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Hi, I just wanted to hear different views about this subject. Is the society better off with or without pure investment banks? looks to me a company like GS is just an agregate of atomic and anarchical individualities whose only target is to make money (just like the other pure IBs btw). Well it looks very rationnal but somehow when we see what they did helping greece hiding their debt...

There is no scientific method agreed upon for defining the society, and measuring how well off it is.

QuoteOriginally posted by: farmerThere is no scientific method agreed upon for defining the society, and measuring how well off it is.Nonsense. There are as many ways as there are social scientists -- although many of them may have significant overlap. However, there is no objective way because, like every perception, there must be a perceiver. Science has never been objective. It always requires scientists. The nearest scientists can get to objectivity is logical consistency. And logical consistency that is also comprehensive, falsifiable and creative makes very good science.

QuoteOriginally posted by: TheNaifHi, I just wanted to hear different views about this subject. Is the society better off with or without pure investment banks? looks to me a company like GS is just an agregate of atomic and anarchical individualities whose only target is to make money (just like the other pure IBs btw).Every Corporation that exists is solely there for making money. If they can diversify into some field where they think they can make money easily, they will. So, even thought the society might be better off without IBs like GS (at least in my opinion), I don't think you can use that argument as an excuse. One thing I will say is that before blaming corporations like GS, we also have to see where the public (regulators, govt.) went wrong. Most of the time (and I mean MOST OF THE TIME, Not all the time) they didn't do anything that the regulators were not aware of.

This question contains a false premise that investment banking is a wholly artificial construct that can removed from society. Instead, three conditions make IB inevitable:1. People and organizations have unused capital resources and seek some combination of return, risk, duration, and contractual terms associated with the delivery and return of that resource.2. Other people and organizations seek capital resources and can offer some combination of return, risk, duration, and contractual terms associated with the delivery and return of that resource.3. The mathematics of return, risk, and duration contain nonlinearities such that aggregating supply or demand changes the parameters of that supply or demand. For example, two high risk investments can combine to create a lower-risk investment. Matching people in group 1 to those of group 2 is a valuable service. Using fact 3 to pool the supply and demand for capital and to change the properties of supplied capital or of investments is a very valuable service. That makes investment banking a very valuable service and an inevitable process. That said, the industry is rife with misaligned incentives and opportunities for fraud. The point is that it not a matter of whether or not we have investment banking (conditions 1, 2, & 3 make IB inevitable in some form or another), but in HOW the functions of investment banking occur.I've not studied the GS case well enough to know if fraud occurred but I do see that the GS pattern (i.e., a contract that is zero-sum) is an unavoidable fact in many financial contracts. Any zero-sum financial contract (e.g., any futures contract) could be construed as fraudulent because the contract will lose money for one of the counter-parties. The problem is that reasonable people can reasonably disagree -- the buyer thinks the contract will lose money for the seller and the seller thinks that the contract will lose money for the buyer. Is that fraud?

QuoteOriginally posted by: Traden4AlphaAny zero-sum financial contract (e.g., any futures contract) could be construed as fraudulent because the contract will lose money for one of the counter-parties.What about, like, a contract to buy a new car. The buyer loses money EVERY SINGLE TIME. Would you say that fraud is therefore impossible in car sales?

If GS did not exist, where would we get our Treasury secretaries and presidential economic advisors?

QuoteOriginally posted by: acastaldoIf GS did not exist, where would we get our Treasury secretaries and presidential economic advisors?lol.... good one.

QuoteOriginally posted by: BornToBeTraderQuoteOriginally posted by: acastaldoIf GS did not exist, where would we get our Treasury secretaries and presidential economic advisors?lol.... good one.And things would probably not look like this at the Treas:US Treasury's bail-out profits top $10bn - Financial Times April 5"The US government has made more than $10bn so far on banks' repayments of bail-out funds, according to a new analysis that suggests taxpayers might turn a profit on the unprecedented help extended to the financial sector during the crisis. Goldman Sachs and American Express played a large role in boosting the US Treasury's coffers by agreeing to pay a favourable price for the warrants received in return for the aid, the study by the consultancy SNL Financial shows. But the Treasury's profits on its $250bn crisis-time investment in banks might quell the political backlash against the use of taxpayers' funds to help companies like Citigroup, Bank of America, Goldman and Morgan Stanley. "The government did not do the bail-out to make money but to provide stability to the financial system," said Russ Yates, one of the authors of the SNL report. "The government's job is not to make money off the private sector." News of the government's returns on its Troubled Asset Relief Programme comes as a high-powered commission into the causes of the crisis is due to grill Alan Greenspan, former chairman of the Federal Reserve, and Citi executives this week. Treasury still expects to lose $117bn on the entire Tarp Programme, which includes investments in the car industry and AIG, the insurer. But the SNL report suggests the financial sector's part of the plan, which was originally expected to cost $76bn, might prove profitable. The 49 companies that returned Tarp funds, which paid dividends on the government's preferred stock and either repurchased or let Treasury auction the warrants, yielded a profit of $10.5bn for the authorities, SNL found.Goldman and American Express were among the biggest sources of profits, generating an annualised return of 20 per cent and 23 per cent, respectively, after repurchasing warrants in July 2009. At the time, analysts said that Goldman, which was under intense political pressure over its pay practices and its behaviour during AIG's collapse, had offered Treasury a good price to buy back the securities. The government stands to make a further profit on its planned sale of its 27 per cent stake in Citi. However, investments in smaller banks might be loss-making, with some 28 lenders holding a total of $1.9bn in Tarp funds being regarded as undercapitalised, SNL said.Critics like Linus Wilson, a finance professor at the University of Louisiana, said the government's returns were largely driven by the surge in banks' shares over the past year. He added: "Treasury continues to get lucky. A year ago, few could have predicted the stock market would have been as high as it is today.""***Maybe they did just get lucky, maybe all of those ex-Goldman guys have some skill. *That* is the $10 billion question.

QuoteOriginally posted by: trackstarthe political backlash against the use of taxpayers' funds to help companies like Citigroup, Bank of America, Goldman and Morgan Stanley.The crime comes in the use of the word "like." What is the complete list and accounting of these "like" companies? The Treasury has committed to trillions in expenditures. What is the subset of "like" companies? Do they just mean to say the Treasury has spent trillions all over the map keeping these three companies alive?If anyone is saying the US treasury has turned a profit, heh... So let's see, the US treasury takes a loss, Goldman turns a profit... hmmm. The US treasury has not turned a profit. So we are right back to dog bites man, and no news story to write about.

QuoteOriginally posted by: farmerQuoteOriginally posted by: trackstarthe political backlash against the use of taxpayers' funds to help companies like Citigroup, Bank of America, Goldman and Morgan Stanley.The crime comes in the use of the word "like." What is the complete list and accounting of these "like" companies? The Treasury has committed to trillions in expenditures. What is the subset of "like" companies? Do they just mean to say the Treasury has spent trillions all over the map keeping these three companies alive?If anyone is saying the US treasury has turned a profit, heh... So let's see, the US treasury takes a loss, Goldman turns a profit... hmmm. The US treasury has not turned a profit. So we are right back to dog bites man, and no news story to write about.What a joke! The US treasury will never make it back on the bail out money. Just look at AIG and if you put fannie mae and freddie mac in the bag or even the weekly FDIC losses...

You certainly have some strong opinions for a Naif.But I will leave you to them.

The end of glass steagall has paved the way to the unprecedented speculative asset market we witness today.It was a former GS banker, Mr. Rubin who pushed the law together with former US President Bill Clinton. It was former GS Banker, Mr. Henry Paulson who suddenly used the TARP Funds to finance IB's & AIG, insteadof using them for buying back the so called toxic assets.It was GS that, in 2008, suddenly became a commercial bank, in order to be able to get TARP-Funds from theGovernment.If AIG had not been bailed out, how much money GS and Paulson & Co. would have made with all trades relatedto the Housing market?Today, the FED has created the perfect environment for another wave of speculation, financed by the steep yieldcurve and quantitative easing. Investment Banks become Ponzi units, the FED itself becomes a Ponzi unit. Thiscreates the unprecedented level of debt, we witness today.If we rebuild glass steagall, the deleverage effect from IB's would be so big, that it could spark some market turmoil. If we leave it like it is right now, we will need another bail out in 2 - 4 years. Total outstanding derivative liabilitiesand total credit on this world are just to big not to fail, one day, sooner or later.Yes, we would be much better of. Hyman Minsky

QuoteOriginally posted by: trackstarQuoteOriginally posted by: BornToBeTraderQuoteOriginally posted by: acastaldoIf GS did not exist, where would we get our Treasury secretaries and presidential economic advisors?lol.... good one.And things would probably not look like this at the Treas:US Treasury's bail-out profits top $10bn - Financial Times April 5"The US government has made more than $10bn so far on banks' repayments of bail-out funds, according to a new analysis that suggests taxpayers might turn a profit on the unprecedented help extended to the financial sector during the crisis. Goldman Sachs and American Express played a large role in boosting the US Treasury's coffers by agreeing to pay a favourable price for the warrants received in return for the aid, the study by the consultancy SNL Financial shows. But the Treasury's profits on its $250bn crisis-time investment in banks might quell the political backlash against the use of taxpayers' funds to help companies like Citigroup, Bank of America, Goldman and Morgan Stanley. "The government did not do the bail-out to make money but to provide stability to the financial system," said Russ Yates, one of the authors of the SNL report. "The government's job is not to make money off the private sector." News of the government's returns on its Troubled Asset Relief Programme comes as a high-powered commission into the causes of the crisis is due to grill Alan Greenspan, former chairman of the Federal Reserve, and Citi executives this week. Treasury still expects to lose $117bn on the entire Tarp Programme, which includes investments in the car industry and AIG, the insurer. But the SNL report suggests the financial sector's part of the plan, which was originally expected to cost $76bn, might prove profitable. The 49 companies that returned Tarp funds, which paid dividends on the government's preferred stock and either repurchased or let Treasury auction the warrants, yielded a profit of $10.5bn for the authorities, SNL found.Goldman and American Express were among the biggest sources of profits, generating an annualised return of 20 per cent and 23 per cent, respectively, after repurchasing warrants in July 2009. At the time, analysts said that Goldman, which was under intense political pressure over its pay practices and its behaviour during AIG's collapse, had offered Treasury a good price to buy back the securities. The government stands to make a further profit on its planned sale of its 27 per cent stake in Citi. However, investments in smaller banks might be loss-making, with some 28 lenders holding a total of $1.9bn in Tarp funds being regarded as undercapitalised, SNL said.Critics like Linus Wilson, a finance professor at the University of Louisiana, said the government's returns were largely driven by the surge in banks' shares over the past year. He added: "Treasury continues to get lucky. A year ago, few could have predicted the stock market would have been as high as it is today.""***Maybe they did just get lucky, maybe all of those ex-Goldman guys have some skill. *That* is the $10 billion question. I thought that the overall TARP trouble was more than a trillion. So whats 10 billions in more than a trillion? Less than 1%...

Poll here.P