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Goldman’s Animal House

Posted by Larry Doyle on April 21, 2010 8:41 AM |

Trust. Would you know it if you saw it? Would you be able to distinguish real trust from the appearance of trust? Whom can you trust?

Wall Street is an industry in which trust is too often promoted, but too seldom practiced. When somebody would say to me “Trust me on this,” I would get increasingly concerned. Why? Real trust is a virtue which goes without saying.

On this note, Wall Street’s favorite punching bag Goldman Sachs is dealing with the most egregious violation of fiduciary responsibility: a violation of trust. Even if Goldman is cleared of the fraud charges brought by the SEC, Goldman is already guilty of a greater charge, that is, a violation of trust in being fully forthcoming in its disclosures.

Can we paint Goldman with a broad brush based on this specific situation? No, not every employee at Goldman Sachs would necessarily operate in this fashion. As an institution, however, global investors are gaining a clearer picture that Goldman’s management has willingly violated the principle of trust in order to profit. European nations and investors are beginning to turn on Goldman. Will the same occur here in the U.S.?

Will state pension funds move to cut off Goldman from their approved dealer lists? For those who may not recall, the slippery slope which brought about Drexel Burnham’s downfall was littered with state funds cutting off Drexel. That crisis turned into a massive vote of no confidence in the organization based on violation of trust.

While the boys in Animal House may be able to provide a few laughs at the expense of the impressionable Flounder, America is learning a lot more about the goings on at the fraternity known as Goldman Sachs. Will Goldman be placed on “double secret probation” by their friends in Washington? There is no reason why any of this needs to be secret as America issues its own verdict.

In an attempt to bring a little light humor to a serious situation, here’s a lesson about trust courtesy of the boys from Delta House:

LD

  • Blutarsky

    Toga….toga….toga….

    …and a future United States senator no less!!

  • D-Day

    ….but Mary Schapiro was making me a pot…..

  • Bill

    There’s a great quote from JP Morgan when he was testifying before some Senate committee in the wake of some financial panic in the days before we were “blessed” with the Federal Reserve. Some assinine senator was pressing Morgan that was it not collateral upon which he loaned. And Morgan retorted, no it was on character and trust. That money could not buy character. And that he would not loan money to a man he did not trust with all the bonds in christendom as collateral.

  • Sean

    Every time I think about the term “moral hazard” I just can’t seem to get the image of Lloyd Blankfein’s face out of my mind.

    On a more serious note, if Goldman Sachs is no longer in the picture a few months from now, who will be responsible for making all of the worlds unmarketable securities marketable? Goldman may not be doing God’s work, but the global economy will cease to function if there is not a Madoff, err – I mean, “investment bank” to successfully market all of the world’s unmarketable “securities.” We all saw what happened to the global economy after debt, err – I mean, “credit” contracted for the first time in U.S. history beginning in 2007, and we certainly will continue to need “investment banks” to keep the ponzi-scheme, err – I mean “economy” functioning by continuing to invent and market new debt-based, err – I mean “credit-based” “securities.” In a debt-based, err – I mean “credit-based” economy, new debt, err – I mean new “credit” must continually and indefinitely be created for the “economy” to continue to function, just as Madoff’s firm continually needed new “investment” funds in order to continue to function, and this is why “investment banks” like Goldman are needed to invent and market new debt, err – I mean new “credit” instruments. Just as Madoff’s firm collapsed when his “investment” funds contracted, our economy will collapse when our debt contracts, as it did in 2007 for the fist time in our history. Private sector debt, err – I mean “credit” continues to contract, and if the government(public-sector) had not stepped-in to add to the “economy’s” overall debt-borrowings, the total, final, utter, cataclysmic “economic” collapse would have already been over by now. Instead, the “economy” will continue to function as long as the government(public sector) is able to continue to add to its overall debt-borrowings over-and-above the amount by which private-sector debt is contracting. The big question is how long can the U.S. government continue to add to its already massive debt-borrowings in this fashion? Ireland, Iceland, Dubai, Greece, Portugal, Spain, Italy, the entire Euro-zone, and the U.K. are providing-us with the answer – not much longer now. There’s not-much time left now. It’s almost here now. Brace yourself. Prepare now while there’s still a little bit of time left. If you haven’t started already, start loving God and loving your family. Got gold?






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