Goldman Sachs

17Apr10

The government has gone completely schizo.

I mean, are you serious?  I can only conclude that the government is out to maximize pain.

First, the government SUCCEEDS in a bizarre bailout/reflationary strategy.  This strategy had a low to moderate probability of success and was the policy equivalent of moving “all-in.”  So, then, after succeeding, and in the process defiling everyone’s vision of government by getting into bed with the banks (recall that Obama’s visitor’s log is a virtual Who’s Who of Wall Street…http://www.msnbc.msn.com/id/33556933/ns/politics-white_house/), the government now looks like it will now morph into a particularly vicious form of the scorned lover.

I find myself in a strange position…. Although I’m not a defender of the big banks, I think that given the strange strange road we have followed thanks to Paulson/Bernanke/Geithner, we now have to defend the big banks.  We chose the cynical model of running the country and now we have to go with it.  To turn back at this point is suicide!

The writing is one the wall here…. we have many more civil suits coming against all the banks.  We will have public anger that will shift the ring from the regulatory sphere to the legislative sphere (giving Barney Frank and Chris Dodd even more power over our lives; we should all just give up).  We might well see a gap down in the markets over the next few months (the banks engineered the reflation and now we are going to attack them??).   I see us revisiting the psychological lows of March 09 some time next year.

Brandon

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2 Responses to “Goldman Sachs”

  1. 1 Mark

    Agree with you that this is probably a much bigger deal than just an isolated case of fraud. Also think a gap down is likely.

  2. I’m not an economist nor do I even have a strong background in finance so take that fwiw.

    I am not surprised that government action has seemed confused. It’s like people were allowed to play with fire and people didn’t want to stop them because so many people were having fun. Then it got out of hand and the whole country was engulfed in flames and nobody was equipped to fight it but they had to do something.

    At the time the bailout was being pitched the only person making sense to me was then CBO Director Peter Orszag.

    It looked like short term cash flow would stop and businesses would start to fail.

    So we prop up the banks and for the most part they continue to do well for the most part.

    The promise that helping Wall St will in turn help Main St didn’t seem to happen.

    Unemployment is still high and many small businesses in my area have closed or are still struggling.

    In my state (NJ) there was a recent scandal involving a number of diners. The economic downturn seems to have hit them hard and they must have had a hard time paying expenses and wound up having to borrow money.

    They wound up going through loan sharks and when they had trouble paying the inflated interest they were persuaded into stealing credit card information to commit fraud.

    Given a choice I think the diner owners would have preferred traditional short term financing from a reputable source. The only conclusion I can make is that banks weren’t willing to provide it.

    It makes the Wall St/Main St relationship seem less like the symbiotic one that was portrayed and more parasitic. (Side note: I really hated frequently hearing Wall St/Main St in the press and I’m about to puke typing it here.)

    People think something needs to be done and the gov’t needs to look like it’s doing something.

    Over the past 10 years Goldman seemed to make all the right moves. Getting in, out and reversing strategy at just the right time. Then they get some pretty nice perks when the s*** hits the fan while their former CEO is at the reigns of the Treasury.

    I just found your site and don’t know if you’ve addressed it before but do you have any thoughts on the best way to fix this whole mess given everything that has happened?


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