While the words are nice, the actions / changes thus far can be ambitiously labeled as muted. But lest we believe the dogma of years of getting pounded into our heads the ability of these magicians to create silk purses via sow ears, in retrospect we see alas... the emperor had no clothes. The value add of our oligarchs' financial innovation is nowhere near to reality as has been advertised for years as THE predominant reason for massive compensation. This had only been whispered in dark corners or on pages of irresponsible blogs (hand raised), but even one of the top honchos of the silk purse society, Goldman Sachs' (GS) Lloyd Blankfein, has come clean. But don't let that little fact stop the ratio of economic utility to pay staying higher than any other industry. Clawbacks for a decade of silk purses? That's outrageous. Let us be content that lessons were learned after much mulling on private yachts.
- Lloyd Blankfein, chief executive of Goldman Sachs, on Wednesday admitted that banks lost control of the exotic products they sold in the run-up to the financial crisis, and said that many of the instruments lacked social or economic value.
- The startling message from the head of the worldâ€™s most high-profile investment bank echoes comments by Lord Turner, chairman of the Financial Services Authority, the UK regulator, who provoked controversy last month when he questioned the social value of much investment banking activity.
Oh there is great social value to a tiny sliver of population. I'd count the value in hundreds of billions.
- Mr Blankfein said: â€œThe industry let the growth and complexity in new instruments outstrip their economic and social utility as well as the operational capacity to manage them.â€
- Acknowledging that some products had become too complicated, Mr Blankfein said: â€œWe have a responsibility to the financial system which demands that we should not favour non-standard products when a clientâ€™s objective and the marketâ€™s interests can be met through a standardised product traded on an exchange.â€
Speaking of closing barn doors long after the horses left....
- A growing number of bankers are admitting in private that the complexities of many structured products were excessive in the boom years. â€œHeâ€™s right. Certain things probably went too far,â€ said one London executive.
- One banker said... But I agree with what he said â€“ these were silly bets and they were absolutely useless.â€
And that's pretty much what a lot of the innovation in the investment banking / global financial supermarket world was about - bets. High stakes poker with OTHER people's money. Levered up to the gills. Heads they win; tails the taxpayer comes to the rescue.
What has changed other the losing Lehman Brothers? Very little - in fact the power brokers are now even bigger and too bigger to fail. And now they know the more entangled they get within the global system, the more risk they can take because they effect the entire world spider web of finance. They just need a new group of suckers to be brought to the table to sell their snake oil too.
If you believe behavior will be any different in 18-30 months once the false chagrin wears off, I have a silk purse to sell you. It's a new innovation of mine....
(for a reality check on what is happening in terms of action, rather than mostly empty words - the Wall Street Journal hit the spot yesterday - watch their gilded hands, not their mouths)