SECTION TWO, PART FOUR

Children of a Lesser God: What I Didn't Tell You. I still haven't forgotten that I promised a European part to the Children of a Lesser God series, but I had another component to my favourite Wall Street house, and we (Australia) had the misfortune of having Lloydy in the country, pontificating on something, this week and he was picked up by the news with the sound-bite that it was risk aversion which was holding back economic growth. I couldn't leave that one on the table without some riposte! Lloydy built his line career skills in the commodities division of Goldmans, and I think specifically in the forex department. In the 80's there was a much more cavalier ( cowboy? ) reputation to the forex markets, where spoofing the market ( by falsely appearing to be a buyer, when really a seller; or spreading research/rumours when you were really in the other side to the transaction; or front running orders...which was even illegal then, but almost unenforceable due to the detection skills of the regulators, which relied almost exclusively on tattle-tails to be willing to adduce evidence) was the quick way to build dis-reputable profits. I suspect Lloydy was exemplary in assisting Goldies, otherwise he wouldn't have mounted the organisational ladder to his current position. I would have thought that risk aversion was a by-product of market participants trying to avoid dealing with Goldies, but there are too many chapters to be filled with those stories. The theme of the "lesser god" series is where lack of access to proper information/regulation, or deliberate use of legal jurisdictional elements create a differing and disproportionately slanted relationship between buyer and seller. Fair enough in the dog-eat-dog world of institutional investing, but what is totally imponderable is why did the regulators let such an egregious abuser as Goldmans escape Scott-free with a banking licence in September 2008, and not Lehmanns, without imposing controls on their prior or subsequent behaviour. The Goldmans diaspora must be a partial explanation, but it cannot be an complete one. The importance of the diaspora in a general sense cannot be underestimated, but the driver will always be money. The Children of a Lesser God moment which I wish to relate is, a number of years ago, the Capital Introductions team at Goldmans were doing a roadshow to raise institutional investor money, of around $1 billion, for a Merger/arbitrage/management buy-out fund called ESL Llc. Now ESL is the acronym of its founder, Eddie Lampert, part of the Goldman's diaspora. At the time of the raising, ESL had a significant holding in Sears, but you had the feeling that Eddie's business was already beginning to struggle, and he was wishing to right size his bets. Forget that the new capital raised was effectively helping Eddie do this; forget that Goldmans were going to receive significant capital raising fees; forget that Goldmans probably had Partners' funds in ESL, and were also downsizing. What I do know, is that as a privately determined unit price, struck just before Sears took a big bath, that anyone buying into that capital raise was going to be a chump....no disclosure/no honesty....who cares, it's a dog eat dog world. And Lloydy wonders why we haven't returned to the halcyon days of 2006 mindless risk taking. Maybe, just maybe, Lloydy, they got sick of the standard practice of two pages of legal disclaimer, without the honesty which should also accompanying dealing with clients...what did fabulous Fab, and Paulson cook up, which wasn't illegal, but certainly was immoral. Maybe, just maybe, Lloydy the clients now want relationships, not just "transactions ". But principally, Lloydy, maybe they just don't trust anymore. When groups behave appallingly, never show remorse, use their diaspora to arbitrarily advantage themselves, and then lobby to maintain an outrageous business positioning, maybe they don't deserve to exist...they have forfeited their social licence to operate, and when the regulators continue to allow that group to operate, they ( the regulators) also need to be replaced with someone/something that understands social obligations. Sure as hell, even in Australia, I am bearing some direct or indirect impost for the taxpayer guarantee that Goldmans received, and I am beginning to think that no taxation without representation is a more than reasonable clarion call. Lloydy, its time to repent! Society deserves better.