Will Goldman drama impact reform?

Fabrice Tourre (L), executive director of the structured products group trading for The Goldman Sachs Group, is sworn in while testifying before the Senate Homeland Security and Governmental Affairs Investigations Subcommittee on Capitol Hill on April 27, 2010 in Washington, D.C.

Tess Vigeland: On Capitol Hill today, a financial drama. Let's call it Uncle Sam versus Uncle Sachs. Top officials from the investment bank Goldman Sachs appeared at a Senate hearing and defended themselves against bipartisan fire over some of the trades Goldman was involved in leading up to the financial crisis. The hearing is unrelated to the SEC's investigation of fraud at Goldman. But the topic was front and center anyway.

Marketplace's Jeremy Hobson has been following the hearing. He joins us now. Hi Jeremy.


VIGELAND: So give us a little bit of a sense, a picture if you would, of what happened in today's hearing.

HOBSON: Well you know, I watch a lot of these hearings on financial topics, and they can get pretty boring.

VIGELAND: Yes, they can.

HOBSON: This one was not. And not just because it included a lot of profanity, which we won't play. But one of the participants, right out of Hollywood, fabulous fab Fabrice Tourre. He's a 31-year-old Goldman trader. And he's the one that's accused of fraud by the SEC for his role in structuring securities for Goldman's clients to invest in, securities that Goldman was betting against. Well he was asked whether he felt a duty to act in the best interest of Goldman's clients.

Fabrice Tourre: I believe we have a duty to serve our clients, and with respect to our role as market maker, to show prices to our clients and to offer them liquidity. I do not believe we were acting as investment advisers for our clients.

HOBSON: So in other words, Tess, that Goldman is just providing a service by offering clients the ability to place bets on various things. That did not go over well with the senators. There was a lot frustration that their questions were not being answered satisfactorily, although it could have just been that they didn't like the answers they were getting.

VIGELAND: Well, you know Jeremy, a lot of people are going to look at this as pure political theater. Do you think there's anything wrong with that analysis?

HOBSON: Well, it's a fair point, but keep in mind this is happening just as the Senate is prepared to enact sweeping financial reforms. I spoke with Boston University's Securities Law Professor Elizabeth Nowicki. She says what's happening today could actually have a real impact on the rules that govern Wall Street going forward.

Elizabeth Nowicki: Last time we saw massive financial reform was right after Enron imploded. It was a response to Enron. The Goldman employees, the Goldman lawyers, are well aware of this issue, and they certainly don't want to give enough ammunition to Congress to justify Congress developing legislation that's really going to significantly curb the business of Goldman Sachs.

HOBSON: And she's talking specifically there about derivatives, and remember one of things Congress is considering doing in this financial reform packages is severely restricting the trading of derivatives, which is exactly what they were talking about today.

VIGELAND: Well, so, I guess the bottom line is whether this could actually influence the reform bill at this point, or is this just posturing?

HOBSON: It could. And keep in mind also that for the senators there's nothing wrong with attacking Wall Street. There's hardly an easier target to find, so having the ability to sit there for hours and attack bankers in front of the camera doesn't hurt during an election year. Just to give you an example, Tess, of one of the more fun moments today, here's an amusing cut from Senator John Ensign who represents the state of Nevada.

John Ensign: I think most people in Las Vegas would take offense at having Wall Street compared to Las Vegas because in Las Vegas actually people know that the odds are against them. They play anyway. On Wall Street, they manipulate the odds while you're playing the game.

VIGELAND: Oh, snap. You know, Jeremy, I think we're also seeing a bit of a culture clash here -- Wall Street meets Washington. And that was really on evidence today, wasn't it?

HOBSON: It was, and it's difficult to say who was the home team and who was visiting because the senators control the time. But the issue is really something the Goldman guys are much more comfortable with talking about in detail. But there was one thing that struck me, which was the question of responsibility. These senators kept coming back to the issue, they would ask the Goldman guys: Don't you feel that you have some responsibility to your clients, to shareholders, to the American public to think about the impact of the trades you're doing? And they were basically saying, look this is business, I'm focused on what's making money for my firm and for me. That didn't sit too well with a bunch of elected representatives who actually do have to think about how things impact the entire economy and the American public.

VIGELAND: Marketplace's Jeremy Hobson reviewing today's hearing for us from his seat in New York. Thanks so much.

HOBSON: You're welcome, Tess.

About the author

Jeremy Hobson is host of Marketplace Morning Report, where he looks at business news from a global perspective to prepare listeners for the day ahead.
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As usual, there's "drama" right now (rather than months ago) *because* there's the debate in Congress right now. This administration, and the Left in general--including the media, including this program--is notorious for making things up to support its position and not letting anything, even facts, get in the way of its narrative. This lawsuit's coming just as debate starts, and the media's acceptance of the government's allegations as settled fact, are standard operating procedure.

So, Sarah of Sunnyvale, by your comment it seems that you also believe that lead in toys manufactured in China are probably the fault of the parents who want to get their kids some toys? And, while Americans do need to live within their means, there are severe consequences awaiting them when they don't. Last time I checked, Goldman and company haven't had to declare bankruptcy or dissolve.

Am I the only one who thinks that another big party at fault for this entire crisis is the American public? The wall street woes, the over leveraging of the housing market and the credit card crisis, were caused to a large extent by the "general public" that was participating in these transactions were clueless as to what was happening, and were greedy. Goldman operated with the same kind of motives, only on a larger scale. So how can you blame one and not the other? When are we going to realize that the only way to prevent such massive losses going forward is to teach people some basic economics, and how to live within their means?

Unless you're Biz Markie, Dave Chappelle, or a "wow, your life sucks" guest or host on a daytime talk show, please resist the urge to say "Oh snap." Cringed when I heard it, and looks even worse in the transcripts.

An Open Letter from the FED

Fellow Financial Cronies:

I think that people who work hard to acquire skills whether it be science, medicine, skilled trades, art, or anything with a tangible product, are darn fools. After all, these people work hard for their money. Why would anybody, except an ignorant fool, want to work harder than necessary? Consider an economist - like me. I get paid the big money to be nothing more than a sack full of baloney. I don't to have to produce a darn thing. Not even a few meaningless breaths of moral suasion. I'm never even right about anything. Yet, I can afford to throw the average doctor in the trunk of my car and send it to the junk yard.

There is another reason why people who produce value added are stupid. Take Wall Street for instance. Engineers and scientists, inventors and industrialists all contributed telephones, computers, and electric appliances that enable my friends on Wall Street to steal money from whomever they wish including their foolish enablers. Now I ask you, how can a Nation feign righteous indignation over that which they themselves are responsible for creating? If you gave a gun to a mass murderer what would be the expected result?

Thirdly, I want to express my disdain for these absurd notions that my banker buddies have some ridiculous intangible civic fudiciary responsibility. In fact, my friends at Fraudman and Sachs have asked to press for tort law repeal. There is a tremendous potential profit to be realized from say, an armed robbery division. Or a fraud products group. How about an identity theft division at Fraudman and Sachs? Sounds good to me.

All of these ideas are capable of moving cash out of the accounts of hard working foolish and stupid taxpayers, and into the coffers of the kind of people I think are more deserving of wealth. After all if you know how to produce something you have been born with an unfair advantage over people whose only skill is lying. These are the kind of people I have been charged to protect.

No law will ever be allowed to endanger my skill challenged friends in banking and on Wall Street or my name isn't Ben Bumnanke.


Ben Bumnanke

Several years ago NPR covered a story about how a gang of drug dealers/murderers/kidnapers terrorized the people of a certain Central American country. This gang daily inflicted crimes on the people seemingly with impunity. The government was dysfunctional and fearful and the police were either afraid or bribed by the gang. Finally, the people had had enough. They got together, captured a known gang member/murderer and executed him. Then, they did it again, and again, and again. Soon, they were not living in terror anymore, and the rest of the gang left the area. They could enjoy life again. They called it "limpiar social", or soial cleansing. Regardless of anyone's opinion. it worked. We kind of have a parralel, here in this coutry. We have a government that is dysfunctional, so big it can't get out of it's own way, and somewhat corrupt. We have a gang, rather a "Cartel" that has robbed the middle and lower wage earners for decades and continues to do so today as I write this. They would think it great fun to put every one of us in a homeless shelter while they pass out their big bonuses for one another. Our government is afraid to address them about it. This "Cartel" is, yes, CEO's and executives of large lending institutions. They have shown themselves to be the enemies of the middle and lower wage earners. The government is not going to do anything. Is it time for "limpiar social" here?

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