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Goldman’s van Praag: “People Don’t Understand”

Posted by Larry Doyle on February 23, 2012 12:58 PM |

“You can’t regulate and legislate for greed and stupidity.”

In the course of a riveting 30+ minute interview, soon to depart public relations chief Lucas van Praag of Goldman Sachs made the above point and many more as he spoke openly and extemporaneously on a number of topics.

The fascinating dynamic at work in this interview with the Dutch television program Tegenlicht is the fact that van Praag does not seem to fully appreciate that he is being taped. Much of what van Praag addresses would seem to toe the Goldman party line, but he does speak in such a matter of fact style that we learn a lot about the mentality and culture at work inside the offices of Goldman Sachs.

What are some of the general themes of van Praag’s commentary? 

A lack of understanding by the public, investors, legislators, and regulators as to many of the intricacies of specific transactions, market dynamics, and the financial services industry at large. As van Praag opens up and speaks liberally across these topics he provides a Sense on Cents instant classic.

For those who are interested in the world of Wall Street, this 5-segment interview is a MUST listen. I welcome sharing it and give credit to The New York Times for highlighting this interview in a recent commentary entitled, Goldman Sachs P.R. Chief’s Accidental Exit Interview.

In segment 1, van Praag addresses: Goldman’s swap transactions with Greece at the turn of the century; the general lack  of understanding by some as to the nature of certain transactions; how the derivatives market is not well understood.

In segment 2, van Praag addresses: the lack of understanding by Congressmen questioning Goldman Sachs in 2010; the public’s lack of understanding of the Goldman business model.

In segment 3, van Praag addresses: deregulation within the world of banking; impact of repealing Glass-Stegall; the primary causes behind the mortgage crisis with specific comment about Fannie and Freddie’s growth during the Clinton administration; the inevitability of a future crisis; counterparty credit risks; the challenges of effectively implementing the Volcker Rule.

In segment 4, van Praag addresses: the incentive compensation system on Wall Street; greed, jealously, and sloth within our culture and how those vices play out on Wall Street; Goldman’s risk management system; conflicts of interest on Wall Street.

In segment 5, van Praag addresses: the future; need for better regulations; the likelihood of another bubble being created; general perception of lack of fairness and opportunity within our society; the unknown effectiveness of the Dodd-Frank Financial Regulatory Reform.

Some may think it is hard to believe that a soon to depart public relations executive may not be fully aware of speaking so openly. I will grant that, but I found this interview to be far more honest, open, and refreshing than the canned messages put out by many financial firms and promoted by many within the general financial media here in the States.

A general lack of understanding by the public, investors, regulators, and legislators? I find this reality to be very true in large measure but also a function of willful negligence by those charged with protecting the American public and consistent with the Wall Street-Washington Incest.

Navigate accordingly.

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets, our economy, and our political realm so that meaningful investor confidence and investor protection can be achieved.

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