One gets the impression that Goldman Sachs (GS) is doing everything it can to make it stand apart from the mess facing the industry. The CFO recently talked up its desire to get out from under the TARP this year, making it the first company to make definitive comments like this.
And now CEO Lloyd Blankfein offers a detached op-ed in the FT, whose main point is: financial innovation is at the heart of a healthy economy, so don’t over-regulate or take away huge paydays. First he starts off though with some boilerplate about how we got here: Risk models weren’t up to snuff, too many companies outsourced their analysis to the ratings agencies, and complexities got the better of finance. All pretty straightforward. His conclusion:
After the shocks of recent months and the associated economic pain, there is a natural and appropriate desire for wholesale reform of our regulatory regime. We should resist a response, however, that is solely designed around protecting us from the 100-year storm. Taking risk completely out of the system will be at the cost of economic growth. Similarly, if we abandon, as opposed to regulate, market mechanisms created decades ago, such as securitisation and derivatives, we may end up constraining access to capital and the efficient hedging and distribution of risk, when we ultimately do come through this crisis.
Most of the past century was defined by markets and instruments that fund innovation, reward entrepreneurial risk-taking and act as an important catalyst for economic growth. History has shown that a vibrant, dynamic financial system is at the heart of a vibrant, dynamic economy.
Translation: don’t take away the gravy train.