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Wall Street Should NOT Have to Defend Itself Against Washington’s and Media’s Ignorance

Posted by Larry Doyle on April 29, 2010 10:27 AM |

I am not bashful in calling out Wall Street for its shortcomings and transgressions throughout our economic crisis. Similarly, I am happy to take Washington or any other party to task for shoddy performance. I welcome the same treatment if and when readers view Sense on Cents as being off base or out of line. Spirited engagement between and among interested and informed parties is the foundation for real progress.

So while I am willing to call out Wall Street when necessary, I strongly believe that the industry should not need to defend itself from the ignorance, and often abrasive ignorance, heaped upon it by those in Washington or the media.

In that vein, I am all too happy to blast members of the Senate subcommittee for real ignorance on a number of fronts during their questioning of Goldman execs this past Tuesday. I am also happy to blast The Wall Street Journal this morning for a ton of drivel put forth in writing, Clients First at Goldman?:

Who wants to entrust their money to a Goldman Sachs fund after this?

Ordinary investors around America have more than $50 billion invested in Goldman Sachs mutual funds, says industry specialist Financial Research Corp. That makes the beleaguered Wall Street bank one of the top 25 managers in the country.

And Tuesday many of those investors will have watched, with disgust, the Mark McGwire moment during the Senate hearings at which four Goldman executives, former and current, testified about the firm’s role in the collapse of the mortgage market.

(The former major league baseball player famously refused to answer congressional questions about alleged steroid use, instead insisting “I’m not here to talk about the past.”)

Why doesn’t The Wall Street Journal use the same approach in going after Mary Schapiro and her tenure at FINRA? You want gutless? I am happy to call the editors of The WSJ totally gutless for allowing Ms. Schapiro to continually play the Mark McGwire card on that front. I have had no problem in calling out our current SEC chair. (In fact, I used the McGwire baseball reference in a commentary I wrote this past January entitled, “Mary Schapiro and Mark McGwire.”) Back to The WSJ piece:

Just before lunch Maine’s Susan Collins (R.) asked the Goldman honchos an equally straightforward question, which should be a slam dunk for any self-respecting professional–namely, whether the firm puts its clients’ interests first. And several pointedly refused to give a direct answer.

Dan Sparks, former head of the mortgages department at Goldman paused briefly, then said: “I believe we have a duty to do well for our clients.”

Fabrice “Fab” Tourre, the Goldman executive director who is named in the SEC’s suit against the firm, said Goldman has a duty to serve clients in its role as a market maker by providing liquidity. “I do not believe we act as an investment adviser to our clients,” Mr. Tourre said.

Sounds like rhetoric from the public relations firm of Waffle, Weasel and Spin.

Neither Senator Collins nor The WSJ’s reporter Brett Arends understand the frame of reference for this question. The Goldman execs answered the question based upon their roles and responsibilities within the firm. These individuals are traders. Their role is to make markets and provide liquidity to clients. The Goldman salespeople covering customers have the responsibility to represent and protect client interests.

The reporter Brett Arends references Goldman Sachs funds as if they were managed by these individuals. Perhaps he may want to do a little homework before spewing off. The funds referenced are marketed and managed by a totally separate division of Goldman Sachs, that is Goldman Sachs Asset Management. In point of fact, GSAM is most likely largely if not totally precluded from doing business with the broker-dealer division within Goldman.

I am all for calling Goldman Sachs and these individuals on the carpet, but they should not have to defend themselves against the ignorance displayed by Senator Collins and the WSJ’s reporter.

America’s interests will never be served if those charged with questioning and reporting have little to NO understanding of the industry.

LD

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