A history of forgetting
"Some on Wall Street forgot that behind every dollar traded or leveraged, there is a family looking to buy a house, pay for an education, open a business or save for retirement," President Obama said on Thursday. Steve Pearlstein doesn't think "forgot" is quite the right word. "Uninterested" is more like it.
I honestly don't know whether Goldman violated Section 10(b) of the Securities Exchange Act of 1934. What I do know is that the facts outlined in the government case are a powerful and convincing reminder of Wall Street's complete and utter amorality. There, concepts like truth, justice, fairness, trustworthiness, duty of care, right and wrong are now totally without meaning. There is only buy or sell, long or short, win or lose. ...
In a trading culture, because buyer and seller are both customers, the Wall Street firm owes its loyalty to neither. It's free to be loyal only to itself. And things get even more complex when firms like Goldman use their own capital to take positions without disclosing it to anyone.
The fundamental truth about Wall Street firms is that they succeed by having better information than most of their customers. They gain this edge by doing more trades, in a wider variety of markets, than most of the people they trade with. And they gain it by underwriting the securities and structuring the derivatives that are being bought and sold.
More than the skill of its traders or the brilliance of its executives, it is this information asymmetry that is the source of Wall Street's outsize profits. It is information asymmetry that allows Wall Street to preserve its oligopoly and keep upstart competitors from gaining a foothold in the market. And as the SEC has reminded us once again, it is this information asymmetry that offers opportunities to manipulate markets and pull the wool over the eyes of even sophisticated investors.
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