And, I just shake my head in disgust with this completely politically motivated move to label Goldman Sachs as the evil witch that Congress is now trying to burn at the stake.
In short, there was no valid reason to make the Goldman CEO (and other firm executives) get slapped silly again in front of what felt like a McCarthy-like hearing yesterday. I should offer up that we do represent companies which are financed by Goldman. But, that has no bearing on why I'm writing this post.
Let's review the facts:
* Goldman is just one of many, many players who created and benefited from the subprime market. Yes, Goldman might have profited more than any of the rest, but were those actions illegal? So far, we've seen nothing to demonstrate this.
* Yes, I agree that the industry needs to be reformed because (in this case), excessive greed without any checks and balances almost killed our economy. Those in the industry should feel bad and need to change. The new regulations should help in some way do this (which of course, is always the major challenge). But, all the giant bank CEOs were already admonished in front of Congress over a year ago. They received a real beating. So, why do this again to one firm as a further example? Makes little sense to me except that Congress has to waste our time seeking out another villain for the recession we're living in because that will feed their constituents' need for revenge.
* I can't speak to the merits of this civil suit by the SEC. But, when was the last time business people (or anyone) were forced to appear on a televised hearing in front of a Congressional circus for a civil legal proceeding? Just ridiculous.
* I've heard a public outcry to create regulation that would end derivatives. The public and congressional members who are aggressively calling for this just don't have a clue. And, that's scary. Maybe they should do their homework. Then they'd see that most derivatives certainly aren't bad. In fact, entire industries (outside of Wall Street) would suffer immensely if we curtailed this important finance tool. Do they know that companies like Jet Blue must utilize derivatives (in a very challenging industry) to compete. By betting on the future of oil costs, Jet Blue can obtain it cheaper. This lowers Jet Blue's overhead which indirectly impacts the ticket prices we pay when flying. Likewise, manufacturers like Hershey, Nabisco and others do the same by betting on the future cost of sugar and other commodities. These are examples of derivatives that are staples for many businesses, providing lower costs in a similar way. Ironically, I should also add that higher costs for these companies would mean fewer jobs. An issue that no politician wants to deal with in his/her district.
* Finally, if we're going to make one participant in this economic meltdown sit on the hot seat, why not include everyone else who shares some responsibility? That's only fair.
I laugh at the bitter irony of how politicians like Chris Dodd and Barney Frank are attempting to now lead the formation of tighter regulations. Well, that's kind of funny since these two led the charge in the 90s to force through laws that made organizations like Fannie Mae give mortgages to people who neither had the credit or money to ever be capable of owning a house. This lack of common sense created the necessary legal environment for a new market to sprout that eventually blew up. Let's give the Goldman seats next week to Chris and Barney and ask them what on earth they were thinking way back when.
The problem is that the media and politicians (I call them the wolves) always have to find someone to blame. That's the culture we live in. Goldman was certainly a willing participant in this mess. But, yesterday's eight hour hearing was pure theater for the masses. And, that's just sad.