Goldman Up At Night Wide Eyed and Contemplating Wetting the Bed

Goldman Sachs has come under so much criticism but has largely stuck to its knitting: making money and managing the risk that goes with making huge amounts of money. Article upon article, and politician upon politician has question the efficacy of selling a product to clients, while simultaneously taking a dim view of said product and hedging the risk.

Some politicians have suggested that Goldman's actions were akin to buying insurance on your neighbor's house, then helping to burn it down. It's a colorful analogy, and probably meaningless.

The better comparison would be buying insurance on your neighbor's house because they are smokers, tend to have electrical fires, and like to make love with lighted candles all over the house like people ridiculously do in movies. Oh, and the house is in a bad neighborhood, and the owner has been convicted in the past of arson.

Sometimes you get someone who puts it all in the correct perspective, like Elizabeth McDonald at Fox. A week or so back she made some observations about the whole Goldman selling Trojan Credit Default Swaps to Greece thing, pointing out that the reporting on Goldman has not been too accurate or meaningful.

But such support, or clarification of the obvious, is rare and quiet. And what should really have Goldman up at  night, wide eyed and wetting the bed is the financial legislation that Connecticut Senator Chris Dodd is pushing. According the New York Times, it would include some pretty harsh restrictions.

In addition, investment banks like Goldman Sachs and Morgan Stanley, which converted to bank holding companies in 2008 to take advantage of the Fed’s liquidity programs, would not be able to go back to their earlier status to avoid Fed oversight.

(N.Y. Times)

In times of dryness, lack of liquidity, you park your caravan next to the big pond, which is exactly what Goldman did. We've been waiting for them to flip back the other way. The clock is ticking. We don't know if this legislation could be retroactive to now, but if I were Goldman I wouldn't wait to see what happens. I would convert back to my old status, or go private, and then fight any legislation that seeks to impose conditions on money I received in 2008 that I didn't necessarily need, and was going to be compelled to accept if I refused.

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