At a panel yesterday in Davos, Goldman Sachs president Gary Cohn, perhaps testing out a few new jokes he’s hoping to use at the Laugh Factory‘s open mic night next week, made several interesting statements. The first was his reason for why banks shouldn’t be subject to greater regulation.
Mr. Cohn warned that greater regulation of banks would push risky activities into the “shadow banking sector” which he said was “less regulated” and “opaque.”
Mind you, we have no reason to assume Gary was saying any of this out of self-interest. He’ll have you know Goldman Sachs LOVES regulation. The more the better. He’s just doesn’t want Goldman and the other banks to be selfish and take more than they need when there are others who could really benefit from increased supervision, like the “unregulated” businesses that apparently caused the last financial crisis and might cause another, if we’re not careful.
“What I most worry about,” said Mr Cohn, “is that in the next cycle, as the regulatory pendulum swings, we are going to have to use taxpayer money to bail out unregulated businesses that, unlike the banks in the last crisis, may not be able to repay them.”
He continued.
“The most recent financial crisis was caused by institutions that didn’t know how to adequately manage risk and were overleveraged. And I worry that if there is another crisis, it will be because the same institutions have failed to learn from the mistakes of the past,” he added.
Unfortunately, some people were less than amused, like the hedge fund managers who didn’t like what Cohn was driving at.
One large hedge fund – a client of Goldman – said Mr Cohn’s comments were “ill-judged and ill-informed”. Another accused Mr Cohn of behaving “cynically” to try to distract regulatory attention. “Until 18 months ago, Goldman Sachs was the biggest hedge fund in the world,” this person said, referring to the bank’s sizeable proprietary trading activities, which allowed the bank to speculate with its own capital. “These statements are just false. Hedge funds are regulated. We didn’t cause the financial crisis. We didn’t take bail-out money,” Richard Baker, the president and chief executive of the Managed Funds Association, the industry’s main trade association, told the Financial Times.
Goldman President Warns On Bank Rules [FT]
Hedge Funds Rebuke Goldman Regulation Call [FT]
Is baldness a requirement for success at GS?
“We had to destroy the regulation in order to save it.”
-G. Cohn
What a dick.
“Hedge funds are regulated” — HAHAHAHAHAHAHA. I haven’t read anything so stupid and moronic for at least 4 hours. Hedge funds are regulated, this much is true, but very lightly regulated — no public disclosure, no broker/dealer requirements, just b.s. ’40 Act filings. Total light touch, signifying nothing.
“We didn’t cause the financial crisis.” Another howler. As if shorts had nothing to do with the collapse of Bear Stearns and Lehman Bros. Massive swaths of the hedge fund community were actively and passionately trying to bring down major players all over the financial landscape. And they succeeded. And they made fucktons of money doing so.
Mr. Cohn has been talking to himself again. No logic. Just self-justification with a tinge of madness.
Regulation is required to make sure that those happy bankers (esp. Goldman) don’t continue to act without thinking. See exhibit A above.
You can short a healthy company forever and all you’ll do is go broke. Shorting LEH and BSC is not what caused the financial system to seize up.
You can short a healthy company forever and all you’ll do is go broke. Shorting LEH and BSC is not what caused the financial system to seize up.
So shorts are the reason senior creditors are going to get 21 cents on the dollar? The part where Lehman was such a disaster as to wipe out that much of its capital structure had nothing to do with it? What exactly is wrong with shorting a company that insolvent and making a fuckton of money doing so? Don’t blame the messenger, especially when they were right.
That’s telling ‘em!!
-That Overstock.com Guy
He should shorten his name to Con.
Yeah, we all need the ability to short companies, countries, even wealthy individuals. Why? Because we can.
Self serving comments from a delusional plutocrat
you sir sound like a very well-read, truth-seeking & rational person, but you forgot to sign SUNY-Binghamton BSchool student 2012.’
dont hate the players
“I haven’t read anything so stupid and moronic for at least 4 hours. Hedge funds are regulated, this much is true” – guy who contradicts himself in barely 2 sentences.
..”What I’m most concerned about is giving the impression that Loyd and I are bald, which, in fact, we are not. Our hair is highly transparent”
..”What I’m most concerned about is giving the impression that Loyd and I are bald, which, in fact, we are not. Our hair is highly transparent”
you’re an idiot.
Did you get lost on your way to Business Insider?
Did you get lost on your way to Business Insider?
“I haven’t read anything so stupid and moronic for at least 4 hours”
until you read your own comment?
I’m short your regulation.
- Guy who likes making t-shirts
Love it! This kind of debate is what makes markets.
Anon Analyst,
Keller Zabel,
CFA L1 candidate
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