crap, there goes my dream of retirement.

    These guys do work all the time. They’re exceptionally driven.

    You know, I get that. So do medical interns, freelance musicians, a lot of teachers, and the millions of folks who don’t make enough money to live off of the income from one job.

    Financial sector guys work all the time because they are hypercompetitive obsessive freaks. They can’t rest until they have demonstrated that they do, in fact, have the biggest d*cks on the block.

    That’s all well and good. Everybody has their thing. I don’t even mind if they make themselves stupid rich in the process.

    I want them prevented, by law, from lying about or otherwise misrepresenting what they’re doing, and from taking stupid insane risks with other people’s money.

    It’s not a lot to ask.

  37. 37
    Violet says:

    @russell:
    Totally agree with you. It’s not the “exceptionally driven” part that’s a problem. It’s the industry in which they work and the lack of regulation.

    Lots of people are driven. But not everyone has the single minded devotion to winning at any cost that these guys do. I’ve seen similar behavior in surgeons, but not too many others.

    They are so hyper-competitive it’s destructive. And without appropriate boundaries to rein them in, we all suffer.

  38. 38
    Jamie says:

    Never expect to win when you play pool with a shark.

  39. 39
    KJD says:

    I’m just finishing up “Liar’s Poker”, Michael Lewis’ first book about his days in the 1980s as an investment banker with Saloman Brothers.

    There is so much there that is germane to the current crisis but Lewis makes it perfectly clear that bond traders are out for your money and your throat 24/7. There is a telling episode when a trainee asks a thoughtless question. The bond trader leading the session puts him down by saying “Some people are born to be customers”.

    They all assume that customers are dumb and are there to be taken advantage of.

    This isn’t new. This is who they are.

  40. 40
    sukabi says:

    BP and Goldman Sachs doing dirty deeds together… remember when gas was $4+ per gallon and “speculators” were accused of driving the price up??? Guess who’s responsible.

    Dozens of small oil and gas producers across Oklahoma and the Midwest are suing Goldman Sachs, BP and ConocoPhillips, claiming the defendants conspired to defraud them out of proceeds for crude oil they delivered just before the collapse of Oklahoma-based pipeline giant Semgroup in the summer of 2008. […]

    Goldman, through its J. Aron commodities division, was Semgroup’s largest counterparty, and appears to have been responsible for giving Semgroup its final push off the cliff by unleashing a massive margin call on Semgroup as oil prices spiked. Billionaire John Catsimatidis, who has settled his own Semgroup-related suits in the past year, has asserted that Goldman’s actions may have helped push up the price of oil to its record of $147 a barrel.

  41. 41
    mark boggs says:

    Wait, all my tea-partying neighbors here in Southern Utah keep telling me the debacle in Greece is caused by liberal entitlement programs. But you’re blaming it on Wall Street. What gives? Can someone help me?

  42. 42
    jonas says:

    We know that ‘Cash Rules Everything Around Us.’ Turns out that Dave Chapelle classic from a few years back was so funny because it was basically true.

    Smith Barney? Buncha bitches.

  43. 43
    Paul in KY says:

    John, that’s one of the truest things you’ve ever written (and you have written a whole shitload of true stuff).

  44. 44
    Rathskeller says:

    @Violet: Strongly agree. I worked for Goldman for several years. (I worked closely with the “shitty deal’ guy, in fact). Broadly speaking, there are two kinds of people there: people for whom a million dollars is a million fucking dollars, and people for whom that’s a score, which should be higher than other people’s scores.

    The first group may or may not have ethics as they go about their business. The second group do not care about consequences, they want the highest score they can arrange.

    The main thing I’ll add is something I’ve said in many forums, under many aliases: nothing important will change unless you have bonus clawbacks as part of the law — for all the major players: traders, sales people, management. They need to be able to reach back three fucking years and say, “Oh man, whocoodanode you were working on something so wrong? Well, you don’t get any of that bonus. You should have known.”

  45. 45
    russell says:

    nothing important will change unless you have bonus clawbacks as part of the law—for all the major players: traders, sales people, management.

    I agree with this.

    Jail will not be a sufficient deterrent. Guns and pitchforks will not be a sufficient deterrent.

    The sufficient deterrent will be the threat of having their stuff taken away from them. Money, houses, investments, cars, whatever. Liquidate what they own and take it back.

    Take their stuff away, and prohibit them from playing the game any more, so they can’t go get more. That will get their attention.

  46. 46
    Anon says:

    nothing important will change unless you have bonus clawbacks as part of the law—for all the major players: traders, sales people, management.

    Totally agree with this.

    And to the people who say it’s not about the money, it’s about competition or whatever, I agree that these are very competitive people. But if you think no one would put themselves through this “just for the money”, I submit that you do not understand what money is worth–especially in the amounts we’re taking about. Money isn’t just for keeping score. Money isn’t just for spending.

    Money is money. The good that is exchangable for all other goods. And when you have enough money, with a little cleverness you can do more than just buy stuff–you can make a world with it. Not a Neverland ranch kind of world, but the real world. And the more money you have, the more leverage you have to remake the world and yourself into what you want it to be.

    Money gets you in whichever door you want to go through, anywhere.

    You want to be a good man? Give $150 million to a church, and churchgoing people will not just suck up to you, a lot of them they will genuinely LIKE you and genuinely believe you are a very, very good person. You spend it well in a poor country, and you’ll be a national hero for generations. Name a big scholarship or a prize for do-gooders after yourself, and people will sell you their reflected glory and their achievements very, very cheap. And happily!

    If you have a little money and you start buying art, you are a poser. If you have an enormous pile of money and you start buying art, you become a tastemaker. You know why we think Da Vinci and Botticelli are any good? Because the deMedici’s money told us they were.

    Money is freedom. Looking at a big pile of money makes you feel free. You could walk away. You choose not to. Because you are the best and you will make that pile higher.

    Money is people who don’t just suck up to you and tell you you’re smart–they BELIEVE you’re smart. And good looking (yes, “unconventionally” good looking, but they still genuinely think you’re hot.).

    Yeah, money doesn’t work on everybody, all the time. But it works on most people most of the time. It works on most situations.

    I’m not denying that it can be about these other things. But once you get that money and once you realize what you can do with it and how your options increase geometrically the more you get?

    It’s about the money.

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