
The Weaver, the Princess and Goldman Sachs  - abhinav
http://in.news.yahoo.com/265/20100501/1705/top-the-weaver-the-princess-and-goldman_1.html
======
swombat
Excellent story.

The world is full of wisdom in the form of myths and stories. Those who know
how to learn from this immense repository of human experience are a step ahead
of the rest.

~~~
mixmax
Very true - and even more so if you're able to tell these stories in an
engaging way to make a point. A good storyteller beats powerpoint any day.

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fnid2
I suspect that the show put on by Congress and Goldman Sachs will end up a
wash for the banks and the people. No one will get punished and Congress will
say, "See, even the worst of the bunch -- Goldman Sachs -- was within the law,
so all the other banks must have been too."

At that point, all cases against the banks will be dropped and we will happily
return to the status quo.

~~~
SandB0x
A large part of the "show" is to increase public support for financial reform.

~~~
jfornear
Financial 'reform' _is_ the status quo:

 _> So Congress is in a lather working on a new set of regulations that will
prevent problems like this from ever happening again. Really? Ask yourself
these questions.

> Did the government sanctioned ratings agencies prevent the meltdown?

> Did the voluminous disclosure laws already on the books prevent the
> meltdown?

> Did vigilant SEC inspectors prevent the meltdown?

> Did a well financed FDIC prevent the meltdown?

> Did Sarbanes Oxley laws prevent the meltdown?_

[http://www.realclearmarkets.com/articles/2010/04/28/did_you_...](http://www.realclearmarkets.com/articles/2010/04/28/did_you_hear_the_joke_about_goldman_sachs_98436.html)
(GR BTW)

No matter how hard we try, we simply can't regulate greed (esp. not when the
regulators are paid by the banks!). Plus, no one in Congress even understands
finance!

~~~
r0s
The bank bailouts _could_ have come with regulatory measures attached. Was
this an intentionally overlooked opportunity?

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nandan
Interesting. Although how much of this debacle can we attribute to conscious
thinking along the lines of "we know this is high risk - high reward stuff,
but let us do it to a point till we are too big to fail"?

I am more inclined to think this is a structural phenomenon - something that
occurred because the incentives available at each step along the way were
structured in a manner that allowed this to snowball.

~~~
jordanb
I think Goldman ignored the counterparty risk they had with AIG because they
knew it was systematic, and that the government would bail AIG out and protect
them.

I think that the stage for this collapse was set with the collapse of Long
Term Capital. That's when all the banks learned that if the bets were big
enough, they couldn't lose.

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mendriacus
Reserving judgment about the other merits of this article - it's sad to
witness again how simplistic, shallow generalizations are the norm when
discussing financial matters:

"Another thing which is crucial to the financial services industry is the
concept of being too big to fail, which has been put to good use by Citigroup,
Bear Stearns, and Goldman Sachs over the past few years in sucking money from
American taxpayers."

While this may be true in some sense for Citigroup, applying that to Bear
Stearns is dubious, and it's plain wrong for Goldman Sachs. Banks like Goldman
and JP Morgan Chase were basically forced to take TARP investments:

[http://www.businessinsider.com/uncovered-tarp-docs-reveal-
ho...](http://www.businessinsider.com/uncovered-tarp-docs-reveal-how-paulson-
forced-banks-to-take-the-cash-2009-5)

Several of those banks didn't need the forced investment, didn't want it, and
thus strove to repay it as soon as possible:

[http://money.cnn.com/2009/03/27/news/economy/tarp_takeback/i...](http://money.cnn.com/2009/03/27/news/economy/tarp_takeback/index.htm)

Goldman in fact repaid the investment in full on June of last year, with a
hefty 23% interest:

[http://en.wikipedia.org/wiki/Goldman_Sachs#TARP_and_Berkshir...](http://en.wikipedia.org/wiki/Goldman_Sachs#TARP_and_Berkshire_Hathaway_investment)

In other words, Goldman didn't want or make any profit from the TARP
investment - the American taxpayer did. GS didn't want that investment at all
- it took it to comply with the wishes and policy of the American
administration.

The current Abacus scandal is occurring not because, but despite the fact that
GS collaborated with the administration and took the TARP investment. In fact,
this scandal is mostly about how GS foresaw the collapse of the housing
bubble, and set up positions to profit from it - thus absolving itself from
any need for taxpayer assistance.

If anything, the American administration and public opinion seem more
forgiving toward institutions that played the "too big to fail" card, taking
too much risk and heavy loses as a consequence. Those institutions were bailed
out, and are currently seeing nothing like the penalties and negative
attention that GS is suffering. If the SEC's portrayal of the Abacus deal is
accurate, GS should be punished - but the "too big to fail" approach is vastly
more dangerous and damaging.

Either way, the discussion isn't served by over-generalizations and lumping
everything together.

~~~
trevelyan
Goldman received over $12 billion directly from the AIG bailout. Perhaps it
could have survived without TARP, but almost certainly not without both TARP
and the AIG bailout.

Would Goldman Sachs have crumbled if AIG were allowed to default? The company
claims it was properly hedged, but it stretches credibility to believe this
given (1) its massive exposure to AIG and (2) the state of the financial
markets at the time.

~~~
mendriacus
This is valid point, but its implications are limited: you're basically saying
that if AIG collapsed, it would lead to further collapses (due to "the state
of the financial markets at the time") and that could very well lead to GS
suffering as well.

This is true, not just for GS, but for almost any other financial firm and
bank in the United States. In that sense, we all, including end consumers,
enjoyed the benefits of TARP bailouts - assuming that without them and
policies related to them, the entire financial system would collapse and drop
the US to something like the great depression or worse.

~~~
pak
Those closest to the bailouts got the most milk in their pails. Maybe the
consumers got a dribble, but that doesn't disqualify criticism of those who
got a whole bucket, especially if they stole the cow to begin with.

GS practically set up AIG to collapse. You might say that's just business, but
you have got to be kidding me if you think GS _didn't_ see major ramifications
for the economy and predict some kind of governmental assistance. (Normally,
if AIG was less entangled with all of the Street and had failed on its own, GS
would have have simply lost a bundle on all of its credit default swaps).

------
byrneseyeview
I wonder if myths like this explain some fraction of a country's economic
growth. I suspect that in Europe, this kind of myth would end with the
perpetrator being executed for lying and committing heresy; even the Geek
myths wouldn't have a god show up to make good on someone else's bogus
promises.

~~~
jplewicke
Eliezer Yudkowsky also suggested this, at least regarding this African myth:
[http://robinhanson.typepad.com/overcomingbias/2009/02/an-
afr...](http://robinhanson.typepad.com/overcomingbias/2009/02/an-african-
folktale.html) .

I'm a little unsure about how much is the myths and how much is just
survivorship bias. A lot of old gruesome European fairy tales stopped getting
told after the rise of liberalism and the free market, so it may just be that
the myths reflect the current status of society.

~~~
byrneseyeview
"Bias" is not the only kind of survivorship out there. If these myths keep
people alive, the cultures that follow them will stay alive. I suspect that
the story mentioned above is part of a larger group of stories with healthier
morals. The Grimm's fairy tales you mentioned are similar: some of the older,
gruesome ones have morals like "Don't travel alone if you're a young woman, or
you'll die," or "Don't convince people they're in danger when they're not, or
everyone you love will be killed." Those are healthy myths; a village that
believed in them would probably be safer than a village that didn't. And once
those myths were no longer necessary, they'd disappear, along with some of the
more noxious stories.

------
katovatzschyn
What is good collection of these Indian myths? Is there one akin to One
Thousand and One Arabian Nights; with more focus on India?

~~~
edj
The Panchatantra: a collection of ancient Hindu tales [PDF]
<http://books.google.com/books?id=jB0YAAAAYAAJ>

This one is "Weaver as Vishnu" on page 46.

Note: the HTML version is in Sanskrit, the PDF in English.

Edit: Of course, there are many other works of Indian mythology. The big two
being the Ramayana and the Mahabharata, which if you consider it a single
work, is the longest text ever written. The heart of the Mahabharata is the
Bhagavad Gita.

------
stcredzero
Winston Zeddemore from Ghostbusters: "Ray, when someone asks you if you are a
god, you say YES!"

 _awesomely enough, this too is a criminal offence under Section 508_

Come to think of it, a lot of India's "God men" could conceivably be
prosecuted under that law.

~~~
vsync
But it's against my programming to impersonate a deity!

------
sman
The full panchatantra story is here:
<http://www.gaudiyadiscussions.com/topic_908.html>

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ww520
That's a good tale. I wish there's website with parables and tales like this.

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garply
I would like to know what kind of factory the author works in.

~~~
rglovejoy
As for me, I'd like to know if anyone has ever been convicted in India for
impersonating a god.

~~~
stcredzero
If it was ever convenient for the government, then it has happened.

------
akshat
now if only I was smart enough to figure one out like this.

------
korch
Is it just me, or is it pretty funny that "pretending to be a God" is illegal
under section 508 of the Indian penal code?

