3 ms·

Interesting. So, some SEC regulations required there to be a Chinese wall between the part of Goldman which was betting against the MBS market and the portion

Interesting. So, some SEC regulations required there to be a Chinese wall between the part of Goldman which was betting against the MBS market and the portion of Goldman which was selling long to clients? If this is the case, then those complaining of the practice must believe that Goldman had some moral obligation to ignore SEC rules.

yummyfajitas 16y ago
A better question is, "what parts of Goldman do not have Chinese walls between them?" To be fair, some information leaks over the walls. For example, consider investment advice. Within a bank, you have "Investment Advice", and you have !Investment Advice. IA doesn't really get to talk to traders, all they do is provide unbiased recommendations to clients. However, there is another department, which I'll call "Conflict of Interest Watch" (CIW, the name varies from bank to bank) which tags every report from IA with possible conflicts of interest. So if someone in IA writes a report about Facebook, some computer system in CIW will apply the label "Warning: GS has a business relationship with Facebook." So an analyst can write a report, submit it, and read the tags to determine if Goldman is doing business with Facebook (of course, reading the newspaper is also permitted). The SEC fines the company $200k per report if they fail to report a relationship and $80k if they report a nonexistent relationship (to prevent companies from just tagging every report as "conflict of interest", a response to Wachovia doing exactly this). A certain investment bank (maybe Goldman, maybe not) is currently devoting tens of millions of dollars to doing a better job of this.
- ShabbyDoo 16y ago
  Wow, so those complaining about Goldman's seemingly two-faced behavior are implicitly complaining that the firm was actually following SEC regulations?

3 ms·

Interesting. So, some SEC regulations required there to be a Chinese wall between the part of Goldman which was betting against the MBS market and the portion

by ShabbyDoo 16y ago

yummyfajitas 16y ago
A better question is, "what parts of Goldman do not have Chinese walls between them?" To be fair, some information leaks over the walls. For example, consider investment advice. Within a bank, you have "Investment Advice", and you have !Investment Advice. IA doesn't really get to talk to traders, all they do is provide unbiased recommendations to clients. However, there is another department, which I'll call "Conflict of Interest Watch" (CIW, the name varies from bank to bank) which tags every report from IA with possible conflicts of interest. So if someone in IA writes a report about Facebook, some computer system in CIW will apply the label "Warning: GS has a business relationship with Facebook." So an analyst can write a report, submit it, and read the tags to determine if Goldman is doing business with Facebook (of course, reading the newspaper is also permitted). The SEC fines the company $200k per report if they fail to report a relationship and $80k if they report a nonexistent relationship (to prevent companies from just tagging every report as "conflict of interest", a response to Wachovia doing exactly this). A certain investment bank (maybe Goldman, maybe not) is currently devoting tens of millions of dollars to doing a better job of this.
- ShabbyDoo 16y ago
  Wow, so those complaining about Goldman's seemingly two-faced behavior are implicitly complaining that the firm was actually following SEC regulations?