Short Memories on Wall Street

Fascinating piece in New York Magazine this week on how Wall Streeters are adapting to the new realities presented by the financial crisis.

The most telling parts of the piece, however, come not from the writer of the story but from a source identified only as a "Goldman vet"

“When I talked to my friends in November and December at firms like Goldman, they would tell me, ‘If the government doesn’t bail us out, we’re going down.’ They really thought they were going to zero, and without exception, they all forget that now. They forget that their company’s stock was going to zero. It’s a state of delusion; they don’t remember those days. The flip side of that is, every guy except the Goldman guy remembers that Goldman was bailed out.”


It's pretty astonishing--to put it mildly--that the Wall Street crowd has already forgotten about the TARP/bailout process which began just months ago. Indeed, this sort of "forgetfulness" says a lot about their maturity and intelligence--an intelligence, by the way, that they insist is worth millions of dollars per year in salary and bonuses.

The unrepentant selfishness and sheer stupidity on display in this piece should serve as a strong reminder of how we arrived at this crisis in the first place.

PS--If anyone on Wall Street would like to see a place where the "world has been turned on its head" please book a plane ticket to New Orleans, then drop me an e-mail and I will personally drive you to the Lower 9th Ward.

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    I heard on NPR this afternoon (5.00 / 2) (#7)
    by sallywally on Mon Apr 20, 2009 at 06:11:45 PM EST
    that the hotshot of Bank of America said their profit was so high this quarter because of the company, the "product mix," the other compan hotshots, etc.

    So he couldn't even offer a cursory thank-you for the money we each provided to BAIL HIM OUT????

    When their memories aren't hazy... (5.00 / 1) (#9)
    by Ethan Brown on Tue Apr 21, 2009 at 12:07:10 AM EST
    they're finding new and interesting ways to report earnings. "Financial innovation" at its best:


    Yeah (none / 0) (#1)
    by Catch 22 on Mon Apr 20, 2009 at 04:53:34 PM EST
    Goldman forgot about TARP which is why they are talking about paying it back - because they forgot about it. LOL They just don't remember it, but yet Goldman talks about it daily in the news. Unbelievable.

    And what is up with today? Is it Anonymous Source day? Are we to belive a person who probably does not exist?

    I took it as meaning that (none / 0) (#3)
    by of1000Kings on Mon Apr 20, 2009 at 05:24:02 PM EST
    the Goldman guys forgot WHY they needed TARP...

    because without it they would have all been without their current jobs...

    that's what they have already forgot...
    but that's the kind of person that is hired for that job...short memory, short foresight...


    I really really (none / 0) (#5)
    by Catch 22 on Mon Apr 20, 2009 at 05:29:38 PM EST
    doubt that they forgot why they needed the money. They are not out of the woods by a long shot, so how could they forget what has been an ongoing drama? Not possible.

    I only hope you're right... (none / 0) (#6)
    by of1000Kings on Mon Apr 20, 2009 at 05:31:25 PM EST
    I've heard too much 'let's just forgot what happened and how it happened and move on' talk to believe this, but i do hope you're right...

    Another way of looking at the comment (none / 0) (#2)
    by Green26 on Mon Apr 20, 2009 at 05:09:07 PM EST
    of the Goldman vet is that it's not representative of what people on Wall St were actually thinking last fall.

    I work with Wall St types all the time, have been in NYC 4 times since the finanial crisis hit, and never heard a single Wall St person say what the Goldman vet said.

    TARP (none / 0) (#4)
    by Dadler on Mon Apr 20, 2009 at 05:26:35 PM EST
    To Assist Rotting Paradigms
    The Asses React Prolifically
    Taking Astonishingly Rosy Poops

    Rosy Poops! gotta be the winner (none / 0) (#11)
    by DFLer on Tue Apr 21, 2009 at 08:54:42 AM EST
    of the TARPS anagram contest, speaking for me only.



    Meanwhile the BKX staggers 10% (none / 0) (#8)
    by reslez on Mon Apr 20, 2009 at 11:22:33 PM EST
    on open after a random nutter claims on his blog to have a leaked copy of the stress test results. This is not a market with a ton of confidence in the banks. Treasury added fire to the smoke by claiming it doesn't have the stress test results when it almost irrefutably already does.

    (The BKW is an index of several large bank stocks.)

    The source is a white supremacist organization. (5.00 / 1) (#10)
    by Green26 on Tue Apr 21, 2009 at 02:09:31 AM EST
    From the last page of the linked article:

    "The Turner Radio Network is described by some monitoring groups as a white supremacist organization."

    Sounds like bad information to me.


    securities, fraud or financial engineering? (none / 0) (#12)
    by Jlvngstn on Tue Apr 21, 2009 at 01:37:51 PM EST
    what is the root of the problem?

    Actual value of SubPrime loan book 2007 1.3 trillion

    Actual % of homes 90 days delinquent = 25%

    25% of 1.3 trn = 325 bn

    Of course you don't know the value of the homes so it is estimated based on total loan volume so a few billion give or take is assumed.

    To solve the problem we could have purchased 50% of the subprime loans at cost for 650 bn, restructured them to make them affordable at cost for the bailout package of and had 50 bn left over.

    However, since they were sold through financial engineering and wizardry and gross leverage, we are told that unbundling is too complex and we still don't know how much is at risk.  refinancing at cost would not have given us full return of value on those loans as we would have had to discount them to make them affordable.  

    But for kicks and giggles let's assumele that we bought half those loans even though only 25% are at risk and renegotiated them down 20%, but extended the life of the loan 5 years (gives you more interest).  20% of 650 bn is a big number, 130 bn loss right off the top.  I don't know how to calculate the 5 extra years of interest (and some will pay off early) but that has to mean at least 20 bn but even if it doesn't, 130bn loss is the equivalence of 5 f-22's.

    So instead of having record levels of unemployment, record earnings losses for corporations, record foreclosures (not yet but it will be), record bankruptcies (not yet but will be) etc etc.

    So we could have cancelled 10 f-22's and bought the mortgages and moved on with a loss of 130 bn which is not really a loss considering the monumental failures of the F-22....