Posted on 09/07/2010 11:17:34 AM PDT by SeekAndFind
Michael Lewis recently offered another interesting explanation for a statement made a few months ago, "Goldman Sachs is doomed."
The reason the company is doomed is their status as a public corporation, he told Vanity Fair, because it allows them to justify barely legal activity that stops at nothing to profit.
A few months ago, the author said Goldman Sachs was doomed because it would never recover from its PR disaster-causing SEC case. Its customers would never be able to trust them if they had a problem with honesty. No customers, no business, went his argument.
Now Lewis has changed his tune. Goldman's problem is that it does too much for its clients, he says, some of its clients anyway.
He told Vanity Fair:
"The minute it becomes a public corporation there is this moral justification for bad behavior."
That was the "beginning of the end," he says. When Goldman went public is when Goldman traded a “long-term greedy” attitude for a “short-term greedy" one.
The beginning of the end of the Goldman Sachs I admired was when it ceased to be a partnership.
As soon as that happened, he says, employees at Goldman Sachs had to do right by their shareholders. The easiest way to do that is by ripping off anyone who isn't a shareholder.
(Excerpt) Read more at businessinsider.com ...
Maybe I'm wrong about this, but I think Lewis' point was that what sets banking apart from almost every other industry in this country when it comes to public vs. private is that there is a much stronger link between government and banking than in other industries . . . hence the fact that the opportunity to rip off taxpayers is that much greater.
P.S. If you want a perfect example of a public company going private, look no further than Warren Buffett’s acquisition of one of the nation’s largest railroads — the Burlington Northern Santa Fe.
Consider the idiotic source.
That’s a very good point, too.
If they claim the decision was made to maintain 'shareholder value' then you can be certain.
RE: If someone justifies a business decision because it is good for the ‘shareholders’
The question we should ask is “which shareholder” ? I used to own the stocks of some major Wall Street firms, but as an individual shareholder, I don’t get a say on ANYTHING (don’t even get me started with CEO compensation).
I believe by “shareholder” Lewis is talking about the big guns who hold a lot of interlocking directorates from one firm to the other.
This is something that a lot of the naive supporters of the free market system don't understand. Once a person owns a controlling interests in stocks in a company, it no longer really matters to him what happens to the stock price. The worst that could happen is he loses paper wealth through the decline in stock price. But so long as the company never goes bankrupt he can pay himself a decent salary every year, get dividends off preferred shares, make himself favorable loans against the company's assets, go on lots of business expensed junkets, get his ego stroked, hob nob with celebs, get gold-plated medical care, and write himself a rock-solid pension policy.
Even better, if the company does go bankrupt he can craft himself a golden parachute just before the vultures come in to scoop up what's left of the capital equipment.
We have all heard the old adage that everyone is a genius in a bull market.It used to be that Wall Street firms made beaucoup dollars during bull markets and the exceptional firms knew when the bubble burst to cut their losses and move to the sidelines.Once investment banks went public and were allowed to speculate with someone else’s money,i.e, shareholders money rather than their own, they morphed from banks whose primary profit lines were mergers and acquisitions fees, underwriting securities and to a lesser extent trading securities into fullscale speculative trading activities that were leveraged to the hilt.They went from running the roulette wheel to playing the roulette wheel.They no longer had the ability to discern when the bubble had burst and when to cut their losses until it was too late. Lehman, Bear Stearns, Merrill are all primary examples.
Exactly! The taxpayer can't be ripped off unless the government has provided the avenue for it.
Self ping
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