Who is to blame for the tsunami of liquidity?
“We all f***** up. Government. Rating agencies. Wall Street. Commercial banks. Regulators. Investors. Everybody.”
Observers familiar with Goldman Sachs and Bear Stearns believe that the quality of the people at each is similar but the language of the two firms could not be more different, recounts William D. Cohan in ‘House of Cards: How Wall Street’s gamblers broke capitalism’ (www.penguin.com). “It’s almost like a piece of conceptual art or symbiotics. It was like reading Umberto Eco – language begets culture.”
Citing a person who knows both firms well, Cohan informs that at Goldman Sachs, the language is very specifically less aggressive and less hostile. “So as an example, if a salesman and trader are talking about how they did a trade with a customer and they think there’s a significant business opportunity that came out of that trade, at Bear Stearns they might say, ‘I just ripped that f*****’s head off. I’m going to make a lot of money on this trade. That’s f****** crazy.’”
How would a salesman and trader in Goldman Sachs describe a similar situation? “That’s a great opportunity. That was a very attractive and commercial price you purchased those securities at and I think we’ll have a very interesting economic opportunity in the near future.’”
They just said the same thing, but the manifestation of the culture comes out of the different uses of language, explains Cohan. “One protects the reputation of the firm. One presents the firm as a far more intelligent being, puts the firm in a position to be much more sought after for its thought processes, and protects it obviously legally.”
In contrast, the other one, while not doing anything wrong, may use a language that can make people suspect it. “That issue was very pervasive at Bear Stearns. The firm was never as aggressive as its reputation. But its language, its culture, and its swagger put it more at risk than its actual actions.” Bear’s swashbuckling, siloed culture also put it at risk for the occasional quirky crime, the author adds.
He wraps his book with the thoughts of Alan D. Schwartz, the last CEO and chairman of Bear Stearns before its acquisition by JPMorgan Chase & Co. “To Schwartz, the near-collapse of the global financial system was caused by many factors, from Hyman Minsky’s financial instability hypothesis – which suggests that whenever the economy is stable for a long period, the financial markets create their own instability – to the dramatic and unprecedented surge of global wealth.”
According to Schwartz, the blame for tsunami of liquidity cannot be on someone or something. “In truth, it was a team effort,” he says. “We all f***** up. Government. Rating agencies. Wall Street. Commercial banks. Regulators. Investors. Everybody.”
“We all f***** up. Government. Rating agencies. Wall Street. Commercial banks. Regulators. Investors. Everybody.”
Observers familiar with Goldman Sachs and Bear Stearns believe that the quality of the people at each is similar but the language of the two firms could not be more different, recounts William D. Cohan in ‘House of Cards: How Wall Street’s gamblers broke capitalism’ (www.penguin.com). “It’s almost like a piece of conceptual art or symbiotics. It was like reading Umberto Eco – language begets culture.”
Citing a person who knows both firms well, Cohan informs that at Goldman Sachs, the language is very specifically less aggressive and less hostile. “So as an example, if a salesman and trader are talking about how they did a trade with a customer and they think there’s a significant business opportunity that came out of that trade, at Bear Stearns they might say, ‘I just ripped that f*****’s head off. I’m going to make a lot of money on this trade. That’s f****** crazy.’”
How would a salesman and trader in Goldman Sachs describe a similar situation? “That’s a great opportunity. That was a very attractive and commercial price you purchased those securities at and I think we’ll have a very interesting economic opportunity in the near future.’”
They just said the same thing, but the manifestation of the culture comes out of the different uses of language, explains Cohan. “One protects the reputation of the firm. One presents the firm as a far more intelligent being, puts the firm in a position to be much more sought after for its thought processes, and protects it obviously legally.”
In contrast, the other one, while not doing anything wrong, may use a language that can make people suspect it. “That issue was very pervasive at Bear Stearns. The firm was never as aggressive as its reputation. But its language, its culture, and its swagger put it more at risk than its actual actions.” Bear’s swashbuckling, siloed culture also put it at risk for the occasional quirky crime, the author adds.
He wraps his book with the thoughts of Alan D. Schwartz, the last CEO and chairman of Bear Stearns before its acquisition by JPMorgan Chase & Co. “To Schwartz, the near-collapse of the global financial system was caused by many factors, from Hyman Minsky’s financial instability hypothesis – which suggests that whenever the economy is stable for a long period, the financial markets create their own instability – to the dramatic and unprecedented surge of global wealth.”
According to Schwartz, the blame for tsunami of liquidity cannot be on someone or something. “In truth, it was a team effort,” he says. “We all f***** up. Government. Rating agencies. Wall Street. Commercial banks. Regulators. Investors. Everybody.”
