Goldman Sachs has been making headlines (again) after charges were filed by the SEC alleging that the company sold a financial product whose components were decided on in part by Paulson & Co., a company who made bets in a hedge fund that the product would see losses, without disclosing this to investors and thereby creating a conflict of interest.
Company executives came before the Senate Permanent Subcommittee on Investigations yesterday to testify about the company’s dealings. In reference to the fund, Chairman Carl Levin (D-MI) said to GS CEO Lloyd Blankfein, “You are betting against the same security you’re out selling. . . . You’ve got a short bet against that security, and you don’t think the client would care?” I think the answer to the question is clear to us all.
The only employee specifically named in the charges filed by the SEC is Fabrice Tourre, Executive Director of Structured Products Group Trading, who referred to himself in personal e-mails as “Fabulous Fabrice.” David Brooks of the New York Times dealt with Tourre harshly in an editorial on Monday:
And as for Fabulous Fab, he seems to be the product of the current amoral Wall Street culture in which impersonal trading is more important than personal service to clients, and in which any product you can sell to some poor sucker is deemed to be admirable and O.K.
Indeed, the company’s ethics seemed shaky in testimony given yesterday. The senators brought up e-mails in which GS executives referred to deals made by GS as “junk,” “crap,” and “shitty.” Furthermore, only one of the four panelists responded in the affirmative when Sen. Susan Collins (R-ME) asked if they acted in the best interests of their clients.
As Sam Barr pointed out in a blog post this weekend, it’s hard to argue that a high salary is the primary attraction of the financial industry. Indeed, it seems more difficult now than ever to convince people that you are going into investment banking simply because it seems more interesting than any other career out there.
Do you want to experience something new every day? Get on the call list at a temp agency. Do you want a job that will give you a real thrill? Join the Army and serve a tour of duty in Iraq. Do you just want to get rich? Go to Wall Street.