Replies to post #170423 on Tornado Alley (PROG)

[rooster]

Jake Siewert, former counselor to Treasury Secretary Timothy Geithner and press secretary at the end of the second Clinton administration, has landed at Goldman Sachs, where he will be a managing director and head of global corporate communications.

Siewert is expected to inherit the portfolio of Lucas van Praag, a long-time Goldman executive who ran the public relations department and developed a reputation for his sharp wit and barbed emails to reporters he believed had misrepresented the bank. Van Praag is expected to leave within weeks.

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Siewert will undoubtedly take some criticism for taking part in the “revolving door” between Washington and Wall Street. Several senior White House officials, including current Chief of Staff Jack Lew and former Chief of Staff Bill Daley joined the White House from big banks — Citigroup and JPMorganChase respectively.

(Also on POLITICO: Pay freeze proposed for lawmakers)

Some on Wall Street have criticized the Obama administration for publicly castigating the banking industry while hiring many of its executives.

Siewert previously worked in mergers and acquisitions at Alcoa before returning to Washington to work for Geithner. His family never left New York. Geither is also expected to leave the administration and return to his family in New York after the fall election, regardless of the outcome.

17



Read more: http://www.politico.com/news/stories/0312/73946.html#ixzz1p74HZk2r

[StephanieVanbryce]

Goldman Sachs Related Humor

By Barry Ritholtz - March 14th, 2012, 12:00PM

Some amusing items circulating Trading Desks today:



Source: FT Alphaville


Source: Business Insider

~~~


Source: Flickr


Source: Daily Bail

http://www.ritholtz.com/blog/2012/03/goldman-sachs-humor/

[StephanieVanbryce]

A Goldman Memo Responds to Smith's Op-Ed

Live Blog: Reacting to Goldman Executive’s Resignation Letter
http://dealbook.nytimes.com/2012/03/14/goldman-executive-resigns-via-public-letter/

The LIVE BLOG is GREAT! ..;)

1:28 P.M. Goldman Stock Is Down


Goldman's stock is down more than 3 percent today, to $120.36 a share in afternoon trading. Overall bank stocks are higher after the Federal Reserve said yesterday that 15 of the 19 largest financial firms had passed a "stress test" and had enough capital to withstand a recession.

12:36 P.M. A Goldman Memo Responds to Smith's Op-Ed

DealBook has received an e-mail from a Goldman representative responding to Mr. Smith's Op-Ed article.

In a message to the company's employees, Mr. Blankfein and Mr. Cohn write that "it is unfortunate that an individual opinion about Goldman Sachs is amplified in a newspaper and speaks louder than the regular, detailed and intensive feedback you have provided the firm and independent, public surveys of workplace environments."

You can read the complete letter below.

March 14, 2012

Our Response to Today's New York Times Op-Ed

By now, many of you have read the submission in today's New York Times by a former employee of the firm. Needless to say, we were disappointed to read the assertions made by this individual that do not reflect our values, our culture and how the vast majority of people at Goldman Sachs think about the firm and the work it does on behalf of our clients.

In a company of our size, it is not shocking that some people could feel disgruntled. But that does not and should not represent our firm of more than 30,000 people. Everyone is entitled to his or her opinion. But, it is unfortunate that an individual opinion about Goldman Sachs is amplified in a newspaper and speaks louder than the regular, detailed and intensive feedback you have provided the firm and independent, public surveys of workplace environments.

While I expect you find the words you read today foreign from your own day-to-day experiences, we wanted to remind you what we, as a firm - individually and collectively - think about Goldman Sachs and our client-driven culture.

First, 85 percent of the firm responded to our recent People Survey, which provides the most detailed and comprehensive review to determine how our people feel about Goldman Sachs and the work they do.

And, what do our people think about how we interact with our clients? Across the firm at all levels, 89 percent of you said that that the firm provides exceptional service to them. For the group of nearly 12,000 vice presidents, of which the author of today's commentary was, that number was similarly high.

Anyone who feels otherwise has available to him or her a mechanism for anonymously expressing their concerns. We are not aware that the writer of the opinion piece expressed misgivings through this avenue, however, if an individual expresses issues, we examine them carefully and we will be doing so in this case.

Our firm has had its share of challenges during and after the financial crisis, but your pride in Goldman Sachs is clear. You've not only told us, you have told external surveys.

Just two weeks ago, Goldman Sachs was named one of the best places to work in the United Kingdom, where this employee resides. The firm was the highest placed financial services company for the third consecutive year and was the only one in its peer group to make the top 25.

We are far from perfect, but where the firm has seen a problem, we've responded to it seriously and substantively. And we have demonstrated that fact.

It is unfortunate that all of you who worked so hard through a difficult environment over the last few years now have to respond to this. But, our response is best demonstrated in how we really work with and help our clients through our commitment to their long-term interests. That priority has distinguished us in the past, through the financial crisis and today.

Thank you.

Lloyd C. Blankfein
Gary D. Cohn

http://dealbook.nytimes.com/2012/03/14/goldman-executive-resigns-via-public-letter/

[StephanieVanbryce]

Why I am leaving the Empire, by Darth Vader


'I no longer have the pride, or the belief'

14-03-12

TODAY is my last day at the Empire.

After almost 12 years, first as a summer intern, then in the Death Star and now in London, I believe I have worked here long enough to understand the trajectory of its culture, its people and its massive, genocidal space machines. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.

To put the problem in the simplest terms, throttling people with your mind continues to be sidelined in the way the firm operates and thinks about making people dead.

The Empire is one of the galaxy's largest and most important oppressive regimes and it is too integral to galactic murder to continue to act this way. The firm has veered so far from the place I joined right out of Yoda College that I can no longer in good conscience point menacingly and say that I identify with what it stands for.

For more than a decade I recruited and mentored candidates, some of whom were my secret children, through our gruelling interview process. In 2006 I managed the summer intern program in detecting strange disturbances in the Force for the 80 younglings who made the cut.

I knew it was time to leave when I realised I could no longer speak to these students inside their heads and tell them what a great place this was to work.

How did we get here? The Empire changed the way it thought about leadership. Leadership used to be about ideas, setting an example and killing your former mentor with a light sabre. Today, if you make enough money you will be promoted into a position of influence, even if you have a disturbing lack of faith.

What are three quick ways to become a leader? a) Execute on the firm's 'axes', which is Empire-speak for persuading your clients to invest in 'prime-quality' residential building plots on Alderaan that don't exist and have not existed since we blew it up. b) 'Hunt Elephants'. In English: get your clients - some of whom are sophisticated, and some of whom aren't - to tempt their friends to Cloud City and then betray them. c) Hand over rebel smugglers to an incredibly fat gangster.

When I was a first-year analyst I didn't know where the bathroom was, or how to tie my shoelaces telepathically. I was taught to be concerned with learning the ropes, finding out what a protocol droid was and putting my helmet on properly
so people could not see my badly damaged head.

My proudest moments in life - the pod race, being lured over to the Dark Side and winning a bronze medal for mind control ping-pong at the Midi-Chlorian Games - known as the Jedi Olympics - have all come through hard work, with no shortcuts.

The Empire today has become too much about shortcuts and not enough about remote strangulation. It just doesn’t feel right to me anymore.

I hope this can be a wake-up call. Make killing people in terrifying and unstoppable ways the focal point of your business again. Without it you will not exist. Weed out the morally bankrupt people, no matter how much non-existent Alderaan real estate they sell. And get the culture right again, so people want to make millions of voices cry out in terror before being suddenly silenced.


http://www.thedailymash.co.uk/index.php?option=com_content&task=view&id=5007&Itemid=81

[fuagf]

Reform groups use Goldman critique to push for tougher rules
By Peter Schroeder - 03/14/12 04:23 PM ET

Advocates for tough implementation of financial reform are saying that a head-turning op-ed from a former employee of Goldman Sachs proves the need for strict rules on the financial sector.

In a blistering piece published Wednesday by The New York Times, .. http://www.nytimes.com/2012/03/14/opinion/why-i-am-leaving-goldman-sachs.html?pagewanted=2 .. Greg Smith announced his resignation as an executive director at the firm, while offering a lengthy takedown of what it has become. He argued that under current leadership, Goldman had placed its own profit-hunting ahead of the well-being of its clients, who he said were called "muppets" behind closed doors.

"I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients," he wrote. "It’s purely about how we can make the most possible money off of them."

Groups pushing regulators to employ strict rules for Wall Street used the op-ed to reiterate their case, especially as it pertains to one of the most controversial aspects of the law.

Americans for Financial Reform issued a statement saying Smith had "laid bare" problems that "remain pervasive at our largest banks." The proper prescription? Tough implementation of the "Volcker Rule."

That key piece of Dodd-Frank is intended to prevent "proprietary trading" by banks, which are trades made purely for the profit of the firm and not at the behest of clients. And AFR says it is "aimed at precisely the problems Mr. Smith describes at Goldman Sachs," calling on regulators to issue a strong proposal implementing it.

"Mr. Smith’s statement today, along with the mountains of evidence from the financial crisis, demonstrates yet again how much we need a Volcker Rule that works," the group said.

Regulators have been swarmed by interested parties looking to pull them one way or another on the rule, which could reshape how many Wall Street firms do business. The rule-writers are struggling to come up with a detailed approach that curbs the risky behavior targeted by the rule while still permitting legitimate actions intended to maintain a healthy market.

That tall order was made apparent when regulators took an original crack at drafting the rule. The proposal offered in October spanned more than 300 pages, and asked the public to weigh in on roughly 1,300 different questions how about the matter should be handled.

The public took that request to heart, inundating regulators with more than 17,000 comments. Several regulators have said that hefty volume likely means the rule will not be finalized by the July deadline laid out in the law.

Goldman was one of a litany of financial firms to provide its opinion to regulators, warning that the existing proposal could hinder markets and needed to be fundamentally reworked so the bank can continue to meet its clients' needs.

"Without substantial revisions, the proposed rule will define permitted market making-related underwriting and hedging activities so narrowly it will significantly limit our ability to help our clients," wrote John F.W. Rogers, Goldman Sach's chief of staff.

Smith offered a different take in his op-ed regarding Goldman's treatment of clients.

"It makes me ill how callously people talk about ripping their clients off," he wrote.

The liberal Public Citizen used the op-ed to push back against "a barrage of self-serving industry comments," noting that Goldman alone sent two separate letters and visited with regulators six times.

"Regulators should put Smith’s candid and brave words on the top of any analysis about how best to reform Wall Street," said Bartlett Naylor, a financial policy advocate for the group.

For its part, Goldman heads responded to Smith's claims by saying they "do not reflect our values, our culture and how the vast majority of people at Goldman Sachs think about the firm and the work it does on behalf of our clients."

"In a company of our size, it is not shocking that some people could feel disgruntled," wrote chief executive Lloyd Blankfein and President Gary Cohn in an internal memo to employees that was published in The New York Times. "But that does not and should not represent our firm of more than 30,000 people."

http://thehill.com/blogs/on-the-money/banking-financial-institutions/216095-reform-groups-use-goldman-takedown-to-push-for-tough-wall-street-rules

[F6]

Goldman Sachs’s long history of duping its clients

By William D. Cohan, Published: March 16, 2012

Greg Smith doesn’t know the half of it.

Smith, now the most famous former Goldman Sachs derivatives salesman on the planet, went off on his former employer [ http://www.nytimes.com/2012/03/14/opinion/why-i-am-leaving-goldman-sachs.html (the post to which this is a reply)] in the opinion pages of the New York Times this past week — much to the amazement of nearly everyone — because he claimed that during his 12years at the firm, the ethics and morals of his co-workers deteriorated so dramatically that he just couldn’t take it anymore.

“I can honestly say that the environment now is as toxic and destructive as I have ever seen it,” he wrote. “To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money.”

Guess what, Greg? You didn’t do your homework about the firm where you worked for more than a decade and happily took home one bonus check after another. Goldman Sachs has been in and out of trouble throughout its 143 years — chiefly because it chose to put its own interests before those of its clients. What appeared to be a revelation to Smith was actually available to anyone who looked for it, buried deep within Securities and Exchange Commission and court records. Smith could have saved himself grief if he had only used his Stanford education to examine Goldman’s DNA before crossing its threshold.

There are numerous examples of Goldman putting its own interests first. But one will suffice: the June 1970 bankruptcy of Penn Central Transportation Company, the nation’s largest railroad.

At the time, Penn Central operated 20,530 miles of track in 16 states and two Canadian provinces and provided 35 percent of all railroad passenger service in the United States. The company also had substantial real estate holdings, including Grand Central Terminal in New York, along with much of the land on Park Avenue between Grand Central and the Waldorf-Astoria hotel. Nevertheless, Penn Central ended up defaulting on $87 million of its short-term unsecured debt — known in the industry as “commercial paper” — and Goldman was at the epicenter of its financial difficulties.

In 1968, after years of being shut out of doing business with many of the nation’s railroads — in large part because it was a Jewish-owned firm — Goldman won the opportunity to underwrite Penn Central’s commercial paper, widely seen as among the safest short-term investments. For large fees, Goldman sold the paper to its clients, including big companies such as American Express and Disney, and smaller ones such as Welch’s Foods, the grape-juice maker, and Younkers, a Des Moines-based retailer. Welch’s and Younkers, particularly, counted on the fact that Goldman told them that the Penn Central paper was safe and could be easily redeemed. Welch’s invested $1 million — some of it payroll cash — and Younkers invested $500,000, both at Goldman’s recommendation.

After Penn Central filed for bankruptcy, an SEC investigation discovered that Goldman had continued to sell the railroad’s debt to its clients at 100 cents on the dollar — even though, by the end of 1969, the firm knew that Penn Central’s finances were deteriorating rapidly. Not only was Goldman privy to Penn Central’s internal numbers, it also heard repeatedly from the railroad’s executives that it was rapidly running out of cash.

According to the SEC, Goldman “gained possession of material adverse information, some from public sources and some from nonpublic sources indicating a continuing deterioration of the financial condition of the [railroad]. Goldman, Sachs did not communicate this information to its commercial paper customers, nor did it undertake a thorough investigation of the company. If Goldman, Sachs had heeded these warnings and undertaken a reevaluation of the company, it would have learned that its condition was substantially worse than had been publicly reported.”

But, according to the SEC, while Goldman did not share the bad news with its customers and continued to sell them the increasingly squirrelly Penn Central commercial paper, it did use the public and nonpublic information to protect itself and its partners from having any of the paper on their books when the music stopped. After all, back then, Goldman was a private partnership with only its partners’ capital at risk, not that of outside investors, like today.

By the beginning of February 1970, Goldman had $10 million worth of Penn Central’s commercial paper on its balance sheet, some 20 percent of Goldman’s $50 million in capital. Losing 20 percent of its capital would be devastating and would jeopardize Goldman’s ability to stay in business — because, as we learned so clearly in 2008, once customers question a securities firm’s ability to make good on its obligations, a bank run can materialize overnight.

Goldman’s partners decided that they could not take that risk. On Feb. 5, 1970, the very day the firm received Penn Central’s latest dismal numbers, it demanded that the railroad buy back Goldman’s $10 million inventory of its commercial paper at 100 cents on the dollar, even though it was worth far less at that point. None of Goldman’s customers were made a similar offer, nor did the firm tell them that it had taken care of itself while leaving them to suffer the vicissitudes of Penn Central’s rapidly deteriorating fortunes — making companies such as American Express, Disney, Welch’s and Younkers some of Goldman’s original “muppets,” as Smith might say.

“Most customers believed that Goldman, Sachs maintained an inventory in all commercial paper which [it] offered for sale,” according to the SEC report. “Many who purchased the company’s paper after February 5, 1970, looked to the fact that Goldman, Sachs had an inventory of the company’s paper as assurance that Goldman, Sachs felt the paper to be credit worthy.”

The SEC sued Goldman civilly as a result of its behavior in selling Penn Central’s commercial paper, and the lawsuit was quickly settled, with the firm neither denying nor admitting guilt.

After Penn Central filed for bankruptcy, Goldman faced an existential threat as client after client sued the firm for selling them the questionable commercial paper. “Everyone hunkered down,” George Doty, a former Goldman partner, told me. “We had a couple of difficult years.”

The firm was able to settle many of these lawsuits for pennies on the dollar. But several suits went to trial, including one brought collectively by Welch’s, Younkers and C.R. Anthony, another Midwestern retailer. In their complaint, they charged Goldman with “fraud, deception, concealment, suppression and false pretense” in the sale of the commercial paper to them. They claimed that the firm had “made promises and representations as to the future which were beyond reasonable expectations and unwarranted by existing circumstances,” and had made “representations and statements which were false.”

Incredibly, Goldman thought it could win the lawsuits and allowed them to go to trial, where much of the firm’s dirty laundry was aired. In the end, it lost the suit brought by the three companies and paid the plaintiffs 100 cents on the dollar, plus interest.

More important, the firm’s partners were petrified that with more than $80 million in potential claims against it and only $50 million in partners’ capital, continued lawsuits could put Goldman out of business, taking everything the partners had earned over the years with it.

“There was real fear that the liability for the Penn Central lawsuits could put the firm under,” Robert Rubin, a former co-senior partner at Goldman and a former Treasury secretary, told me. (Rubin became a partner at the firm in December 1970.) “People were really deeply worried that the firm and their net worths were going to be gone. They were surprised by the dangers lurking in the firm’s commercial paper business. They weren’t traumatized, but they were deeply worried. Deeply worried.”

In the end, the firm squeaked through the crisis, thanks to a combination of good luck and an assortment of insurance payments and settlements. It also held on to the Penn Central commercial paper it took back from its clients through the company’s bankruptcy until it regained its value.

Anyone who watched the 11-hour evisceration of Goldman’s top executives by Sen. Carl Levin’s Permanent Subcommittee on Investigationsin April 2010 will immediately recognize similar greed and self-dealing in the Penn Central incident as in the months leading to the 2008 financial crisis, when Goldman made a huge bet against the mortgage market in December 2006 — netting the firm $4 billion in profit — while it continued to sell mortgage-backed securities to its customers at 100 cents on the dollar. Only the amounts were different: millions at stake in 1970 vs. billions in 2007.

So, by the time Greg Smith started picking up on Goldman’s duplicitous behavior, the firm’s culture had been long established. What took him so long to figure it out? Goldman’s culture is no different now than in 1970 — or even in 1928, when it created the Goldman Sachs Trading Corporation, a notorious Ponzi scheme(that’s a whole different story).

Perhaps Smith’s youthful enthusiasm to join Goldman Sachs and become part of Wall Street’s elite blinded him to the firm’s history. For all the venom he has now focused on Goldman, he probably drank the Kool-Aid for most of his time there and still seems convinced that it had been a unique and special place — a place to which he could recruit young talent — until the firm’s values only recently eroded.

In that misconception, he has not been alone. Presidents of both parties have been similarly blinded by the Goldman mystique, appointing Treasury secretaries with Goldman pedigrees, to say nothing of various White House chiefs of staff and officials throughout the federal government.

The shocking thing about many Goldman Sachs employees — including Smith, apparently — is that they actually think the firm intends to live by the 14 principles that former partner John Whitehead, now 90 years old, sketched out on a yellow pad of paper one Sunday afternoon a generation ago. Whitehead said he wanted to emphasize what made Goldman a “distinctive” and “unique place to work” without “sounding too schmaltzy.”

Principle No. 1: “Our clients’ interests always come first. Our experience shows that if we serve our clients well, our own success will follow.”

But some Goldman executives, perhaps more cynical, have seemed to understand well that the truth about the firm does not resemble its public relations material. As for putting clients first, former Goldman partner Pete Briger used to say around the trading desk, “Yeah, and when we do, make no mistake about it, it’s a business decision.”

[e-mail]

William D. Cohan, a columnist for Bloomberg View, is the author of “Money and Power: How Goldman Sachs Came to Rule the World [ http://www.amazon.com/gp/product/0767928261 ].”

© 2012 The Washington Post

http://www.washingtonpost.com/opinions/goldman-sachss-long-history-of-duping-its-clients/2012/03/15/gIQAVlu3GS_story.html [with comments]