7 ms·

New Scrutiny of Goldman's Ties to the New York Fed After a Leak

90 points by taivare 12y ago

rayiner 12y ago
Leaking confidential information is clearly not okay, and good on Goldman for firing everyone involved. That being said, look at how the government and regulators approach the tech industry: Words like "open," "distributed," "inter-operable," which have not just technical but philosophical meanings in the tech industry have no meaning to lawmakers or regulators. That's precisely because there's no revolving door bringing people with these perspectives from the industry into the government, where they can shape policy. There's no particularly good solution to regulation, and I'm not convinced our status quo is worse than the alternatives. Most people do not believe you can achieve societal goals in a free-market without regulation. So you have some sort of regulation, and the question becomes: who are the regulators? A professional class of bureaucrats well-insulated from industries, or a class of practitioner-bureaucrats that move fluidly from industry to government and back? There's good and bad that comes with both options.
- ceejayoz 12y ago
  Did they fire everyone involved, or did they fire everyone who got caught? It wouldn't be shocking if their managers were aware and just careful not to get provably implicated.
- comboy 12y ago
  > good on Goldman for firing everyone involved There's too much for one comment, but from the sound of it I think you may not be seeing the full picture. E.g. http://www.zerohedge.com/news/2014-11-20/here-are-highlights-senates-finding-banks-manipulate-physical-commodities-live-heari http://www.zerohedge.com/news/2014-11-20/here-are-highlights...
  - rayiner 12y ago
    What in that article has anything to do with information leaking between regulators and banks? That is an article about banks manipulating commodities prices by buying up vast quantities of them. Which is a good argument in favor of regulating the free market, but doesn't address the point I'm making.
    - comboy 12y ago
      It's about Goldman Sachs and I thought it gives some good general view, but sure, here is an article related to the topic: http://www.zerohedge.com/news/2014-11-20/latest-scandal-goldman-ny-fed-employees-busted-colluding-illegally-sharing-confident http://www.zerohedge.com/news/2014-11-20/latest-scandal-gold...
  - wglb 12y ago
    "Zerohedge" and "full picture" in the same sentence is a matter of concern.
    - comboy 12y ago
      I admit, the view there is biased towards one side, but they do provide facts.
      - wglb 12y ago
        but they do provide facts Unclear to me if this is the case. They certainly do provide speculation and conspiracy theories.
        harryh 12y ago
        But I agree with the speculation! So it must be a fact.
        comboy 12y ago
        I think there are both facts and speculation there, but they are clearly distinguished. I don't want to evangelize anyone, I just wanted to provide an alternative view for the author of the first comment I replied to. That maybe GS is not the good guy here that got rid of the black sheep. It may or may not be true. I like looking from different perspectives. I'm OK with somebody having different perspective, but once in a while it's great to take a moment and "hey take a look how it looks from my point of view". Since I clearly have been received negatively, I'd love to learn more about your perspective, so any links providing info on how these allegations are false and how GS is doing mostly good things are welcome.
- mercurial 12y ago
  I see where you're going with that, and it's particularly an issue in France, where most lawmakers seem extremely ignorant about anything technical. However, I'd rather live with that than with, say, regulatory capture by Microsoft. Having businesses and governments live in symbiosis is never a good idea.
- unclebucknasty 12y ago
  >Most people do not believe you can achieve societal goals in a free-market without regulation. >...who are the regulators? A professional class of bureaucrats well-insulated from industries, or a class of practitioner-bureaucrats that move fluidly from industry to government and back? If you do subscribe to the premise of the first quote (i.e. that regulation is required) AND you accept the premise of the second quote (that those represent the only two choices), then it seems obvious that you have to go with the insulated bureaucrats. Otherwise, you effectively have regulatory capture, which is to say, effectively, no regulation at best. And, at worst, this capture represents no achievement of societal goals PLUS a distorted marketplace which further compounds societal problems. This, versus imperfect or inefficient regulation, but regulation nonetheless.
incision 12y ago
The episode of This American Life referenced is well worth a listen if you've ever been curious about what trying to do good work inside a crushing bureaucracy sounds like. 1: http://www.thisamericanlife.org/radio-archives/episode/536/the-secret-recordings-of-carmen-segarra http://www.thisamericanlife.org/radio-archives/episode/536/t...
- 001sky 12y ago
  See also: on how they pick the bosses of career regulators http://www.huffingtonpost.com/elizabeth-warren/presidents-wall-street-nominee_b_6188324.html http://www.huffingtonpost.com/elizabeth-warren/presidents-wa...
cryoshon 12y ago
Scrutiny? The article is pretty weak on real scrutiny. It's not quite a whitewash, but it's definitely limp when it comes to hammering the bottom line: The "ties" described by the article would be better described as symbiosis between regulatory bodies and Goldman Sachs designed to maximize wealth for Goldman Sachs to the detriment of the public. Everyone knew that Goldman Sachs owned most of the politicians and regulatory groups before. This article puts forth a few more pieces of evidence, to nail the coffin shut. Cue apologists denying that these are established facts. Why is this corruption tolerated?
- sillysaurus3 12y ago
  Why is this corruption tolerated? A more illuminating way to phrase this is, "What are you going to do about it?"
  - 001sky 12y ago
    - Audit the Fed - Bar "revolving door" employment for 5 years - Lots of others...
  - alphonse23 12y ago
    use bitcoins, stop using banks.
    - dredmorbius 12y ago
      Oh aren't you just adorable.
- philrapo 12y ago
  >Everyone knew that Goldman Sachs owned most of the politicians and regulatory groups before. I didnt know this. Source please?
jgalt212 12y ago
Goldman, it seems, has become very effective in the practice of Regulatory Capture. http://en.wikipedia.org/wiki/Regulatory_capture http://en.wikipedia.org/wiki/Regulatory_capture
philrapo 12y ago
While the "revolving door" between banks and regulators clearly presents some problems, consider the alternative. I personally hate the idea of career politicians who have no practical experience in the private sector trying to write laws. (We see examples of bad legislation all the time from people who are clueless about tech, for example). Finance and central banking are very complicated areas, and I'd prefer to see regulations written by those who have an intricate and practical understanding of how those industries/markets work. It makes sense to me that the most qualified regulators would be those who spent years in the private sector working at places like GS. And on the flip side, it makes sense that private firms would be interested in hiring former govt officials and regulators who best understand how compliance and regulation work from the inside. It's like wanting to have an ex-IRS guy do your taxes. Regulators and public officlas who spent years earning little pay and doing public service also want to monetize their experience and finally get a good paycheck after leaving office. (Lots of examples of this in the bitcoin space lately.. e.g. Arthur Leavitt.. it's not just happening at goldman sachs). In this article, it sounds like a foolish (and possibly illegal) decision by a 29 year old former Fed guy, and as soon as it was identified by Goldman, they self-reported the issue to make it public. What else are they supposed to do?
- dreamweapon 12y ago
  It makes sense to me that the most qualified regulators would be those who spent years in the private sector working at places like GS. I can see how what you're saying could make sense, from a utilitarian perspective. But unfortunately lifetimes of empirical evidence suggest that we just can't trust any of these industries (oil/gas/mining, banking, pharma, telecom, etc) to self-regulate (which in effect is what the "revolving-door" culture leads to). Not all of the people in these companies are bad (most are not). But enough of them are, and the temptation for malfeasance (both to maximize profit, or to simply save their asses when the inevitably run into hot water), along with the human tendency to rationalize away such malfeasance (if it serves a perceived higher end) are simply too great.
  - philrapo 12y ago
    So are you then suggesting that it's preferable to have regulators who never had hands-on industry experience in their relevant sector?
jostmey 12y ago
After listening to the entire article what struck me hard was the secretive nature of the "fed". Their behavior was the exact opposite of what I consider to be a transparent and corrupt free government agency.

90 points by taivare 12y ago

Leaking confidential information is clearly not okay, and good on Goldman for firing everyone involved. That being said, look at how the government and regulators approach the tech industry: Words like "open," "distributed," "inter-operable," which have not just technical but philosophical meanings in the tech industry have no meaning to lawmakers or regulators. That's precisely because there's no revolving door bringing people with these perspectives from the industry into the government, where they can shape policy. There's no particularly good solution to regulation, and I'm not convinced our status quo is worse than the alternatives. Most people do not believe you can achieve societal goals in a free-market without regulation. So you have some sort of regulation, and the question becomes: who are the regulators? A professional class of bureaucrats well-insulated from industries, or a class of practitioner-bureaucrats that move fluidly from industry to government and back? There's good and bad that comes with both options.

ceejayoz 12y ago
Did they fire everyone involved, or did they fire everyone who got caught? It wouldn't be shocking if their managers were aware and just careful not to get provably implicated.
comboy 12y ago
> good on Goldman for firing everyone involved There's too much for one comment, but from the sound of it I think you may not be seeing the full picture. E.g. http://www.zerohedge.com/news/2014-11-20/here-are-highlights-senates-finding-banks-manipulate-physical-commodities-live-heari http://www.zerohedge.com/news/2014-11-20/here-are-highlights...
- rayiner 12y ago
  What in that article has anything to do with information leaking between regulators and banks? That is an article about banks manipulating commodities prices by buying up vast quantities of them. Which is a good argument in favor of regulating the free market, but doesn't address the point I'm making.
  - comboy 12y ago
    It's about Goldman Sachs and I thought it gives some good general view, but sure, here is an article related to the topic: http://www.zerohedge.com/news/2014-11-20/latest-scandal-goldman-ny-fed-employees-busted-colluding-illegally-sharing-confident http://www.zerohedge.com/news/2014-11-20/latest-scandal-gold...
- wglb 12y ago
  "Zerohedge" and "full picture" in the same sentence is a matter of concern.
  - comboy 12y ago
    I admit, the view there is biased towards one side, but they do provide facts.
    - wglb 12y ago
      but they do provide facts Unclear to me if this is the case. They certainly do provide speculation and conspiracy theories.
      - harryh 12y ago
        But I agree with the speculation! So it must be a fact.
      - comboy 12y ago
        I think there are both facts and speculation there, but they are clearly distinguished. I don't want to evangelize anyone, I just wanted to provide an alternative view for the author of the first comment I replied to. That maybe GS is not the good guy here that got rid of the black sheep. It may or may not be true. I like looking from different perspectives. I'm OK with somebody having different perspective, but once in a while it's great to take a moment and "hey take a look how it looks from my point of view". Since I clearly have been received negatively, I'd love to learn more about your perspective, so any links providing info on how these allegations are false and how GS is doing mostly good things are welcome.
mercurial 12y ago
I see where you're going with that, and it's particularly an issue in France, where most lawmakers seem extremely ignorant about anything technical. However, I'd rather live with that than with, say, regulatory capture by Microsoft. Having businesses and governments live in symbiosis is never a good idea.
unclebucknasty 12y ago
>Most people do not believe you can achieve societal goals in a free-market without regulation. >...who are the regulators? A professional class of bureaucrats well-insulated from industries, or a class of practitioner-bureaucrats that move fluidly from industry to government and back? If you do subscribe to the premise of the first quote (i.e. that regulation is required) AND you accept the premise of the second quote (that those represent the only two choices), then it seems obvious that you have to go with the insulated bureaucrats. Otherwise, you effectively have regulatory capture, which is to say, effectively, no regulation at best. And, at worst, this capture represents no achievement of societal goals PLUS a distorted marketplace which further compounds societal problems. This, versus imperfect or inefficient regulation, but regulation nonetheless.

incision 12y ago

The episode of This American Life referenced is well worth a listen if you've ever been curious about what trying to do good work inside a crushing bureaucracy sounds like. 1: http://www.thisamericanlife.org/radio-archives/episode/536/the-secret-recordings-of-carmen-segarra http://www.thisamericanlife.org/radio-archives/episode/536/t...

001sky 12y ago
See also: on how they pick the bosses of career regulators http://www.huffingtonpost.com/elizabeth-warren/presidents-wall-street-nominee_b_6188324.html http://www.huffingtonpost.com/elizabeth-warren/presidents-wa...

cryoshon 12y ago

Scrutiny? The article is pretty weak on real scrutiny. It's not quite a whitewash, but it's definitely limp when it comes to hammering the bottom line: The "ties" described by the article would be better described as symbiosis between regulatory bodies and Goldman Sachs designed to maximize wealth for Goldman Sachs to the detriment of the public. Everyone knew that Goldman Sachs owned most of the politicians and regulatory groups before. This article puts forth a few more pieces of evidence, to nail the coffin shut. Cue apologists denying that these are established facts. Why is this corruption tolerated?

sillysaurus3 12y ago
Why is this corruption tolerated? A more illuminating way to phrase this is, "What are you going to do about it?"
- 001sky 12y ago
  - Audit the Fed - Bar "revolving door" employment for 5 years - Lots of others...
- alphonse23 12y ago
  use bitcoins, stop using banks.
  - dredmorbius 12y ago
    Oh aren't you just adorable.
philrapo 12y ago
>Everyone knew that Goldman Sachs owned most of the politicians and regulatory groups before. I didnt know this. Source please?

jgalt212 12y ago

Goldman, it seems, has become very effective in the practice of Regulatory Capture. http://en.wikipedia.org/wiki/Regulatory_capture http://en.wikipedia.org/wiki/Regulatory_capture

philrapo 12y ago

While the "revolving door" between banks and regulators clearly presents some problems, consider the alternative. I personally hate the idea of career politicians who have no practical experience in the private sector trying to write laws. (We see examples of bad legislation all the time from people who are clueless about tech, for example). Finance and central banking are very complicated areas, and I'd prefer to see regulations written by those who have an intricate and practical understanding of how those industries/markets work. It makes sense to me that the most qualified regulators would be those who spent years in the private sector working at places like GS. And on the flip side, it makes sense that private firms would be interested in hiring former govt officials and regulators who best understand how compliance and regulation work from the inside. It's like wanting to have an ex-IRS guy do your taxes. Regulators and public officlas who spent years earning little pay and doing public service also want to monetize their experience and finally get a good paycheck after leaving office. (Lots of examples of this in the bitcoin space lately.. e.g. Arthur Leavitt.. it's not just happening at goldman sachs). In this article, it sounds like a foolish (and possibly illegal) decision by a 29 year old former Fed guy, and as soon as it was identified by Goldman, they self-reported the issue to make it public. What else are they supposed to do?

dreamweapon 12y ago
It makes sense to me that the most qualified regulators would be those who spent years in the private sector working at places like GS. I can see how what you're saying could make sense, from a utilitarian perspective. But unfortunately lifetimes of empirical evidence suggest that we just can't trust any of these industries (oil/gas/mining, banking, pharma, telecom, etc) to self-regulate (which in effect is what the "revolving-door" culture leads to). Not all of the people in these companies are bad (most are not). But enough of them are, and the temptation for malfeasance (both to maximize profit, or to simply save their asses when the inevitably run into hot water), along with the human tendency to rationalize away such malfeasance (if it serves a perceived higher end) are simply too great.
- philrapo 12y ago
  So are you then suggesting that it's preferable to have regulators who never had hands-on industry experience in their relevant sector?

jostmey 12y ago

After listening to the entire article what struck me hard was the secretive nature of the "fed". Their behavior was the exact opposite of what I consider to be a transparent and corrupt free government agency.