Saturday, March 17, 2012

Wall Street on the way to becoming a bit player in world finance? The real meaning of the Goldman Sachs resignation letter.

March 17, 2012


Investors are wanting transparent yield not murky promises. Aivars Lode



“Greg Smith’s letter adds fuel to an idea going mainstream that the markets are a rigged game,” says Chris Mayer of the Goldman Sachs exec who not only burned his bridges, but poisoned the river below the bridges by publicly resigning in The New York Times.

“In the world of professional baseball,” Chris explains, “the worst crime you can commit is against the integrity of the game. Baseball banned Pete Rose for life because he bet on games while he was a manager of the Reds. Baseball banned ‘Shoeless’ Joe Jackson and seven other White Sox players for throwing the World Series in 1919.”

“You could be a druggie or a rapist and still play ball. But do something to damage the perception that what people are watching is a legitimate athletic contest and not a rigged game and you are out — for good. It is a stiff penalty because the game knows that without that perception, it is out of business. Fans won’t come to the ballpark or watch games if it is all a farce.”

“I think the storm around Greg Smith has touched a similar chord. Goldman Sachs is almost synonymous with Wall Street. If people widely believe Goldman is actively trying to screw its clients, then the game is up. No one wants to play. The public markets suffer. The ability of the nation’s companies to raise large amounts of capital is impaired. And Wall Street’s role in the world is much diminished.”

“This is already happening, as the world’s financial axis spins now not only on New York, London and Tokyo, but also Sao Paulo, Dubai, Mumbai and other market hubs. Greg Smith and Goldman Sachs just hasten that process along.”

[Ed. Note: The process Chris describes is a central theme in his new book, World Right Side Up — wealth and power shifting away from the West back toward China, India and other places that dominated trade for the better part of recorded history.

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