Goolsbee: Goldman Sachs CEO “not going to win any popularity contests”

By Evan Harris

Apr 25, 2010 10:59am

White House Economic Adviser Austan Goolsbee told me that Goldman Sachs CEO Lloyd Blankfein is “not going to win any popularity contests” after the release of e-mails which show company officials including Blankfein discussing how the company was profiting from the crash of the housing market.  During my “This Week” interview Goolsbee added that “over a period that ordinary Americans’ pensions, houses et cetera were collapsing in value, they were actually making significant money off of it.  If that’s true… we’ve got to end the conflicts of interest and that the Volcker rule is really on point on that I think is also highly relevant.”


Tennessee Republican Senator Bob Corker acknowledged that the e-mails “do not read well” but that he would “rather
wait and see how this investigation unfolds before making any judgments.”


Democratic Senator Sherrod Brown said, “these emails signify that there are all kinds of conflicts of interest on Wall Street… .  That’s why we need really strong reform that will separate the proprietary trading from banking functions.  I think that says it more articulately and more forcefully, that example, than anything we’ve seen so far.”


WATCH VIDEO HERE:


 


    TAPPER:  Before we start with Wall Street reform, I do want to talk
about these Goldman Sachs memos, these emails that the Senate Permanent
Subcommittee on Investigations has released, emails that seem to show
executives rejoicing as the housing market crashed, and in fact, they
seem to contradict the impression given by Goldman Sachs that they lost
money as the mortgage related investment crash happened.  In a private
email, Goldman CEO Lloyd Blankfein wrote in November of 2007, “Of course
we didn’t dodge the mortgage mess.  We lost money, then made more than
we lost because of shorts.” 


    Senator Brown, I want to ask you.  What do these emails signify to you?


    BROWN:  Well, these emails signify that there are all kinds of
conflicts of interest on Wall Street, that there are — that Wall
Street, while working for its clients and working against its clients in
the same sort of bundled toxic securities, and that’s why we need the
Volcker rule.  That’s why we need really strong reform that will
separate the proprietary trading from banking functions.  I think that
says it more articulately and more forcefully, that example, than
anything we’ve seen so far.


    TAPPER:  Senator Corker, doesn’t Senator Brown have a point?  This
is exactly why people think that proprietary trading, that is when a
bank uses its own money to invest, should not be the same, it should not
be in the same firm as trading for commercial banking, for clients? 
That there is an inbred conflict of interest there.


    CORKER:  Well, I can understand the sentiment.  I know that
certainly the emails do not read well.  I look forward to seeing what
the SEC investigation brings forth, and the Senate investigation through
this subcommittee brings forth.  At the end of the day, though, some of
that has to do with making markets.  I am in no way defending sort of
the attitude expressed in the emails, but I think we’re better off
waiting to see exactly what has taken place.


    I think, you know, at the end of the day, instruments are set up on
Wall Street.  People take either side of it.  There are some conflicts
of interest that can exist and do need to be looked at, but I’d rather
wait and see how this investigation unfolds before making any judgments.


    TAPPER:  Austan, is there anything in the legislation that Democrats
are pushing that President Obama wants to pass, is there anything that
would have prevented what Goldman Sachs is accused of having committed?


    GOOLSBEE:  You know, I don’t know the exact details, but there are a
number of things that would go directly at the heart of some of these
issues that are raised in these cases, like with securitizations, that
the people who originate the securities have to maintain some ownership
so that if they pack it full of things that are going to fail, they
themselves are going to lose money when they do it.  I’m certainly not
going to comment on independent, you know, regulatory investigations,
but these emails that are released, the CEO of Goldman is not going to
win any popularity contests when over a period that ordinary Americans’
pensions, houses et cetera were collapsing in value, they were actually
making significant money off of it.  If that’s true, I think Senator
Brown’s point, that we’ve got to end the conflicts of interest and that
the Volcker rule is really on point on that I think is also highly relevant

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