Much is being made of Goldman Sachs ($GS) CEO Lloyd Blankfein lawyering up. It’s unprecedented. Matt Taibbi’s article finds him guilty before having a trial. If you are a regular reader of this blog, you know that there is no love lost between me and the investment bank traders of Wall Street($MS, $BAC, $BX, $BLK, $C). Taibbi’s article brings up some great points, and shows how standard operating procedure on Wall Street leads to some really crummy business practices when it comes to dealing with Main Street. The unfortunate part of Taibbi’s analysis is his conclusion that the banks were under regulated. I don’t think that is the case-but I do think the way they were regulated was incorrect.
99% of people’s eyes glaze over when you bring up regulation of the banks and trading. It doesn’t seem important. It’s not glamorous. But the way they are regulated sets the wheels in motion for the discrepancies that occur when your orders are executed in the marketplace. Conflicts of interest are codified. Unethical business practices are whitewashed. By the way, Dodd-Frank didn’t contemplate any of it. The banks are actually probably better off under D-F than before, since D-F will get rid of most of their competitors.