Sunday, May 2, 2010

Mr Blankfein - so how is that Goldman perennially earns MORE money than anyone?

Can we agree that it's because of the very essence of Goldman's franchise - INFORMATION; it's paid for and exceedingly valuable, otherwise why collect it in the first place? Dare I suggest an abomination - what if same information were shared with customers - then value would disappear.
Sort of like sharing water (or not) with others stranded on a desert island.

And he who has it (information) defines the situation just as he who has it controls the situation - yes; just like a parent with a child.

What is Goldman's IT budget for discretionary purposes i.e. non mandatory regulatory and compliance systems? Why spend the money? Of course, as the circle completes itself - it's better to know ALL available information and DECIDE whether to incorporate it, assign lesser weight or disregard completely.

Goldman and other Investment Banks - for purposes of gaining control and market share of certain customers, products and services; offered certain customized risk products / service not elsewhere available - namely but not limited to certain MBS derivatives.

Private label CDOs, CDOs Squared, and Synthetic CDO's - Goldman in this example, created, traded and valued same using its proprietary IT budget and passed itself off as a market maker, intermediary - BEREFT it seems, of any duty owed to customers.

When a market or market maker - to use your example from the interview on the Charlie Rose Show April 20, 2010 replace Goldman with NYSE.

Would it be a fair market for the NYSE to fail to disclose ALL information it possessed?

If Goldman were to put itself in the position of IKB - would it want to know that certain MBS were actually suggested for inclusion NOT by the independent collateral manager ACA but by Mr Paulson? Not necessarily; but failure to disclose that kind of information by Goldman assumes that IKB was not possessed of other information that once connected may have changed their decision - to buy more, buy less or buy the same amount of Abacus they wound up buying anyway. Later, it may have influenced their continued holding all or part of the Abacus deal - but then a related question is did Goldman provide accurate and FAIR "market price information" in the months following the underwriting and distribution? I'll bet this is an area that could yield useful, litmus test information in contrast to Mr fabulous Fab's subsequent customer marketing or proprietary trading activities.

UBS has long advertised on TV, that UBS stands for and combines to mean U and Us - as if there is a partnership; suggesting that the thousands of UBS employees are there, united for YOUR benefit. Goldman I recall, does not tend to advertise except for displaying the image of its name.

Mr B has stated many times that Goldmans' 35,000 employees don't know what the others are doing - as if position and risk limits are UNmonitored / UNsupervised / UNdiscussed - when in reality it's believed that every position, every minute or more frequently is summarized in the parlance "rolls up" to a level for a manager to see - why else does the manager / supervisor / managing director position exist - managing what?

Would it - let's frame the same challenge of the usefulness of information in a very graphic, stark indeed pornographic way -

It's dark, you're a man, you've been out and want to play in a pleasure palace.
Upon entering, incense invades you, you are led to a small private, dimly lit room, there are several silk sheets each covering someone on the other side; an attractive silhouette catches your interest - you take your pleasure - then out from behind the curtain emerges _____ (fill in the blank) - something different from your initial expectations - would you feel the same elation or feel tricked or _____ (fill in the blank)? Would you ask for a refund? Would you have penetrated armed with the information about the counterparty?

At the end of the day the experience was NOT what you expected correct? However, it doesn't immediately result in a conviction of good or bad, right or wrong rather this - it LEAVES OPEN the possibility of 1) negative, 2) positive or 3) neutral reactions; same, I believe is reasonably applied as with certain Abacus deals.

Redolent of a provocative movie from 2007 Lars and the Real Girl link to comments here

And as pointed out several times here Goldman as a regulated entity must address how it fulfilled NASD IM 2310-3 Obligations to Institutional Customers (see link to this in below posts) and in a civil litigation how it met its fiduciary duties to certain customers; extending to how it trained and supervised its customer facing employees (sales people), market makers, traders and proprietary traders.

From November 2009 here
and from January 2010 here

Yes Mr Blankfein - it's all about - INFORMATION and fair and fully disclosed markets.
Otherwise - certain customers may have a less than hoped for experience.

And last I checked Goldman and all other investment banks exist for what purpose?
As stated in a US Bancorp TV ad yesterday "As our country has grown, so have we" recognize the order of priorities?

Ending the siesta on the US taxpayer's dime every time.

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