Sunday, December 6, 2009

Bethany Mclean on Goldman

This gets to the heart of the complaints about Goldman by others on Wall Street, which are often quite bitter. When Blankfein speaks of being “so close to clients that you can see the pattern better than anyone else,” some worry that this means his firm is using client information in ways that aren’t necessarily in the clients’ best interests (though few in the business think Goldman would cross the line into illegality). In Street parlance, a “counterparty”—i.e., the person on the other side of a trade, as opposed to one you are representing—is like a consenting adult, and hence the line you’ll frequently hear: The new Goldman Sachs doesn’t have clients—it has counterparties.

These questions are particularly pronounced among hedge funds. “People worry that they’re in my business, and they’re better than I am,” says one money manager. Asks another hedge-fund trader, “Are they the Yankees? No, the Yankees actually lose! Goldman never loses. And people say they are a hedge fund! This ain’t no hedge fund. Hedge funds lose money.” When I ask him if he does business with Goldman, however, he replies, “Of course we do business with them. We have to. It’s like the Mob who picks up the garbage. You pay their fees, because you need your garbage picked up.”


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