Dear Wall Street,
Hey, it’s your cousin Main Street again. Hadn’t heard from you after our letter last week, and frankly we’re a little hurt. We weren’t asking for much. Just for you take some time to honestly consider how that a deal might affect Main Street. And if you come to the conclusion that the deal will likely be bad for Main Street (and bad for America), we just wanted you to move on to something else.
We don’t think that this is too much to ask. But maybe you disagree. Or maybe you’re just too busy to get back to me.
It’s been a busy couple of days for you. I saw that a number of Goldman Sachs executives, including CEO Lloyd Blankfein, testified before a Senate committee earlier this week. That must have been tough for you, despite the fact that the committee was staffed by often disorganized and confused Senators. They kind of nailed you, didn’t they? Didn't help Wall Street's image problem much, did it?
Now we know that you think that Main Street has lots of misconceptions about Wall Street, but that hearing gets to the heart of what we’re writing to you about. The big issue during Blankfein’s testimony was whether or not Goldman had the obligation to tell investors it was shorting a product that it was selling to investors as a long-term investment. In other words, Goldman put together a mortgage-backed security fund that it was selling to investors, who bought shares in that security believing that it would increase in value and that they would ultimately make money. Goldman did not dissuade them of that belief. Meanwhile, Goldman was betting against the very same investment.
Now, the way we look at it, this poses a problem. We hate to quote elected officials, but Sen. Carl “S-Bomb” Levin had a point when he told Blankfein:
“When you sell something to a client, they have a right to believe that you want that security to work for them. In example after example... we're talking about betting against the very thing you're selling, without disclosing that to that client. Do you think people would buy securities from you if you said, 'you know, we want you to know this, we're going to sell you this, but we're going out and buying insurance against this security succeeding. We're taking a short position'... That's a totally different thing from selling a security and no longer having an interest in it... Is it not a conflict when you sell something to someone, and then are determined to bet against that same security, and you don't disclose that to the person you're selling to?”