Category Archives: Banking/Finance/Regulation

Fragments from Goldman Sachs! The Musical

Posted by Ben Greenman

The hedge-fund manager JOHN PAULSON is in his mountain hideaway, stirring something in a CAULDRON. At his side is a VULTURE.

JOHN PAULSON:
Here is a derivative
Complicated, full of math
Here we have bad mortgages
Guaranteed to take a bath

By “take a bath” I mean to say
That they will almost surely fail
And we will bet against them then
Who cares if there’s a paper trail?

Do you see my strategy?
It has a pleasing shape, I think
A way that we can profit when
The market is pushed to the brink

But to commit these heinous acts
I’ll need a partner.

A foul bubble issues forth from the CAULDRON; when it pops, it speaks.

CAULDRON BUBBLE:
Goldman Sachs?

JOHN PAULSON:
Perfect. Brilliant. Exactly right.
Go to them, Vulture. Go! Take flight!

The VULTURE doesn’t move.

JOHN PAULSON:
I gave the order.
I said the word.
I meant what I said
Now go, great bird!

The VULTURE still doesn’t move

JOHN PAULSON:
When I say leave, it’s not idle chatter.
Why are you here? What is the matter?

The VULTURE sighs.

VULTURE:
I feast on
Decaying meat
But this seems like
A worse deceit
If you know that
This thing will tank
How can you take
Cash from the bank
Without a sense of
Crippling guilt?
This whole thing, John,
Is falsely built
It isn’t like I’m faint of heart
I eat creatures when they’re dead
Still and all, this scheme of yours
Rests uneasy on my head

JOHN PAULSON:
Well, you are oversimplifying
I think it’s time that you were flying
Off to Wall Street. Be on your way.
I’ll see you down there later today.

JOHN PAULSON strikes the VULTURE with the stick he uses to stir the CAULDRON. The VULTURE flies off.

JOHN PAULSON:
I’m in high finance
I’m not a librarian
I hope that stupid bird brings back
Some capitalist carrion

New York. The Goldman Sachs boardroom. The firm’s C.E.O. and chairman, LLOYD BLANKFEIN, is addressing company officers.

LLOYD BLANKFEIN:
Gentlemen, I called you here today
To say we’re losing money
The housing market’s crumbling quickly
We’re going with it; it’s not funny

The VULTURE flies in.

VULTURE:
John Paulson sends his love to you
He also has a proposition
About how you can make big bucks
Off the market’s demolition

LLOYD BLANKFEIN:
My name is real
Even though
It sounds like something out of Dickens
And when I hear
About big deals
My eyes go wide and my pulse quickens

The VULTURE explains the scheme. LLOYD BLANKFEIN nods, smiles, and nods again. One OLD MAN rises to protest.

OLD MAN:
Way back in 1928
We set up a closed-end fund
It worked just like a Ponzi scheme
Our investors were all stunned

For many years it hurt our name
And scuttled our good reputation
We shifted to investment banking
And that proved to be our salvation

Learn, then, from our checkered past
Remember the first Goldman, Marcus
Death showed him the door in 1904
But I can hear his spinning carcass

LLOYD BLANKFEIN:
Enough with the history lesson, Professor
It’s time to go out there and fleece the investor!

Goldman Sachs puts the plan into motion. When the housing crisis hits and people start to lose their homes, JOHN PAULSON earns a tremendous profit.

JOHN PAULSON:
I started out with thirteen billion
When things went down, my worth went up
In eighteen months I tripled that
The falling tide, it filled my cup
I made so much I couldn’t count
Ten million every single day
I’ve outearned Oprah, Trump, and Tiger
And nobody suspects foul play

At Goldman Sachs, the FABRICE TOURRE is minding his own business, wasting company time by writing flirtatious e-mails to his girlfriend MARTINE SERRE.

FABRICE TOURRE:
Other men are dull and drab
But I am the fabulous Fab
I’m a freakin’ cash machine
How you like me now, Martine?

MARTINE does not answer. FABRICE TOURRE sends another e-mail.

FABRICE TOURRE:
Dear Martine
I’m really keen
On our most recent creation

A Frankenstein
Of dollar signs
And intellectual masturbation

MARTINE does not answer. FABRICE TOURRE sends another e-mail.

FABRICE TOURRE:
When poor homeowners
Get the axe
We load gold
Into our sacks
We sell off short
And break their neck
Uh oh, look out
Here comes the Sec

MARTINE finally answers.

MARTINE:
I think it’s pronounced “S-E-C”
Your brain is smaller than a pea

The S.E.C. considers charging Goldman with fraud.

S.E.C.:
Should we let Goldman respond
Or should we name them in a suit
Should a weed be sprayed in the garden
Or ripped from the ground at the root?

The SEC decides to file suit. FABRICE TOURRE is named as one of the principal architects of the deceit. FABRICE TOURRE appears before Congress, where he is questioned by a Senate panel that includes CARL LEVIN (D-MICH).

CARL LEVIN (D-MICH):
I want to know what you knew
And exactly when you knew it
And why you all believed
You’d manage to get through it

FABRICE TOURRE:
We didn’t prey on our clients’ stupidity
We showed them our prices and offered liquidity

CARL LEVIN (D-MICH):
To you it may have been a game
To me it all seems pretty real
I mean to make you feel shame
For how you made this shitty deal

FABRICE TOURRE:
I’m not deceitful or conniving
Did you see the picture of me skydiving?

CARL LEVIN (D-MICH) questions LLOYD BLANKFEIN.

CARL LEVIN (D-MICH):
How can you peddle a product
And then bet that it will go south?
Isn’t that like selling toothpaste
That creates cavities in your mouth?

LLOYD BLANKFEIN:
At the risk of appearing pedagogic
Markets, you see, have an internal logic
There are always cycles of boom and of bust

CARL LEVIN (D-MICH):
But isn’t this simply a matter of trust?
People think you are a fiduciary

LLOYD BLANKFEIN shrugs.

LLOYD BLANKFEIN:
They also think that there is a Tooth Fairy.

The Senate hearings continue. Meanwhile, JOHN PAULSON reassures his investors that he has done nothing wrong.

JOHN PAULSON:
All I did was see things clearly.
Housing prices were severely
Overvalued; I generated
Profit from what was inflated.
And though my insights were aberrant
I was open and transparent

JOHN PAULSON’s worth is estimated at twelve billion dollars. He is walking to the bank to use the A.T.M.—not to withdraw any money, just to check his balance—when he sees his VULTURE perched on the ledge of a building.

JOHN PAULSON:
Vulture, hello
How goes it, old friend?

VULTURE:
Oh John, you are surely
A horse’s rear end

JOHN PAULSON:
What? I’m shocked.
I’m scandalized
Among my pets
You were most prized
Come back to work
In my mountain lair
I’m taking the jet
I’ll meet you there

The VULTURE stands still.

JOHN PAULSON:
This again?
Come on, birdbrain
Are you stupid
Or just insane?

The VULTURE stands still.

JOHN PAULSON:
I’ll say it once more
But I’m losing my cool
Go back to the mountain
You insolent fool

VULTURE:
You know what, John?
I have a hunch
I’ll see you soon
So let’s have lunch

The VULTURE takes off and circles JOHN PAULSON, beating his wings so violently that the A.T.M. receipt flies out of JOHN PAULSON’s hand and spins in a vortex in the street.
Read more: http://www.newyorker.com/online/blogs/goingson/2010/04/goldman-sachs-the-musical.html#ixzz0oRuPaBrO


On propaganda and mooncakes;

Apologies for leaving you shuckling oysters alone on Sunday, Beansprouts – have been reading several financial regulation papers for the purposes of a course this week. On the way home in the train, I was reading some fascinating papers and articles, including one of a treatise of Singapore’s growth as an international financial centre, and how glorious the stories of decisions and ramshackled policies! I think propaganda works too well for me for I find the topic utterly engaging and one that grows on me.

Truth to tell when I was in high school, we were similarly inundated with a series of three books on Singapore’s history- and being quite of a dilettante sort, I took away all the sensationalist facts (in Sherlockian manner in being drawn to the debonair and corrupt) and was not the least fired up by the politics (It discouraged, I supposed, by the fact that we were to be tested on the books’ content in the course of three lengthy test papers).

But reading politics within the financial is like adding the right olive to a dry martini, and the issues mingle giving rise to all sorts of interesting issues underlying the most banal details like capital adequacy and disclosure requirements. The reading between the lines. It reminds me of D describing to me once about the rat race in a cheese maze and how some other naughty mouse was nibbling bits and pushing others and so the maze was changing every few seconds…but I digress.

The course itself is basic. There is nothing which we have not learnt before, beyond detailed points on IOSCO principles etc. which are not for the faint of heart. It is the thoughts which are sparked off from the course readings, and noting Singapore’s policy choices undertaken by the central bank (amidst the different credit/financial environments) which are worth some thought. I am not writing well enough of my thoughts but maybe it will be the subject of a more practically written article rather than in this arena. One day perhaps, I will share these stories with you Beansprouts, and I promise to make them interesting with plenty of curious analogies.

It is now mooncake season, and everywhere in the building I see people heaving bags of mooncakes. It seems that conversations can be started with the phrase “double yolks?” and one of my favourite scholar juniors bought a box for her boyfriend only to be chastised by her mother that “you only give mooncakes to your boyfriends’ household when you are married!” Don’t ask me of the relation, but in that sense mooncakes, if the statement bears any truth, now takes symbolic significance together with red eggs, double-head abalones and piglets.

I am not much of a mooncake person myself, though I used to love the red wine mooncakes that E’s mother used to make. Maybe it was a bias towards the wine, for I was at the period then of pinot noir cravings. A while back I rather liked the snow skin ice cream versions. But these are plaything mooncakes which are not at all like the haughty, authentic versions which profess to be yolkier than the other.

Perhaps I’ll share my other lantern festival memories another time, for they have just returned suddenly in my mind, and the aftertaste is an altogether wonderful feeling.