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The holes in Goldman's Greek defence

Robert Peston | 08:09 UK time, Tuesday, 23 February 2010

Goldman Sachs' statement on its financial deals with Greece, which made the debt of this financially stretched nation seem smaller than it actually was, will not - I think - silence the many critics of the world's most successful investment bank.

In a series of deals, Goldman did two things for Greece.

During December 2000 and January 2001, it "swapped" some of Greece's Yen and Dollar debts into euros, using a "historical implied foreign exchange" rate rather than the market rate. In other words, it used invented exchange rates, rather than market rates, whose effect was to make it seem that Greece's liabilities in its own currency were less than was actually the case.

Second, Goldman took on responsibility for paying the coupon - or fixed rate of interest - on a newly issued Greek bond, and received "cash flows based on variable interest rates". Now, this is a rather opaque statement, but it implies that Greece sacrificed the certainty and comfort of fixed rate interest payments for variable ones.

So what was the effect of all of this?

Well Goldman say the deals "reduced Greece's foreign denominated debt in euro terms by €2.367bn and - in turn - decreased Greece's debt as a percentage of GDP by just 1.6 per cent, from 105.3 per cent to 103.7 per cent".

Okay, so far, so factual.

What are Goldman's justifications for entering into transactions whose primary purpose was to make it look as though Greece's indebtedness was smaller than it actually was?

Well, there seem to be three.

First, it suggests that everyone was at it. Goldman says "Greece entered into a series of hedging agreements designed to transform foreign debt into euro, a common practice by many European member states with foreign debt outstanding".

Why single out Goldman and Greece, if loads of other banks and EU countries were playing the same game, or a similar one?

Second, Goldman says that "the Greek government has stated (and we agree) that these transactions were consistent with the Eurostat principles governing their use and application at the time". Or to put it another way, they did not breach the European Union's accounting rules of the time.

And third, the deals "had a minimal effect on the country's overall fiscal situation". As Goldman points out, in 2001 Greece's debt to GDP ratio was 103.7 per cent of GDP with a value of $131bn. In 2008, Greece's national debt was 99 per cent of GDP with a value of $357bn.

In that context, deals that reduced the appearance of Greece's debt by €2.367bn - or $3.2bn at current exchange rates (as opposed to "historical implied" ones) - seems a drop in the ocean, neither here nor there.

However, there does seem to me to be a gap in Goldman's explanations and justifications - which is that they do not address the question of whether the deals were the right thing for a firm of its size and reputation to be doing.

Yesterday, one of Goldman's managing directors, Gerald Corrigan - the former president of the New York Fed - told British MPs that "with the benefit of hindsight . . . the standards of transparency could have been and probably should have been higher", in respect of such transactions.

But that seems to shift the blame to regulators who created a loophole; it's not an examination of Goldman's corporate conscience.

And here, I think, is what will concern those politicians and regulators who are currently wrestling not only with the narrow question of how to ensure that European countries borrow only what's prudent, but are also contemplating a redesign of the financial system to prevent a repetition of the kind of banking crisis we saw in the autumn of 2008.

Goldman's Greek defence carries the following momentous implication (albeit one that many will say is blindingly obvious): Goldman is in effect saying that banks will always go for the seemingly profitable deal, unless they are formally prohibited from doing so; and that it's naive to expect them to do the "right thing", in a nebulous ethical sense, unless they are obliged to do that right thing.

Which may reinforce the case of those - like the US president - who argue that the only safe bank is one that is subject to the tightest possible constraints on what it can do and has been cut down to a safe size.

But don't expect Goldman to say three cheers for that.

Comments

Page 1 of 2

  • Comment number 1.

    If it was legal why are we discussing it? We all know by now how dodgy these Governments are including the main European ones. Goldman Sachs are a shareholder owned bank who need to make profits. Nothing wrong with this so far.
    Just goes to show we are being lied to continuously. The banks used 'accounting rules' to hide things and now it's plain to see the governments are doing the same. Shock horror. Anyone know the size of our own governments off-balance sheet PFI account?

  • Comment number 2.

    "Goldman is in effect saying that banks will always go for the seemingly profitable deal, unless they are formally prohibited from doing so; and that it's naive to expect them to do the "right thing", in a nebulous ethical sense, unless they are obliged to do that right thing."
    Disgraceful. Thats like a theif going into an old granmothers house under false pretences with the view, I'm going to take as much for myself as I can get away with unless someone actually stops me. Are there no depths to which these people wont go, do they have any morals at all?

  • Comment number 3.

    There's another interesting thing: these instruments (sometimes known as 'tilted swaps') were much used by Enron - both for its own financing, and the 'embedded financing' they sold to other energy companies.

    And we know how that all ended ...

  • Comment number 4.

    Mmm...financial "conjuring tricks" on an international scale.
    The outcome of all the financial "re-routing" and mayhem of the last 10 years may be the return of militant trade unions, industrial unrest, and ever stronger communist parties.
    Governments gave bankers a free-hand to do their stuff....result...debt, debt, debt.
    Hopefully all governments can now look back on this period and see the folly of it all.
    Might tighter regulation and smaller banks....Obama is right.

  • Comment number 5.

    It is like the pitcher going to the well until it breaks; with banks in consensus with governments and vice versa bending the rules while playing hide and seek this will fade into the last corners of society making a regulated and controlled acting in concert more and more impossible; decay and break-up of social structures can already be seen and are the normal consequence of such misconduct.

  • Comment number 6.

    Investment bankers seem to have created a world for themselves made of smoke and mirrors. Tools or instruments are being invented to make financial deals possible. The main beneficiary of all this smoke and mirrors seems to be the bankers themselves who make a nice cut no matter what. Regulators puffing and panting behind struggle to keep up and comprehend what’s going on, and quite often simply don’t have the tools to do anything about it. Is it any wonder why we are in such a mess.

  • Comment number 7.

    Back in the old days when rectitude was deemed essential in the transacting and reporting of financial affairs there was a word for all this.

    Now what was that word?

    Ah, yes! The word is `fraud'.

    People got sent to prison for it, if my memory serves me well.

  • Comment number 8.

    So why are we surprised that the bankers are only motivated by profit? Why on earth dont we use the existing network of post offices to provide a no risk basic banking system and let the rest take out insurance to cover their risky dealings. I have had enough of greedy people who care not a jot about their impact on others so long as they get a mega bonus.

  • Comment number 9.

    I guess this conclusion was rather predictable Robert. However whilst Goldmans does not come out well nor do Greece's politicians. It takes two to tango. I have followed the way the Greek economic crisis has unfolded on http://notayesmanseconomics.wordpress.com and feel that this is yet another of the moral hazards that he has mentioned.

    Is there more to come out of the woodwork?

  • Comment number 10.

    Yet another reason to doubt official statistics!

    Apart from the sheer crookery underlying these 'deals' both sides are culpable - we need to seriously see if Goldmans can be forced to repay their profit on the deal as they in effect conspired to defraud the rest of Europe.

    Bring back national exchange control where all deals in currencies are publicly visible and need to be pre-approved as there is no prospect of an international management agreement that stops this organised and legalised 'thefts' and deceits. (Perhaps the threat of this will force the international super banks to come clean.)

    And yes, we must go it alone and not wait for international agreement (as this will never come and that is precisely the way that banks steal money from the poor - i.e. the rest of us)!!!! We must call their bluff.

  • Comment number 11.

    We already know that the bankers are gougers, and now they have shown that (left to thier own devices) they are twisters too.

    The Prez is right - we have to break them down and give them strict commands about what they must and must not do. In short, we have to hobble the banks, without the usual big delay.

  • Comment number 12.

    How can you be critical of these bankers when they (supposedly) are doing "Gods Work" - so they tell us anyway.

  • Comment number 13.

    I heard you on the radio this morning Robert.

    You explained clearly the defense of this was the 'old' expenses defence.

    "It was to the letter of the law, not the spirit"

    Which proves my point exactly. Bankers can't be regulated - you said yourself if they think they can make money then they will do whatever they feel is neccessary.

    Unless the public want to pay for a regulator which is as big as the banking industry itself then I'm afraid regulation is pointless.

    Nationalisation is the only solution. If something is too big to fail, then you have to place it in the hands of the only body which cannot fail.

    The problem is the Government (who would take control) are currently acting in the interests of the same elite - which is why so many people baulk at the idea of it.

    A change of Government (not party) is the only solution. Until that happens there will be no end to the problems.

  • Comment number 14.

    Companies don't have consciences people do. Companies are a way in which a group of people (shareholders) band together, generally to make a profit, sometimes to fulfill a perceived need. That is the bottom line, all the corporate tree hugging in the world is only there as a smokescreen or as a method of achieving an individuals goals without spending his own money (generally in a tax efficient manner).

    As people often don't "see the harm" in their actions we can't expect companies to do so. People can be responsible (but sadly often aren't) a company should only have one raison d'etre to maximise share holder value. All talk of stakeholders is a way to pretend to include customers, and to maximise the benefits of the company executive (either financially or otherwise). The sooner people realise this and laws are enacted to limit damage to the powerless the better.

    Step1. Put a (global) ceiling on market capitalisation(1 Billion for instance) before the company has to split.

    Step2. Remove the tax benefits of debt.

    Step3. Only allow private individuals to own shares. Insurance companies and pension funds will only hold capital and debt. Limited liability partnerships would be banned.

    All 3 steps above are not economically efficient and will never happen.
    Even though they would be massive employment creators.
    But it would be good to try to head in this direction.

    If we got close then we could go back to caveat emptor and jungle commercialism rather than the corporate fascism that we seem to be getting.


  • Comment number 15.

    If all of these accounting ploys are now coming out, what is to come? Which of the other European countries will suddenly find themselves now newly broke owing Goldman millions of currency in fees?

    It does not really bode well........

    On the bright side the bankers spin on this is that they are now honest!!

    NOT

  • Comment number 16.

    Accountants, Lawyers, Bankers; one thing in common, they know all the rules, and none of the ethics.

    I just wonder whether good old Prudence Brown availed himself of the Squid's generous lending terms to help massage UK's deteriorating figures during the downhill journey of the past decade.

    After all, '...it was common practice...'

    Regards,

  • Comment number 17.

    "Goldman's Greek defence carries the following momentous implication (albeit one that many will say is blindingly obvious): Goldman is in effect saying that banks will always go for the seemingly profitable deal, unless they are formally prohibited from doing so; and that it's naive to expect them to do the "right thing", in a nebulous ethical sense, unless they are obliged to do that right thing."

    1) Banks are businesses, not charities. They are obliged to make money for the shareholders. If you want banks to do the 'right thing', don't call them banks and call them something else, like charities.

    2) Don't ever confuse the roles of the regulator and the regulated firms. The regulator is to set the rule and enforce them. The regulated firms are there to make as much business as possible under the regulatory regime.

    It is as simple as that. It ain't rocket science.

  • Comment number 18.

    Is this a storm in a Retsina glass or is there something missing. If this is reason for worry perhaps other highly indebted countries need looking at. Euroland appears to be the land of nod - perhaps in either sense of the word. Do countries as well as banks need close regulation. If Eurostat can miss the Greek fiddle what chance do we have with multinational banks?

  • Comment number 19.

    This reminds me of John Lancaster's excellent recent book, Whoops!
    One of his major themes was that banks tend to view rules as something to be circumnavigated. There are many instances of them doing things that goes completely against the spirit of the law, but manages to stick within the explicit wording of the law.

    Structured Investment Vehicles were one example, which enabled the banks to increase their leverage to levels way above what was technically allowed without actually breaking any rules.

    What can we do about this? I kind of feel like the banks have well and truely got us over a barrel and even our MPs are powerless against them.
    Unless Obama manages to rally a worldwide initiative, I can't see anything changing.

  • Comment number 20.

    just to get a few things clear:

    - the primary purpose of the transaction was a "cross currency swap" which would swap an existing debt of the greek currency out of u.s. dollars (or some other currency) into euros. this is a perfectly legitimate and reasonable thing to do, and indeed something that most governments do when they borrow in a currency that is not their own.

    - what is ethically dubious is that goldman "cheated" on the exchange rates for the swap in a way that allowed it in effect to lend greece more money, but without this extra lending appearing in greece's official eurostat-endorsed debt figures.

    - also, an interest rate swap (switching fixed payments into variable payments) is a perfectly legitimate transaction, but its use in this context is highly questionable because, as robert rightly points out, why would greece want to pay variable interest? i would imagine that the purpose was to reduce greece's current interest payments (because current variable rates were lower than fixed rates), but in the expectation that these variable payments will rise much higher in the future (presumably some time after the next greek election).

    - goldman will not have offered a "eurostat efficient" cross-currency swap to greece for free. they will also have charged some fees (probably reflected in a less favourable exchange rate). these fees would have represented a (small) deadweight loss to greece that would have further increased its hidden indebtedness under the swap.

    - plenty of banks have been doing cross-currency swaps and interest rate swaps for government borrowers, and this is perfectly fine and legitimate. however, what is not perfectly fine and legitimate is when banks find elaborate ways to help greece and others "cheat" on their eurostat debt statistics. and plenty of banks have also been doing this. this cross currency swap is just one method. there are plenty of others well known to the market and to the eurozone goverenments. it is an open secret.

    - a lot of this comes down to politics. if these transactions were an open secret, why was eurostat not investigating them more aggressively? maybe because it knew that many eurozone governments were doing these transactions and it did not feel it had sufficient authority? maybe because these transactions were technically within the rules, so eurostat felt it was safe to turn a blind eye?

    - although this one transaction makes only a small difference to greece's debt statistics, how many other transactions are there out there? and what does the impact of all those other transactions add up to? nobody really knows (although i expect goldman has a good idea, and they have purportedly been among the most aggressive speculators against greece).

    - governments have to be very careful using "regulation" as a solution. if it is regulation of the "you can do x, but you cannot do y" variety, there will be problems. banks thrive on exploiting loopholes in these kinds of regulations. that is where their most profitable opportunities exist. what is more important than the rules is the regulatory culture. in other words, do bankers have a genuine fear that the regulator has teeth and will come after them and punish them for transgressions against the spirit of the law (not just the letter of the law). contrast the lax attitude of financial regulators during the credit bubble with the increasingly harsh attitude of tax authorities towards personal tax evasion. at the moment, it still feels like most bankers just don't get it. and maybe they are right not to.

  • Comment number 21.

    As a shareholder owned bank, aren't Goldman's legally obliged to do the best they can for their shareholders.

    Forgoing legal profits because the bank thinks it needs to be more ethical than the law requires would therefore be illegal.

    Where next? Perhaps we should all pay more than our legal requirement of taxes because we should err on the ethical side! I think not.

  • Comment number 22.

    "1) Banks are businesses, not charities. They are obliged to make money for the shareholders. If you want banks to do the 'right thing', don't call them banks and call them something else, like charities. "

    I am genuinely shocked to see someone advocating this line.

    Does morality really have no place in business now?
    Is it fair for businesses to pour over laws to try and identify loopholes to get around them?

    It reminds me of the drug laboratories in the Netherlands in the 90s.
    As long as they concentrated on only the newest recreational drugs, that the regulators hadn't had a chance to assess yet, they could legally produce drugs more dangerous the ecstasy.

  • Comment number 23.

    20 - well put

    I'm wondering - does anyone know how much of UK overseas debt is in Stirling against other currencies? There has been a few comments about us being able to pay back our debt and various dates of when large repayments are due. The currency of the debt will make a huge difference to how we can service it (eg Stirling can involve the printing presses with the knock on effect of trashing the currency, USD or EUR could be more problematic and may impact interest rates (so inflation/domestic debt implications))

    Or I guess we could hand the lot over to Goldman, on say, May 5th, and have it all magically reduced!!

  • Comment number 24.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 25.

    21 - from the shareholder point of view - shouldn't you look at long term vs short term profits? Would the (old) shareholders of RBS believe that their board had done the right thing with the short term pursuit of profits? Yes, they saw a large increase in share price for a while but if you were a longer term investor you saw a reduction in your return. Which shareholder should you be working for? The short term trader or the long term holder? Different investors will be looking at different returns from THEIR company (eg dividends, capital growth etc) - not all shareholders have the same approach to their investment

  • Comment number 26.

    Following the near total collapse of the global financial system eighteen months ago have the banks actually changed their behaviour in any way whatsoever?

    For example, are banks working to unwind their $600Tn CDS positions in a controlled and orderly manner, or have they created more?

    Is the system surviving on the stimuli that world governments have pumped in, and are the banks sucking this out just as quickly as it's pumped in? It looks that way to me.

  • Comment number 27.

    13 - WOTW - the issue we have is that we have a nationalised bank - RBS! (well actually we have a few...)

    A few of the objections to a nationalised bank has been the cost of set-up (it ain't gonna be cheap to set up one) but now we have a complete turnkey operation. The other would be the deemed unfairness of a government supported one against one's that weren't (remember the criticism of NR when it was suddenly deemed a safer place because of the government ownership...) - well that doesn't seem to wash either given that ALL banks appear now to be covered.

    Surely we can just complete the nationalisation of RBS. In terms of the return on investment - can't we sell of the investment banking areas to keep the old style "savings and loan" and the merchant side (eg credit card processing etc). If the big money and value is in the investment side then surely it is worth a lot of money? We could make a lot of the money back on that and the rest wouldn't be lost as even with the bail out of it I assume it would be cheaper to buy than build?

  • Comment number 28.

    # 1. At 08:34am on 23 Feb 2010, tony oxley wrote:

    > If it was legal why are we discussing it?

    This is a good question. In fact, it's what this is all about. There are many things that are legal, but which aren't the done thing. I could fart in an elevator – it's perfectly legal, and it may make me feel a little more comfortable. I could walk down the middle of the corridor because I like the space, and push everybody else to the side. I could shout loudly in the restaurant to get the waiter's attention, irrespective of the disturbance I cause to other diners. All these things are legal, yet they are not done. Ultimately, they would cause me harm too. In the long term, I'd get a black eye.

    So why do banks do legal anti-social acts? These acts cause them harm too, in the long term (e.g. if we get fed up, we'll break them all down, and hobble them). It can only come about if they are greedy, masochistic and sadistic all at the same time!

    Whatever the underpinnings – the world is totally fed up with the legal anti-social acts of greedy fat-cats in Wall Street and its little brother, The City, and we have decided to put a stop to it. Rest assured, it'll do them good in the end.

  • Comment number 29.

    The media, and particularly the public, need to get over (at least) three core things:

    1. We live in a capitalist economy. That means someone takes money from someone else. As long as it's willingly and legal, then it's fine.

    2. Let he who is without sin cast the first stone. Only priests and nuns are supposed to be moral role models. In a democratic society, as long as it's legal, the rest of us can do what we like.

    3. Listening to people does not always mean agreeing. In a democratic society, as long as it's legal, it is possible to take a view that others disagree with and still be right.

  • Comment number 30.

    Perhaps the UK Treasury should now come clean on its tongue in cheek approval of cases that justified procurement using PFI. Objectors within the civil service were told to "shut up" because PFI was the "only game in town."

  • Comment number 31.

    It seems to me that this is all about the dubious ethics that we also saw during the run up to the financial crisis. It might have been a "legal" deal in that it was within the rules, but was it ethical - it does not feel comfortable: see http://tinyurl.com/ygb3ecc

  • Comment number 32.

    22. At 10:38am on 23 Feb 2010, Dave

    Business and ethics rarely mix well.

    The point of a business is to make money and, let's face it, 99.9% of businesses will do that any way they can. Shops will have continual Half Price sales - who has ever paid full price for a sofa at certain shops? Sports clubs and shops will charge as much as possiblwe for a new kit and the kit might change 3 or 4 times a year.

    There are many other examples that could be listed....

    As for the 0.1% that don't - chances are they will not last long

  • Comment number 33.

    Didn't I read that another New York merchant bank (Morgan Stanley I think) has been selling the Greek Government schemes the conceal the level of debt much more recently?

  • Comment number 34.

    # 17. At 10:06am on 23 Feb 2010, spikegifted wrote:

    > 1) Banks are businesses, not charities. They are obliged to make money
    > for the shareholders. If you want banks to do the 'right thing',
    > don't call them banks and call them something else, like charities.

    Well, they certainly didn't do a good job of that. Northern Rock went broke, HBOS went broke, RBS went broke, AIG went broke, Lloyds went broke, Lehmens went broke, Barclays had to borrow from sheiks, Bear Sterns went broke, Dunfermline went broke, Bradford & Bingley went broke, Landbanki went broke, Glitnir went broke, Kaupthing went broke. This is just a few. I havn't even bothered to list the 65 U.S. banks have that become insolvent in the credit. And to list the global bankrupcies would take all day!!


    So, banks are obliged to make money for the shareholders? Yeah, right...

  • Comment number 35.

    All this vitriol is better directed at the Greek government than at Goldman.

    Goldman no doubt were approached by the Greeks and asked to structure the swap. It would normally be a perfectly legitimate transaction, except in this case it allowed Greece to hide debts due to the account rules by which it had to comply.

    Compare with Swiss bank accounts: Who is more at fault, the Swiss banks for providing the privacy that potentially allows dodging of tax, or the tax dodger hiding their wealth?

  • Comment number 36.

    Well done Moderator.

    Absolutely spineless.

    Clearly the Squid has its tentacles in the BBC also.

  • Comment number 37.

    Goldman's into it up to their neck - and they were effectively bailed out by the US taxpayer too.

    Secret AIG Document Shows Goldman Sachs Minted Most Toxic CDOs

    http://www.bloomberg.com/apps/news?pid=20601087&sid=ax3yON_uNe7I

    “It’s almost too uncanny,” Calacci says. “If these banks had insight into the underlying loans because they had relationships with banks, originators or servicers, that’s at the least unethical.”

  • Comment number 38.

    # 26. At 10:50am on 23 Feb 2010, the_fatcat wrote:

    > Is the system surviving on the stimuli that world governments have
    > pumped in, and are the banks sucking this out just as quickly as it's
    > pumped in? It looks that way to me.

    Basically, the bankers are trousering our money as fast as we can print it.

  • Comment number 39.

    29. At 10:58am on 23 Feb 2010, Belgravia Bertie wrote:
    In a democratic society, as long as it's legal, the rest of us can do what we like.
    --------------------------------------
    My expansion of this would be:
    In a democracy, as long as it's legal, we can do what we like. In any society we must accept individual consequences of doing what we like.
    In a society there will always be consequences of offending the majority.

  • Comment number 40.

    Banks are there to make money for the shareholders.

    I think it is crass to particularly blame Goldman Sachs for business activities that 'seem' unethical when their guiding principle must be to maximise profit from transactions and deals that benefit their shareholders - legitimately and within the regulations in force at the time.

    The implied criticism of Goldman Sachs (and for that matter all Banks) should be redirected at the National Bank Regulatorswho have the right to control and manage the behaviours of Banks regardless of shareholder benefit.

    It would be far better to examine the role of the National Bank Regulators, identify their weaknesses and strengths and, perhaps more importantly, identify the problems of government interference in the role of the Regulators in nations such as Greece (and for domestic consumption, right here in the United Kingdom) where the true weakness in the system lies.

    It is my contention that too many former-Bankers are now poachers-turned-Gamekeepers and they are all tainted with the too keen a desire to achieve profit ahead of moral rectitude and so need close governmentt overview. However, more importantly, it is my contention that Governments are all too often attracted to the benefits of huge tax revenue from the Banking System and all too often turn a blind eye to risks of immoral banking processes in order to maximise the tax revenues that they can reap to sow and then blow on extravagant popularity and vote catching political initiatives.

    I draw the conclusion that the fault of Banks making huge profit at the expense of weak national economies is not the fault of Banks or Bankers but blame can be firmly heaped upon the shoulder of the Bank Regulators and their masters, national governments.

    I suspect that the current and previous UK governments have all been guilty of poor behaviours when overseeing the banking industry within the UK - preferring high profit and maximised tax revenue as opposed to more regulatory overview and less tax revenue - allowing moral and ethics to be sacrificed for the large tax take available from the banking industry.

  • Comment number 41.

    Did this mean that Goldman were selling another currency for less than it was worth?

    I still believe that all banks should be allowed to fail AFTER they have insured the depositors total deposits and ensured that their mortgage pot is totally covered with assets and retained capital.

    Then they can play whatever way they like for it won't affect those two areas.

  • Comment number 42.

    # 29. At 10:58am on 23 Feb 2010, Belgravia Bertie wrote:
    > That means someone takes money from someone else. As long as it's
    > willingly and legal, then it's fine... as long as it's legal, the rest of
    > us can do what we like.

    Legality is necessary for a thing to be “fine”, but it isn't sufficient. For example, just because (in Britain, anyway) it's perfectly legal for me to (say) cheat on my wife and hire a prostitute, most people wouldn't say that it is “fine”.

    If bankers insist on operating against us, then we will break them down; and it's their own doing.

  • Comment number 43.

    32. At 11:17am on 23 Feb 2010, yam yzf wrote:
    The point of a business is to make money..... As for the 0.1% that don't - chances are they will not last long.
    ---------------------------
    The important provision here is that the customers must not feel ripped off in the process or they will no longer be your customers.
    Unless of course you are a monopoly or a de facto cartel.

  • Comment number 44.

    To ALL Regulators and Legislators, you should Read, understand and then sign to confirm it's been read and understood, the following Goldman view, "....banks will always go for the seemingly profitable deal, unless they are formally prohibited from doing so; and that it's naive to expect them to do the "right thing", in a nebulous ethical sense, unless they are obliged to do that right thing."

    In case you're still not sure what, "Formally prohibited" means, it means "illegal!" (Not self-regulated or any other similarly worded "guff!)

    The Regulation of banks NEEDS to be made similar to how the rest of the world is regulated and lives, i.e with Legislation, nothing less. (Goldman's words almost seem resigned to accepting this is what is going to happen anyway.)

    I would agree with those that may believe even Legislation might not be enough to get banks to behave. But unless you have legislation as a first step you won't have anything solid to stop bankers wriggling off the hook. Bankers should have taken responsibility for suggesting to their shareholders that $Billion dollar CDO, CDS and Debt securitisation trading was not healthy for their bank, but bottled it, (in-spite of their pay cushion!) It's one of the main reasons I believe bankers deserve to be paid far less, because they lack the skills (and the modicum of courage,) necessary to tell shareholders , "no we can't keep doing ever more of that, it's too risky, especially as we have to use saver's own money as capital."

    Then there's the Sovereign stuff. Well, I would at least like to think that Greece is run much more democratically than Goldmans or Barclays et al. At least the Greeks have a direct say in whether or not they want a government that skews its use of Eurostat principles to massage its debt figures. What ability do U.S. voters have to remove the Goldman Board or in reality the ex-Goldmanites in the U.S Treasury?

  • Comment number 45.


    I posted up a link in an earlier blog regarding the Bank of England paper on the financial bail out cycle (Banking on the State). Simon Johnson and Peter Boone have (re)published a piece on Vox this week that outlines the points.

    http://www.voxeu.org/index.php?q=node/4659

    If you don't want to tackle the full BofE paper then this is really worth a few minutes to read.

    The 'Banking on the State' paper is linked to from that site. A quick look at page 19 is recomendedv to read the conclusions of the BofE's Director of Financial Stability.

  • Comment number 46.

    # 32. At 11:17am on 23 Feb 2010, yam yzf wrote:


    > ... chances are they will not last long

    Like Bear Stearns, Northen Rock, Glitnir, Landesbank, Lehmans, AIG, HBOS, Lloyds, RBS ... and thousands of other around the globe. Bankers aren't businessmen, in the normal sense of the word. They are parasitical leetches, as we all know.

  • Comment number 47.

    It just goes to show; people, governments, etc. all seem to forget - the primary corporate mantra, however it may be glossed over or hidden, is that any corp. has one ultimate responsibility, and that is to the welfare of its shareholders. Be it a bank, financial organisation, supermarket, any quoted company will try to do its utmost to benefit its shareholders, and will only be held back by legislation or major public opprobrium.
    Look at the supermarkets - they drive suppliers out of business. Look at the book trade - the supermarkets and chains insist upon, and get, 80% discounts from publishers. In fact, over 100%, because they charge admin fees and other disguised forms of (you might call it extortion; I couldn't possibly comment...) as well.
    Look at many other major quoted companies for similar examples. One of the latest is Google - many authors and others perceive their latest effort to grab hold of orphan copyright products for their own purposes as an outright infringement of the Berne Convention on copyrights.
    Back to Goldman Sachs and many others - the only time that self-regulation works is in good times, when it's actually unnecessary. regulation, limits, have to be enforced, and the only authorities strong enough to do so are at government level, whether they like it or not.
    Finally, for those who claim that the end justifies the means - that's how Hitler operated. It's wrong, period.

  • Comment number 48.

    29.Belgravia
    ... and I assume you are advocating for a very light touch legal system...

    your argumentative makes no sense whatsoever - and if we end up with more people like you, we would need to have a 'minute per minute' scrutiny of every moves you make (and honestly - what a waste of time...)... You are obviously not able to live in any type of society... at best you can hide in your castle and wait for the next revolution...

    Hopefully, you are a very tiny minority (I can only count you and spikegifted with this deluded view on this blog), completely blinded by your 'faith' (the only way I know to justify the 'stop thinking' attitude of yours..)

  • Comment number 49.

    On "Goldman's corporate conscience": A corporation can't have a conscience. This is not news: it was said by the Lord Chancellor, Sir Thomas Egerton, around 1600, and by Sir Edward Coke, Chief Justice, not much later ...

  • Comment number 50.

    and you were wondering yesterday why the number of individual shareholders has fallen dramatically. the investment banks seem to be in total control . the american president wont rock the boat goldman sachs funded his campaign.are voices can be heard at the forthcoming election vote for a candidate who is not a member of the three main parties there are plenty of choices and show the establishment that we have had enough.

  • Comment number 51.

    13. At 09:46am on 23 Feb 2010, writingsonthewall

    Spivs, all of them, not the kind of folk you'd want marrying into your family.

    I've a serious question. I heard about Prof Sikka at Essex who has suggested a salary max formula of 10 times the median salary.
    I like the idea because it will help reduce the vast inequality in the UK.
    Would a maximum salary help change attitudes and behaviour?

  • Comment number 52.

    29. At 10:58am on 23 Feb 2010, Belgravia Bertie wrote:

    "The media, and particularly the public, need to get over (at least) three core things:

    1. We live in a capitalist economy. That means someone takes money from someone else. As long as it's willingly and legal, then it's fine.

    2. Let he who is without sin cast the first stone. Only priests and nuns are supposed to be moral role models. In a democratic society, as long as it's legal, the rest of us can do what we like.

    3. Listening to people does not always mean agreeing. In a democratic society, as long as it's legal, it is possible to take a view that others disagree with and still be right."


    ...and with that - I'm off to belgravia where I will break into your house and take what is not mine.

    Got a problem? - well I'm not a Nun or a Priest and therefore not a "moral role model"

    Legal? - well I've got news for you - I "listen to the law - but don't agree with it" - I don't believe it's right that I cannot enter your house and steal your TV - even though everyone else thinks it's wrong.

    Welcome to Anarchy.

    (Oh sorry, that's not what you meant? - oh you thought we would apply your principles but follow the laws which are imposed on us without agreement?)

    Very Naieve.

    Another classic "live by my rules and we'll all get along fine" and "Don't worry about inequiality - that's just your envious side"

    Some people are truly living in a different world.

  • Comment number 53.

    If you listened to Robert on the radio this morning, he danced around the phrase "made up" when referring to the interest rate Goldman chose to switch the Greek debt from Yen and Dollars to Euro's.

    This is what you all want to invest in? Is this an environment where anything is certain?

    I'm sure Goldman must have been pulling this off during, or shortly after the Enron scandal.

    I think that sums up the 'morals of banks' - and gives a valid reason why they all need closing down.

    The banks prime concern is resource allocation (through the medium of money) - what use are they if they simply 'make up resources' in order to allocate them?

    Some people realy need to question the part the banks have played in all this. Blaming the Government for the downfall of Capitalism is looking weaker by the day.

  • Comment number 54.

    #34 Jacques Cartier.

    Anyone who has been following news for the past couple of years would have been able to name a few institutions that have met with difficulties during the credit and banking crisis. You have to remember that for every bank that had problems, there is another that managed to void them which you haven't heard of. I agree with you, or anyone who raised the point about banking losses, that some banks have been poorly managed and the losses have been colossal. However, any business has risk. It is a fine balance between maximizing profits and minimizing the probability of total loss.

  • Comment number 55.

    40. At 11:42am on 23 Feb 2010, Menedemus

    When society ceases to function for the benefit of all, a number of institutions and organisations have brought that about.

    What it comes down to is morality on all sides.
    The letter of the law may be one thing, but the intent is, at least to me, what matters.

    We wouldn't allow a chemical company to dump toxins somewhere, keeping it secret for a few years, in order to show a profit and earn those bonuses, leaving the mess for others to clean up years down the line when were are all supping champers on our yachts.....

    In terms of economics and peoples ability to earn a living, this is exactly what is going on. Lives are being economically poisoned.

  • Comment number 56.

    If banks are going to game the system and follow the letter of the law, rather than the spirit, then we are in need of a massive increase in regulatory power.

    And if we are to ever get that far, I can foresee a Sadam/Weapons inspectors style chase, with the banks trying to high their more imaginative practices.

    I disagree so strongly that the leaders of these companies have a dutie to navagate through the rules for shareholders profits.
    My industry is gets a lot of criticism for its practices, as dodgy dealings are frequently made by some of the workers. As a consequence, the board work incredibly hard to make sure that the company has a clear code of ethics that all staff should follow.

    I don't see anything like that in the finance sector.
    All I see is a big game of poker, where the inevitable losers aren't actually aware they were playing.

  • Comment number 57.

    I love this "it may be legal but it is anti-social (lacking in morality) therefore wrong" line of argument.

    Do any of you understand how our (and USA) entire legal system functions?

    The starting point for our entire legal system is that everything is legal unless there is a law to stop it. Now admittedly continental Europe runs on a different system where their code is intended to cover every type of human interaction but it has never been our system and indeed our entire political outlook and our approach to politicians may, arguably, be grounded on the principles behind our legal system.

    Morality underpins a lot of our laws, but there are areas where govts have decided not to interfere. You may not agree with this lack of interference in which case you have the option at general elections to change govts, but unless govt. actively passes a law to stop it then it is legal and that should be the end of the matter. Of course govt can pass a law to stop in the future and if you feel that strongly I suggest you lobby your MP.

    Take a simple, yet at the same time complex, example: tax avoidance is legal tax evasion is not. Now you might say that tax avoidance is immoral but leaving aside the obvious bibical quote of "render unto Caeser..." what HMRC might consider tax avoidance someone else might consider to be entirely normal commercial activity. HMRC would no doubt consider that someone who takes the Channel ferry to stock up on 12 months of booze is effectively a tax avoider because they have done something unusual with the sole purpose of avoiding paying UK tax (in this case VAT) - but of course the normal person simply regards it as a way of getting his/her booze cheaper.

    The point is that what seems to be a simple moral point often appears considerably more complex when looked at more closely.

    The Goldmans/Greece transaction was nothing more than a simple piece of off balance sheet financing. It is not for Goldmans to worry about whether the client is doing this for morally dubious reasons that is for Greece to worry about. If the banker had to decide whether the borrower was acting morally (as opposed to legally) everytime then many transactions would not happen - for example should a bank lend money to a man to buy a flat for his mistress, and of course no PFI deal would now happen

  • Comment number 58.

    40. Menedemus

    agree with most of what you say - as this depicts where we are....

    Now the way forward... Is it even possible to regulate the banks in line with 'capitalism'? (free competition and all...) / the system did allow some pretty scary people to get away with their dubious activities for quite a while. The main train of thought is now: 'A new law/regulation - what can we do to get around it? Can we just ignore it and pay the fine?'....

    So except a monumental increase in the regulatory system and policing (and the cost associated with it) - this cannot be resolved through 'regulations'... it needs a major 'rethink' of what bank/money is...

    Now - we do have in the UK standing in the next election that has the drive to tackle this... (I agree politicians are too happy to profit from them...)?????????
    So it is gonna continue for a while longer... until the general public takes matter in their own hands... (bring back the guillotine!)

  • Comment number 59.

    The problem is the caused by the commonly-held view in banking circles that "if it's not against the regulations then we can do it.". Which, legally speaking, is true. However, the problem with regulations is that they can never be comprehensive enough to compete with the teams of people at banks who's sole job is to find loopholes and ways around regulations. In many ways it's the result of the US-style of prescriptive regulation. These regulations are so easy to circumvent. The UK used to have "principles-based" regulation which was more broad brush - but in the last few years the FSA has been moving more towards the prescriptive end of the spectrum.

    Unless someone can do the impossible and pass and enforce a law which simply states "do no harm to anyone", these problems will recur.

  • Comment number 60.

    41. At 11:47am on 23 Feb 2010, Naomimuse wrote:
    "Then they can play whatever way they like for it won't affect those two areas."

    the main problem - they are playing with money... and it is the only relation to wealth we can use (most of us do not own commodities...) >> so until we give them monopoly money not linked to ours, it will affect us all big time...

    the problem is amplified since 1997 as per the sum of money used from there to 'bangle' (bank gambling) - but do not get fooled by this > the problem was already there before...

  • Comment number 61.

    51. copperDolomite wrote:
    "Would a maximum salary help change attitudes and behaviour?"

    at present - they would just move the extra earning as 'bonuses' / 'expenses' / ... anything they can think of before the regulators....

    I like the idea - but not sure it is workable when you hear about their level of ethic...

  • Comment number 62.

    It is perfectly reasonable for a country to wish to have its sovereign debt denominated in its own currency. Otherwise, it would be subject to possible problems due to exchange rate fluctuations.

    Greece should not have been obliged to use a private company to do this swap, the European Central Bank should have done it.

    Members of the Eurozone are supposed to limit their deficits and consequent borrowing each year. The quid pro quo should be that their debts are denominated in euros and guaranteed by the ECB, which can give an absolute guarantee and prevent speculation in government bonds. This would mirror what the BoE does for the UK government, and those entering the Eurozone should have insisted upon this before giving up their own currencies and central banks.

    The flaw in the Eurozone system is that the limit on deficits was set inflexibly, and soon proved to be unworkable even for countries such a Germany with strong economies. It should be replaced by a flexible system controlled by a committee of experts, working within the ECB and required, like the UK's MPC, to seek to achieve economic targets set by the European Parliament.

  • Comment number 63.

    54. spikegifted

    sorry - It has been demonstrated ALL banks would have failed in a giant domino effect...

    And by the way - your logic is: some banks were not managed properly (ie making huge profits on unsound risk taking')... others are...
    How can you compete with the first ones??? .... the only way is to become one of them (the main argument (from bankers) for the 1997 deregulation....

    so 13 years later - there are no 'other well managed banks' left...

  • Comment number 64.

    # 40. At 11:42am on 23 Feb 2010, Menedemus wrote:
    > blame can be firmly heaped upon the shoulder of the Bank Regulators
    > and their masters, national governments.

    And what about _their_ masters, the voting, taxpaying bailers? Look, there are plenty of vicious bankers around now, trying to deflect the blame. Some of them worked for the likes of Lloyds, Alliance & Leicester, Anglo Irish Bank,Barnsley Building Society ,Bear Stearns,Bradford & Bingley,Catholic Building Society ,Cheshire Building Society, Countrywide Financial,Derbyshire Building Society,Dunfermline Building Society,Fannie Mae and Freddie Mac,Glitnir, HBOS, RBS,IndyMac,Kaupthing Bank, Landsbanki, Lehman Brothers, Merrill Lynch,Northern Rock, Washington Mutual, AIG (+ 60 US banks omited)) etc. etc. etc. The list goes on and on and on.

    They screwed up, Menedemus; they screwed up bad.

  • Comment number 65.

    Averagejoe said "Disgraceful. Thats like a theif going into an old granmothers house under false pretences with the view, I'm going to take as much for myself as I can get away with unless someone actually stops me. Are there no depths to which these people wont go, do they have any morals at all?". That's not the case at all. The thief is committing an iilegal act. Goldman aren't breaking any laws.

  • Comment number 66.

    # 57. At 12:28pm on 23 Feb 2010, Justin150 wrote:

    > I love this "it may be legal but it is anti-social (lacking in
    > morality) therefore wrong" line of argument.

    > Do any of you understand how our (and USA) entire legal system functions?

    I think the point they are making is that it doesn't function, Justin150.



  • Comment number 67.

    I think this says more about governments than banks. Governments are always trying to blame the banks for the financial crisis, but in reality governments are up to the same tricks as the banks. They are all trying to keep debts off the balance sheet and taking huge risks with our money. Blaming the banks is an useful way of diverting attention away from what they are up to. The UK government doesn't seem too good at following rules that it says others should follow. If the government kept their own house in order, perhaps they'd be more beliveable.

  • Comment number 68.

    58. At 12:29pm on 23 Feb 2010, Cedric wrote:
    So except a monumental increase in the regulatory system and policing (and the cost associated with it) - this cannot be resolved through 'regulations'... it needs a major 'rethink' of what bank/money is...


    We could just invent a law that says all deals must be approved. Staff the office with three police accountants and tell the banks 'get in line, bring some sandwiches because it will take some time to investigate'.

    We won't of course, but as a democracy there is no reason why we can't excercise the will of the people rather than putting up with the banks 'navigating' and tax-dodging.

  • Comment number 69.

    No. 52
    ...and with that - I'm off to belgravia where I will break into your house and take what is not mine.

    For novices like this chap: your proposal is not legal. Therefore, the moment you arrive you will be taken away in a police car, if not by the men in white coats...

    The whole point here is that all of us have to suck some things up. Not liking something is not the same as it being illegal. And to the chap who wants an affair, go ahead. I have zero interest. The only person who might be interested is your wife, but probably not if you approach marriage in this way... :)

  • Comment number 70.

    35. At 11:22am on 23 Feb 2010, Tony

    On what basis are you using the term 'no doubt' here, is there some evidence to support this position.

    Either way, these intractable laundering schemes were largely put together by huge global banks and not by governments. The fact that governments get persuaded to use them to remain competitive (or viable) does not make them a good thing.

  • Comment number 71.

    The only time the people will ever be listened to and be able to guide real change is when it effects those in power and with influence.
    It would need people to boycott en masse the upcoming General Election, as it is almost impossible to govern without a proper mandate given by a majority of the people. I think with the recent MP's expenses fiasco they are really worried about this prospect, so perhaps for once the politicians are on the ropes!?
    Perhaps then the people would have a voice and be listened to!?

    There was an interesting piece on Radio 4 this morning comparing today's http://www.bbc.co.uk/programmes/b006s7d6 national debt during this current financial crisis to that of the days of Waterloo. Is worth a listen.

  • Comment number 72.

    57. At 12:28pm on 23 Feb 2010, Justin150

    Much of what you express here is simplistically valid.

    However, your (implied) suggestion that elections provide a means for people to influence change is flawed; there first needs to be an option on the ballot that expresses an alternative view.

    In addition, it is not the job of governments to decide what is legal, that is the role of the judiciary. This tends to fall apart quickly at the international level and, as we know to our huge cost, financial transactions across country boundaries have become rather opaque.

  • Comment number 73.

    Politics and Banking have always been wrapped up together, more so than ever, since the rise of the bond market. I would be interested if anyone can enlighten me on the role of investment banks in handling UK govt gilt issues. I mean do they have the politicians at the end of a barrel, seeing as Govt needs to raise £225 billion this year?

  • Comment number 74.

    #63 Cedric:

    Thanks for point out the obvious mistake. I should have said "for every bank that had problems, there is another that managed those problems better which you haven't heard of".

    My point is that, whether you like it or not, banking is a risky business. Look at the Chinese banks - before they were recapitalized by the state, they were all practically bust. They were all doing things that were socially very useful - propping up inefficient companies by lending (giving) money to them and keeping people employed in those companies. But just hides the problem. Banks in Western capitalist countries don't tend to do that. Instead they lend to companies that have a chance to repay the loans and invest in other things to make money for their shareholders. Ok, they get things wrong from time to time, that's when we have crisis. Just like any other kinds of industries - companies do fail if run badly.

  • Comment number 75.

    I think we need to have a step back from the outrage of bankers and the talk of legal vs social responsibility.

    I work for an IT firm which produces software which aids in automation. Is my firm a leach on society? We produce something which will lead to job losses (eg our software will do the work of actual people). We are part funded by the Government (in that we get a tax credit for basing the R&D element in the UK). Due to the fact that we are an international group we have a set-up which "maximises" our tax position - eg we have (legal) transfer pricing arrangements set-up to ensure we pay very little UK tax (actually with the R&D credit we are in a net reclaim position from a corporation tax perspective). We pay large commissions to our sales guys when they make a sale and there are bonus' payable to staff for doing a good job (which is what we are employing them to do). Does that make us as bad as the bankers?

    What about other industries/professions? Are scientists/engineers evil and should be punished? Without scientists/engineers would we have the weapons of war we have (nuclear and biological spring to mind), certain areas of medicine go against certain religious beliefs - from a social point of view how would we regulate that (worldwide). What about something like a car - is destroying (and led to the destruction) of our environment faster than almost anything else, results in thousands of unnecessary deaths a year, the industry was bailed out by our money - is the car industry evil and should be stopped?

  • Comment number 76.

    68. copperDolomite

    I completely agree with the need for change... Sadly, politics nowadays is no longer useful (in most advance economy) -- I still have hopes with Obama - but it seems more and more he will not be able to do much either...

    Here in the UK - we only have puppets... well groomed and educated... but never the less puppets to the powers in existence...

    Anglo-Saxon Gvts have 'sold' us to the banks - and it will be very hard to turn away from that....

  • Comment number 77.

    copperDolomite @ #55

    I suspect we are in agreement but you may have misinterpretd my #40?

    My contention is that the 'fault' for poisoning the lives of the people, does not lie entirely with the banks or the bankers but with the fact that for far too long (and even now) the regulation of the banking industry is far too unrestrictive because it is a fact of life that national governments have far more to lose by restricting banking practices by seeing their tax revenues from the banking industry fall away than bankers have from self-regulation through some kind of born-again ethical conversion.

    In your example, we can quite rightly blame Chemical Plants for poisoning the ground water around their location but it is probably the authorities who issued the licence to build the plant with permission to spill the output toxins into the river who are the entity that should have the fickle finger of blame pointed at them.

    In the case of Robert's fickle finger of ethical blame being pointed at Goldman Sachs, it is the Greek government who borrowed the money and did so to continue to fund an over-bloated Civil Service, an expensive social welfare system that allowed people to retire as early as 61 (oh were we so lucky in the UK where my retirement might even be delayed until age 71 or more!) and a massive military spend just in case Turkey ever decides to invade Greece again! I strongly suspect that the Greek government of the day never enquired too deeply into the ethics of Goldman Sachs loan methodology as the Greek government preferred the cash to any moral rectitude. They simply took the money and spent it!

    So it is with the Government of the day and the tenure of Gordon Brown as both Chancellor of the Exchequer and now Prime Minister ..... why did Gordon Brown agree to the Basle bank regulations and the decisions of his new Regulator, which encouraged banks to overextend their balance sheets? I contend that this simply because the tax take was larger for his governance if the banks were not over regulated. More tax revenue from British banks meant more money for the NHS, two wars, more welfare and better social provisions.

    To be fair, what government of the people for the people is ever going to turn their nose up at more revenue so they can spend more - certainly no socialist government would do such a thing?

    Thus, I entirely agree that businesses like banks should consider their moral obligations but I think it is actually more relevant to suggest that the government should and must be the entity that ensures that banks behave ethicallo - simply because they, the government, are there to represent the best interests of THE people they govern and to make sure that banking regulations and the regulatory bodies do their job which is to protect society from malpractice and to maximise profit for shareholders in an ethical and acceptable way.

    Blaming the banks for not doing things ethically is simply a cop out for failed government.

  • Comment number 78.

    74. spikegifted

    "Just like any other kinds of industries - companies do fail if run badly."

    but for banks.... the whole system is a failure but yet they are still there... As no gvt wanted to take the risk (riots & anarchy are not well regarded by the wealthy... they are the ones who have something to loose...)
    my big problem with them is the complete lack of remorse... blame the gvt, blame the regulators, blame the public who was convinced he can/should have debt...
    What managing director in his right mind does not take responsibilities for the action of its company???

  • Comment number 79.

    74. At 1:23pm on 23 Feb 2010, spikegifted

    Again, this reads true at a simple level. However, the current behaviour of banks is directly influenced by their understanding of the high probability of a state bail out when the system fails.


    Go take a look at the BofE paper referenced in post 45 and see if you still believe that banks operate just like any other business.

  • Comment number 80.

    Jacques Cartier @ #64

    Quite so. But it is the goverments of the people for the people who screwed up by not regulating and managing the banks properly in the first place.

    A prime example of this was Gordon Brown's acceptance of the Basle Banking Regulations which ulitmately led to British banks overextending their balance sheets which led to the srew up you contend was tha fault of the banks.

    It was an unholy alliance of the British Banks, Gordon Brown and a desire for the UK government to receive more tax revenue that lead to the unfettered controls that doomed us all.

    If we could do things over we, THE People would probably have accepted less tax revenue, lower public expenditure and more tightly controlled banks ..... but then that is the beauty of hindsight!

  • Comment number 81.

    "they do not address the question of whether the deals were the right thing for a firm of its size and reputation to be doing."

    Has anyone asked Goldman how this deal got approved? Did the bankers in Europe just take a swing or was this escalated for approval at the highest levels?

    Personally, if this was a legal trade at the time, then there's probably no formal sanction available. But you could at least be asking who stood behind the approval of this trade, who in fact embodies "the corporate conscience".

  • Comment number 82.

    If you don't like the bank don't trade with them...unfortunately there are so many Desperates, that they take what is offered. Evidently whole countries, not just companies or individuals.
    You would also think that governemnts are duty bound to accept the best offer to their hard-earned tax paying subjects...in steps the big American banks again.

  • Comment number 83.

    75. Horned_Devil
    I also write software... and you are going down the route of 'progress is bad'...
    People that were employed to do very automated task (the ones you can replace with a software/hardware) are out of a job is not relevant in this discussion. Those people will need to work on new skills to get their place in society - and if they refuse, then they are not better than the 'bankers' (living as a parasite... but for the insane wages the latest take as 'right') >> we should just make sure as a society those new skills are accessible to all who wants....

    I am sure you can see the difference with 'bankers'... they are 'facilitators' in a modern economy... except they are now the main players/gamblers as they did use their special access to money to build empires... and are arguably more powerful as most gvt (but are not even voted in!)
    Empires are very difficult to 'tame down'... they usually fall (in a very abrupt manner).

    I just hope there is now enough anger around - so the fall of the empires does seem the 'best of 2 evils' for our dear leaders (this or unprecedented scale of international social unrest...)

  • Comment number 84.

    The same instruments that caused the crisis are still in use. Goldman apparently can re-value currency. Greece agreeing to an ajustable rate will bring regret in the long term. We have an agreement between politicans and bankers.....why would there some expectation of honesty.

  • Comment number 85.

    What is it with banksters and this incessant, unending, grinding and relentless death wish? To put the love of money before the survival of their own businesses is bad enough, but to value money before society itself is utter derangement.

    Do they hate the West that much to have crippled it so badly? Do they despise the freedoms we've clearly taken for granted? Or have all the fast cars, private jets and super yachts been unable to ease the dark and lonely void that must clearly dominate their strange and sad little lives.

    In years to come people will look back and see the crisis as what it is: the biggest banking suicide note in history.

  • Comment number 86.

    77. At 1:43pm on 23 Feb 2010, Menedemus
    Blaming the banks for not doing things ethically is simply a cop out for failed government.


    No. It is seperate and additional.

  • Comment number 87.

    # 69. At 1:00pm on 23 Feb 2010, Belgravia Bertie wrote:

    > The whole point here is that all of us have to suck some things up.

    You seem to quite like it, though!

    > And to the chap who wants an affair, go ahead. I have zero interest.

    You should if it was with _your_ daughter, though. It _is_ taxpayers' money that is being trousered and we won't "suck it" anymore. Legality is necessary but not sufficent to make it "OK". That's why we are breaking down the banks.

  • Comment number 88.

    Psst! Avast there! It be too late to alter course, mateys. And there be plundering pirates lurkin' in ev'ry cove, waitin' to board. Keep a weather eye open mateys. Thar be squalls ahead, and Davy Jones waiting for them what don't obey...

    http://www.reuters.com/article/idUSN2214647320100222

  • Comment number 89.

    80. At 1:51pm on 23 Feb 2010, Menedemus wrote:

    Your posts to the BBC seem to have a strong political bias. This is perfectly ok but are you suggesting that Gordon Brown is responsible for what is a very global problem?

  • Comment number 90.

    77. At 1:43pm on 23 Feb 2010, Menedemus

    I think we are in agreement.
    Government
    Regulators
    Rich manipulators
    Politicians (some just dumb/ill-informed, others well informed and manipulate to advantage)
    So what we have is a social problem (well, they don't hang out with Greggs shop assistants, do they) of self-serving interest among the rich and powerful and there is where the responsibility lies?

    My point about a chemical company not getting away with it is this. We don't write a law to cover ever single possible chemical and every single 'bit of damage' to the environment. We don't wait until they come up with a new chemical, dump it and then think 'right, we need a new law then to stop this happeing in the future.'

    We could approach the financial industry in the same way if we wanted to. I reckon the excuses and assumptions as to why we can't are, well nonsense and spin. If we can put a man on the moon, sequence the human genome and eradicate small pox.......


  • Comment number 91.

    32. At 11:17am on 23 Feb 2010, yam yzf wrote:

    "Business and ethics rarely mix well.
    The point of a business is to make money"

    There you go - all the supporters of 'nice' Capitalism take note - this attitude is why it doesn't and never will work.

    It's only a short step from this attitude to the Gordon Gecko style of money making....which everyone knows will be barbarism with money.

  • Comment number 92.

    It's probably a little unfair to single out Goldman Sachs for having made lots of money out of the sub prime mortgage crisis and its afermath.

    I suspect that other firms have done alright as well - lawyers, accountants, other investment banks. What is probably under scrutiny is the Goldman Sachs corporate culture. I don't buy the argument that companies only exist to make money for their shareholders.

  • Comment number 93.

    40. At 11:42am on 23 Feb 2010, Menedemus wrote:

    "I draw the conclusion that the fault of Banks making huge profit at the expense of weak national economies is not the fault of Banks or Bankers but blame can be firmly heaped upon the shoulder of the Bank Regulators and their masters, national governments."

    ....in drawing that conclusion - did you forget about the bit where the banks ran up loses they could not meet and as a result the Governments stepped in (it's called a bailout you know) and that's why the National Economies are weak?

    By this same argument I shall conclude that Argentina honestly won the '86 world cup because they played so well against Germany and did not cheat (forgetting about the earlier hand ball against England from Mr Maradona)

    It's no good relying on history if you leave out the bits that don't suit your argument!

  • Comment number 94.

    51. At 12:06pm on 23 Feb 2010, copperDolomite wrote:

    "Would a maximum salary help change attitudes and behaviour?"

    How about spinning this one in your next rinse cycle.......

    No salaries at all!

    I am mature enough that I don't need a 'reward' for doing what is a neccessary task - and there are many like me. Only children (and bankers) need to be rewarded for their work - or is it because they are not doing 'neccessary duties' - hence the demand for payment.

    The problem is mature adults don't run the country - children do, and it also seems that children are in the powerful minority (for only children can come up with the concept that you don't have to work, but still get your rewards)

    I say, lets get the Adults back in charge - then we don't have to worry about who gets paid what.

    The reward of work is the item you produce, or service you provide - and consequently the consumer who benefits from that provision.

    ....or you can stick with the system which sets one set of society against another - like children arguing in the playground.

    When the war for resources kicks off you will see how childish the world has become - wasting the last of the resource you're actually fighting for.

  • Comment number 95.

    55. At 12:24pm on 23 Feb 2010, copperDolomite wrote:

    "In terms of economics and peoples ability to earn a living, this is exactly what is going on. Lives are being economically poisoned."

    As Marx said - we will all be treated like commodities eventually. Turned onto the scrap heap when there is an excess, babies and children bought and sold, lives assessed by their economic viability.....

    This is what we have become - because we allow people like yam yzf and Belgravia Bertie to continue to exist.

    I say - it's time to stop that allowance.

    Me and Mr Cartier are already at a revolutionary stage - I suspect there are many who are very close right now...

  • Comment number 96.

    57. At 12:28pm on 23 Feb 2010, Justin150 wrote:

    "for example should a bank lend money to a man to buy a flat for his mistress"

    Interesting - and in the short term (as Goldman would think) - yes, it's fine to lend.

    However those of us who can 'relate to the real world' know that men with mistresses are not the most reliable of people (well they've already broken the promise made in front of God - I mean is there a higher moral plain to breach than that?

    In the long term - this would represent a very bad decision (to lend) - simply because when the wife finds out (which she always does) and takes most of his wealth in a divorce settlement - who is going to keep up the payments on the flat?

    Who says there's no place for morals in business? - ah yes, the short term thinkers. This lack of understanding of human nature is exactly why the banks didn't see the crash coming - and never will either....

  • Comment number 97.

    This is absolutely nothing less than you'd expect from the "great vampire squid".

    But could you research a little further here, Robert, please.

    Any idea whether another tentacle of the squid, knowing that this deal had been designed to hide increased Greek debt from the market, promptly took positions on their own account betting against this very debt?
    And in due course trousered tens of millions no doubt, in addition to the reputed Euro 200 million fee for the swap?

    I wonder.

    Perhaps the time has come for direct action?!

    Where are Goldmans offices in London?

  • Comment number 98.

    80. At 1:51pm on 23 Feb 2010, Menedemus wrote:
    > A prime example of this was Gordon Brown's acceptance of the Basle
    > Banking Regulations which ulitmately led to British banks overextending
    > their balance sheets which led to the srew up you contend was tha fault
    > of the banks.

    There is no way that Gordon Brown forced banks to overextend their balance sheets. That was their choice. In any case, we've got to look to the future, and stop them doing so again. That means:

    1)We need a little “retrospective moral hazard”. Make the bankers suffer personally. Hit them where it hurts them most (in the pocket). They won't be so keen next time.

    2)Making the banks less able to screw us up again. That means banks so small we don't give a hoot about them.

    3)Explore ways to dispense with banks – they fulfil a very simple function, and it should be possible to reduce their involvement in things.

    4)Find ways to run our economy once the banks are gone. That means finding some function in the world which is required and which is less easily transferable than paper shuffling and pressing button.

  • Comment number 99.

    The more we learn about Goldmans the dodgier they get. Check-out the scam they pulled on US taxpayers over the rubbish they pumped into AIG before engineering a full price return on the same CDO garbage, worth, in reality, only a fraction of the return price!

  • Comment number 100.

    I've noticed that neither Stephanie nor Robert have run a story about the Eric Daniels bonus.

    How detracted from reality can you get?

    I mean you take your bank to the brink of Nationalisation, you have to rely on the Government to back you after you rubber stamped a very bad takeover. Your share price has resulted in a mass contraction of the market cap and you have to go to shareholders for extra money in a split.

    So not a good year then. - However in banking this allows you to get the maximum bonus possible under the terms of your contract!!!!

    ...but at least you can 'turn it down' and look like a good guy.

    However people like writingsonthewall aren't going to let you - we've seen these tricks before.

    Ever asked yourself why there are so many poor people around Mr Daniels? - WELL YOU MADE THEM POOR!

    Somebody get me some rope - I'm setting up a Gallows on Bishopsgate this afternoon.

 

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