Goldman Sachs Round Up

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As I mentioned in class, as the Senate Hearings continue this week is producing a range of opinions.

David Brooks, a conservative columnist for the NewYork Times, sees a typical story of dumb politicians:

First, as is traditional in our culture, the elected leaders of the clueless establishment have summoned the leaders of Goldman Sachs to a hearing so they can have a post-hoc televised conniption fit on the amorality of Wall Street.

Paul Krugman, now considered  a progressive, but I am old enough to remember him being disliked by the left for arguing for free trade back in the 1990s, is reliably more focused on economics in “Looters in Loafers.”

We’ve known for some time that Goldman Sachs and other firms marketed mortgage-backed securities even as they sought to make profits by betting that such securities would plunge in value. This practice, however, while arguably reprehensible, wasn’t illegal. But now the S.E.C. is charging that Goldman created and marketed securities that were deliberately designed to fail, so that an important client could make money off that failure. That’s what I would call looting.

Part of his article relies on the investigative reporting of ProPublica on Magnetar, a hedge fund that modeled much of what Goldman Sachs is accused by the SEC of doing, as presented in this podcast: Inside Job.

For a more comprehensive overview, here is our friend Bethany McLean (here on the Daily show) (of the Smartest Guys in the Room) on the Goldman Sachs story:

That is, there are no good guys here. It’s dishonest and ultimately dangerous to pretend that Goldman is the only bad actor. And the worst actor of all is the one leading the charge against Goldman: our government.

Finding Fact Through an Aggregate of Opinion

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As I wrote about last week, my interest in the Great Recession lies in exactly what caused the events leading up to the crash.  Now, I believe that most of my information will be derived from subjective feeds such as interview transcripts, court proceedings, and blogs about the crash.  The reason I believe this type of information is just as useful (if not more) than objective data because it incorporates a humanist perspective into the equation.  And really, if it weren’t for the inherent human flaws in the system, the Recession may have never of happened (plug for Adam Smith there). Continue reading

Next steps for paper

This post is due Friday by 4 p.m. instead of the usual Wednesday.

By now, you have a topic. If you do not, you can still switch or even write a new post testing out an idea. I think it is a good idea to start with some aspect of the Great Recession you want to learn more about.

Once you have a general idea of a topic, you have explored it through last week’s post. Now you can ask next questions. For example, why did this happen? Who was involved? What are the causes and what are the outcomes? At what level of analysis do I need to focus? What concepts or theories that we have learned seem relevant?

This brings us to the next post. With your next questions, you are going to need more info on X, where X is your topic and questions you have. Recall what I said in class, you are making yourself more of a relative expert on your topic and using your research skills and the analytical tools of organization theory to analyze or explain some aspect of the Great Recession.

Hence, we have this general flow:
Topic→ Your preliminary exploration→ Next Questions→ Need for more data or information.

Where will you get more information or data?

Continue reading

Whose Fault Was It? Reagan? Greenspan? Someone Else? Everyone?

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I really like that Jordi posted that first quote regarding history and those who do not know it are doomed to repeat it.  In fact, when it comes to the Great Recession as a whole, I’m not really concerned all that much about learning exactly what happened during the crash.  I think everyone is pretty well aware, having lived through it, what happened.  Moreover, as we fix everything over the next half a decade, people will be paying attention to what regulations are set in place and what other measures are taken to “prevent” this from happening again — or at least try to.  Continue reading

Learning About Household Leverage (no, not the popular TNT drama series)

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When asked to investigate the economic recession of 2007, I was really at a loss for inspiration.  The financial crisis was something that I really did not know much about.  However, one thing I did know is that the housing bubble burst and at least partially caused the recession.  So I began my educational journey by learning about household leverage and the housing bubble. Continue reading

Resources for Understanding the Great Recession

“Progress, far from consisting in change, depends on retentiveness. When change is absolute there remains no being to improve and no direction is set for possible improvement: and when experience is not retained, as among savages, infancy is perpetual. Those who cannot remember the past are condemned to repeat it.”

George Santayana

Last night’s blog council turned the tables on me and asked me to come up with a list of good resources to get more background on the great recession.  They compelled me to write a post.

Here are some good resources.  Choose one and, to repeat the BC’s instructions:

2. Pick a topic from one of the resources (can be a podcast, an article, or something else).  This topic should probably be a starting point for the final paper that you will write.

3. Write an engaging and informative post reacting to your chosen topic on the financial crisis.  Share your thoughts, your take on the situation, your reaction to the point of view presented, etc.

4. I AM ADDING: Do not repeat the source you use.  When you find one, paste what it is in the comments so others can check.  Be sure to include title and URL link.

Continue reading

What the H*&##*!&! Happened to the Economy?

Here are the initial questions you all were interested in learning more about.  (PS, note that this is the first use of the “What is Going On”category which is different from our blog posts about organization theory.

  • What was the role of derivatives and securitization of risk-related products? (What is a risk-related product?  Do you mean securitization of risk?)
  • Why do companies put so much emphasis on share price?  Did that lead to misleading financial statements and the collapse of firms?
    Same person: Did consumer patterns in US influence this recession?
  • How can housing bubble issues be changed for the future to prevent problems?
  • I would like to know if there have been any new regulations that banks must abide by when giving out loans or if these policies remain the same.
  • What exactly determined which financial organizations received bail outs over others?
  • What were some of the first signs and in noticing these, what could have been done as far as organizations getting involved?
  • I would like to know who got hit the hardest?
  • I would like to better understand the recession in relation to past recessions.
  • Creation of the banks’ incentive system for loans given out (by managers).  Why?  How was it meant to function? [I think you mean how was the incentive system put in place by mangers supposed to function?]

Same author: Or the logic of the political decision to make banks give loans to people who would not normally qualify.  { I think you mean either the Community Reinvestment Act and/or the role of Freddie and Fannie Mac?  Otherwise, how did a political decision drive loan practices?]

  • I want to know more about why there so few regulations about trading derivatives and others [other what?]  Also, if there were regulations, why did everyone look the other way?
  • What else caused the collapse besides the sub prime mortgages?
  • What regulations expired to allow this to happen and what regulation will be placed in the future to stop a recurrence?