Too Successful to Succeed?

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Executive Perspective by Robert Cirkiel and Garry Rogers

expert perspective telescopeThe recent article in the Wall Street Journal by Joe Bel Bruno titled “Goldman Pay, Trading Probed” got our Editorial Board blogging.  Mr. Bruno’s article states: “Goldman Sachs Group Inc.’s second-quarter results might have attracted some unwanted attention from the government. The investment bank said Wednesday in a regulatory filing that the government has launched investigations into pay practices and credit-derivatives trading. Goldman said it was cooperating with the request, but declined to give further details.”

Robert Cirkiel points out that Goldman is an unapologetic predator. “So what!” he says, “That’s how it works.  Is everyone concerned that they are too good at it?  Perhaps the ultimate good that could come of this is in the future Congress will take the time to reflect and think about a law before enacting it, especially one with the magnitude and consequence of TARP.”

Garry Rogers weighs in with saying “Beyond the obvious jealousy, the public is irked by the AIG situation and the billions that flowed to Goldman from the AIG bailout.  Saving the financial system is a goal that one everyone supports, but other than a handful of government officials and, of course, Goldman itself, people don’t really care about Goldman’s survival.”

The timeline and selective approach our government used in the bailout caused a lot of problems. Let’s revisit: first Bear Stearns, then Lehman and finally Merrill fall by the wayside.  After that the government goes crazy saving AIG, banning short selling in financial shares, fast tracking Goldman and Morgan Stanley bank holding company applications, and creating a dozen different liquidity and lending programs for banks. 

One reason Congress can’t safely congratulate themselves on saving the world economy is that three very large and very important firms were left to fail while the government stepped up to the rescue what has been argued were a few select players, all without transparency regarding criteria and leaving room for “conspiracy theories” given Goldman’s connections to treasury and the fed.  It is the failure of Goldman’s competition as much as the bailout itself that has contributed to Goldman’s current success. Goldman has had the opportunity to acquire talent with very large books of business.

Goldman’s current success, in light of the TARP money it received and then repaid, is akin to the American people having loaned them a dollar to buy a lottery ticket, they hit the jackpot, and then repaid us only the dollar.  But do they really owe us more than that dollar?

You can email Robert Cirkiel at robert.cirkiel@grahall.com and Garry Rogers at garry.rogers@grahall.com

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