I don’t know what to say except – run for your lives! It’s the smart vs the inept and we’re in the middle of it. Goldman got no sympathy – from neither side, which is understandable. Although I did get a feel at one moment that Sen. Coburn (whom they kept calling doctor, for some reason, although he wasn’t there in a role of an ob/gyn) tried to steer Mr. Tourre to blame the media but the Frenchman did not understand where the senator was going with his question, much to Coburn’s dismay. Coburn asked Mr. Tourre what he thinks about all the firestorm that was caused by the release of his personal e-mails, how does that make him feel? Obviously, Sen Coburn expected Mr. Tourre to say something that it has ruined his life and is really hard on his family, but the guy either was oblivious to the innuendos due to language barrier or was so heavily coached that he responded that he regrets sending those e-mails and he should have used different language. It is unfortunate that senators are still not up to speed to what’s going on on Wall Street judging by their questions. Sen. Levin thinks that by selling a security to a customer and thus becoming short, Goldman is going the opposite direction from the customer and should disclose it. Coburn keeps saying “buying a short position”, forcing the guys to clarify the language before answering the question which only annoys the senators. And those big ass books with copies of e-mails and all sorts of exhibits that only makes them kill time by looking for a specific document, which they no doubt took advantage of.
Back in the days, I think it was around December 2006, my desk had dinner with Michael Swenson, one of the witnesses at today’s hearings. At the time I was leaning on the bearish side and already then I tried to short ABX when it was still trading around par. At the dinner Mr. Swenson tried to convince us that it might be a good opportunity to buy, because some bonds were trading at about 95(!) cents on the dollar. Now I know why – they were massively long ABX at that time and wanted to reduce exposure. None of us actually bought it. It is easy to say now that we knew this whole thing was going down, but of course, no one knew for sure. It was just that we have started to see things, little things, but that looked like a canary in the mine. Like some small subprime lenders going bust for example. I remember that something didn’t feel right back then and then the shit has started hitting the fan a month later, right after a major conference when ABX started to sell off in massive moves have not seen before. And the rest is history.
These Goldman guys are teflon and our senators are no match for those guys. There will be a financial regulatory bill, but I’m not sure if it’s going to be effective if it’s written by the people who don’t even understand the practices they oppose. Perhaps they separate prop trading from commercial banking, ban some sort of derivatives and that’s going to be all. As long as there are fools there will be people fleecing them. It’s as old as history and there’s nothing you can do about it.