Professor Elam

Friday Feb 12 2010

Tonight on the PBS NEWSHOUR, business and economics correspondent Paul Solman takes a look at GOLDMAN SACHS and how they’ve made a profit over the past several years.  Solman explores whether Goldman Sachs is an investment bank "doing God's work," as CEO Lloyd Blankfein claims, or actually a hedge fund. Solman looks at the issue and practice of front-running at the investment bank, and risk management.

From the piece:

PAUL SOLMAN: So when a Republican friend of mine who used to be in the Treasury Department says that Goldman Sachs is a hedge fund masquerading as a bank, that’s true?

DAVID STOCKMAN (President Reagan’s budget director who went to Wall Street in the mid-'80)s: Absolutely true.

*******
Lloyd BLANKFEIN: What we do is risk management. Because we had this risk, because we were accumulating positions which, by the way, we acquired from clients who want to sell them to us, we have to go out ourselves and provide and source the other side of the transactions so that we can manage our risk. These are all exercises in risk management.

ANGELIDES: Well, I'm just going to be blunt with you. It sounds to me a little bit like selling a car with faulty brakes and then buying an insurance policy on the buyer of those cars, // pension funds which have the life savings of police officers, teachers…
BLANKFEIN: These are the professional investors who want this exposure.

A & M Students

I have assigned a paper for next Wed Feb 17 on just this topic, I suggest you watch this broadcast, I have asked for a transcript but do not know if we will receive one.