May 042010
Authors: Samuel Lustgarten

After employees spent hours channeling ambiguous lawyer speak, nothing was accomplished at the Senate Subcommittee on Investigations last week.

It wasn’t until Lloyd Blankfein, CEO of Goldman Sachs, defended his company that the main event started.

I pondered his fate. As a long-time investor in Goldman Sachs, I believed that they could do no wrong. But even Blankfein, with his Harvard Law degree, seemed vulnerable.

He wasn’t personally in charge of the Goldman employees that have been accused of fraudulent behavior, but he’s the face of this behemoth financial firm –– the responsibility is on his shoulders.

As for fraud, I realized my partiality and conflict of interest –– this wouldn’t be easy to parse my opinion.

Blankfein’s position as the head of the most powerful financial institution carries tremendous clout. Not only that, he supports President Barack Obama’s push for financial regulatory reform.

I was quickly sidetracked when Oklahoma Sen. Tom Coburn began to ask partisan questions to the CEO. Coburn greedily stole 20 to 25 minutes of face time –– pushing Blankfein to retreat and redact his past support. Blankfein was unwavering.

The exchange and subsequent conversation felt out of place, like the two were debating at a ritzy club over whiskey. The Senator comically addressed Blankfein by saying, “I just want to pick your brain.”

CNBC interjected that we were hearing from Lloyd Blankfein’s testimony, which was in response to fraud allegations.

Blankfein had been called to represent his firm and explain the controversy over dubious collateralized debt obligations. His support of systemic risk prevention and the Obama administration shouldn’t have been deliberated.

Humoring Coburn’s attack, Blankfein said banks and investors would have greater confidence and more money would flow into the market. Finalizing the one-two punch, Blankfein stifled Coburn’s advances by cleverly saying: Goldman Sachs has “only been a bank for short time.”
Partisan politics had once again weaseled into a grave allegation: fraud. The loaded, leading questions made a mockery of the seriousness of the proceedings.

Besides the disgusting rant, talking in acronyms and abbreviations was commonplace. It became readily apparent how the general American populace becomes utterly confused by the case.

CDO, CDS and derivatives, all intertwined together to eliminate the masses, most aren’t able to comprehend the complexities. We understand that stocks go up and down, but derivatives are much more complicated.

Despite the length of time and testimony, post-inquiry polls and interviews showed that the majority of the U.S. is still convinced that Goldman Sachs committed a crime. Perhaps it’s my own partisan belief and bent toward the financial markets; Goldman isn’t at fault, it’s the system.

In fact, each time the concept of selling pre-packaged deals of sick assets come to mind, I think of people who bought financials before the crash.

You have the right to buy stocks, sell them short, hold them or sell your remaining shares; what you decide is your prerogative, as is the consequential risk.

In every transaction, there’s a buyer, seller and market maker. The market maker is the company involved in the trade; they make a transaction fee on the deal. When market makers decide to bet against a stock, derivative or credit default swap (packaged worthlessness), it’s their right.

Disclosure isn’t expected because traders trade, markets are made and nobody on either side tends to care about each other.

You can’t gain large amounts of wealth by following public or analytic opinions. Monetary success comes from intelligent investments and strategies.

After watching the subcommittee in its entirety, I felt pity towards the bankers because they’re the scapegoat for underlying problems in this market. Transparency is necessary, but the disclosure of a company’s holdings seems backwards.

America is still sitting on the sidelines, waiting for the call of a safe, secure market. Investing in companies and messages is a fundamental part of America’s capitalistic success. Unfortunately, the average investor shouldn’t invest in this market, at least not until it’s been revolutionized.

We’ll all win if financial reform occurs. We’ll all profit, even bankers. Change the system and a rush of money will be injected into this fledgling market.

Samuel Lustgarten is a junior psychology major. His column appears weekly in the Collegian. Letters and feedback can be sent to

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