Goldman Sachs Laughing At Financial “Reform”

Posted by | August 12, 2010 10:28 | Filed under: Top Stories

By Yashwanth Manjunath

Goldman Sachs executives recently told analysts that  they do not expect the new financial “reform” measure to cost them any revenue. (CEO Lloyd Blankfein is pictured). In fact, Goldman thinks that they are “well positioned to be a market leader under the new rules” according to Jack McCabe, co-head of Goldman’s derivatives clearing service business, and the analysts agree. “They’ve clearly seen the writing on the wall and are planning their moves ahead of time,” said Jim Sinegal, a bank analyst at Morningstar Inc. “It’s definitely a little sooner than I expected.” Richard Bove, another bank analyst at Rochdale Securities, recently changed his view of the law’s effect on Goldman. “I thought this company was going to be really harmed by this bill; now I’ve figured out that it’s not going to happen,” he said. “They should win big here.” So why are Goldman and their groupies on Wall Street feeling so bullish?

First and foremost the financial “reform” left too-big-to-fail banks in place. Brown-Kaufman, the only proposed amendment to actually break up the big banks and prevent them from holding the entire global economy hostage, was crushingly defeated relatively early in the process (see if your senators were on the bipartisan list of corrupt bankster-enablers here). Al Franken’s amendment to eliminate the perverse incentive structure that ratings agencies like Moody’s and S&P have for doing the big banks’ bidding and deceiving pension plans was taken out in conference committee. Blanche Lincoln’s amendment intended to force derivatives to be traded on an open exchange was turned into a study that can be implemented by the regulators later, on a limited basis. Given the incestuous relationship that exists right now in Washington between banks like Goldman Sachs and the regulators who have already worked for or would like to eventually work for Goldman Sachs, I’m not exactly holding my breath on them riding to the rescue.

Perhaps the best indicator of the impotence of the financial “reform” legislation is Senator Russ Feingold’s reaction. Feingold was the only Democrat to vote against the legislation because he came to the conclusion that “false security is no security at all.” He is also one of eight senators to vote against the repeal of Glass-Steagall and one of only four senators to vote against the Riegle-Neal Interstate Banking and Branching Act of 1994, which accelerated the concentration of financial assets, and the creation of “too big to fail” firms. As an aside, Feingold also had the courage to vote against the Iraq War, No Child Left Behind, and was the lone dissenting vote on the PATRIOT Act, which passed 99-1. The man is literally never on the wrong side of a vote and if he’s right again like he always is, we are headed for an even larger financial collapse than the one in 2008. So much for financial “reform.”

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