Goldman, Sachs

Is anyone really surprised that Goldman Sachs, the Wall Street icon, is accused by the SEC of playing both ends against the middle? Isn’t that what brokerage houses do? They find a buyer and a seller and they make money from one or both.

Goldman Sachs is also currently being investigated for its involvement in helping the Greek government disguise the extent of its financial problems from the E.U. and others. Governments around the world are looking to make sure that the economic collapse that almost happened in recent years is not repeated, and Goldman stands right at the centre of this tempest.

The bigger question, and one that will likely never be answered, is: did Goldman Sachs executives play both ends against the middle when its former executives advised Presidents, and Congress on deregulation.

Robert Rubin, who was with Goldman Sachs for over 25 years, became Secretary of the Treasury in Bill Clinton’s administrations.

George W. Bush appointed Goldman chairman Henry Paulson as HIS Secretary of the Treasury.

Both Secretaries of the Treasury advised the administrations they represented to deregulate financial institutions as much as possible. Did these administrations have a clear understanding of the reach and magnitude of derivatives and other vehicles to be used in this new marketplace? Apparently not, if you ask former President Clinton.

He has recently stated that he was wrong to follow the advice of Treasury Secretaries Robert Rubin and Lawrence Summers about deregulation and derivatives. "I think they were wrong and I think I was wrong to take" their advice, Clinton said in a recent interview. Interesting words coming from a former President with Clinton’s intellect.

Clinton said that the argument he was given was that derivatives didn’t need transparency because they were "expensive and sophisticated and only a handful of people will buy them and they don’t need any extra protection," "The flaw in that argument", Clinton said " was that first of all, sometimes people with a lot of money make stupid decisions and make it without transparency."

Well we all know how that turned out. Clinton went on to say: "Even if less than 1 percent of the total investment community is involved in derivative exchanges, so much money was involved that if they went bad, they could affect 100 percent of the investments."

So do we need better controls on our financial institutions, or leaders that do not have a vested interest in the marketplace they are affecting?

What is the old saying about the "Lunatics running the asylum"? Hopefully we will learn something things from this whole experience, but I doubt it. Not so long as the people in charge can make money regardless of whether their advice is right or wrong.