Yesterday I watched Phil Angelides grill Mr. Blankfein. Phil is a liberal democrat, no problem with that, differences makes the world go round. What hit me yesterday watching Mr. Blankfein getting grilled by the Democrats, was when I worked at GS, I was shocked at how many of my colleagues supported Obama and the Dem’s. I never understood why any capitalist market makers would get behind the Democratic ideology , but many did, and now Lloyd gets to hang out with Phil.
During my tenure at GS, we purchased residential mortgage loans, underwrote them very tightly, the bond sales guys sold the securities and institutional investors bought them, with pure transparency of the assets outlined in the prospectus. GS also shorted the market with CDS underwritten by AIG, I was not close to that, but in my view, it was insurance, and it paid off (as a shareholder, I appreciated that trade). Yesterday, Mr. Blankfein correctly stated GS is a market maker, he didn’t apologize for that and he shouldn’t.
Agreed the market was too heady and controls need to be put in place, I hate the pendulum anology, but the pendulum swung too far from the center, so watch out because it’s coming back at 120 mph, could cut off your head….or made cut off liquidty. GS is a lightening rod, always has been. I once asked why we didn’t have a marketing department, the response, “Read the Wall Street Journal, we are in it every day. ” Yes deriviatives need to be regulated, was it tricky to make your clients long then short them? Well, yes and again GS is good but they can’t read the future (can they?..wait…a..minute, some guys on the 28th were working on that…) Anyway, if you’ve been on the street, you know GS is the largest hedge fund in the world, you better be as good a poker player as they are. It’s like they say down here in Florida, in order to not get eaten by an aligator you don’t have to be fast, just faster then the slowest guy you are with.