Goldman Sachs and the Wall Street Conman

I was reading the New York Times and came across this article with the following headline:
Wall St. Helped Greece to Mask Debt Fueling Europe’s Crisis

Surprise is not the appropriate word. My only question is why do institutional investors continue to work with an organization that continues to sabotage the financial system for its own person greed. Where are all the pension funds that signed the PRI and claim to work towards a more values based finance system:
Here are the principles:
1 We will incorporate ESG issues into investment analysis and decision-making processes.
2 We will be active owners and incorporate ESG issues into our ownership policies and practices.
3 We will seek appropriate disclosure on ESG issues by the entities in which we invest.
4 We will promote acceptance and implementation of the Principles within the investment industry.
5 We will work together to enhance our effectiveness in implementing the Principles
6 We will each report on our activities and progress towards implementing the Principles.

Where is the outrage and disgust? If you look at a recent study done on mba’s, the shock is even greater.
“The bank’s reputation remains strong among aspiring MBAs. It was ranked the fourth-most-desirable place to work in a survey of 6,207 MBA candidates at 67 business schools from December 2008 through March 2009 by Universum Group, a Stockholm-based marketing company. Goldman Sachs, which was rated third the previous five years, trailed No. 1 Google Inc., based in Mountain View, California, and the consulting firms McKinsey & Co., in New York, and Bain & Co., in Boston.
Unflagging Interest

Goldman Sachs hasn’t seen any decline in job inquiries from MBA students since last year, Sandra Hurse, vice president for global recruiting, wrote in an e-mail.

“Our applications numbers remain on par with previous years, and attendance at our recruiting events on campus this year were high,” Hurse said.

I guess dying rich in any way possible is still the mantra. However, I do believe that what Dow Chemical, experienced during the Vietnam War and what Shell experience with Nigeria and Brent Spar with respect to reputation will happen to Goldman Sachs. Perhaps, it will take longer, but in the long run, we need a finance system based upon values and less on macho ego. If not, the same melt down will happen over and over again.
We are already starting to see large institutional investors (pension funds, family offices, etc.) do their own financial engineering. It’s not rocket science, and many of the so called whiz kids on wall street, are not that smart. Recently, a large investment bank approached me for an introduction to a $ 100 billion low carbon infrastructure project. I tried to facilitate, but my friend (the client) said that the balance sheet of the investment banker was not strong enough for them. I referred this information to the investment bank, and they said in a pathetic attempt to boost up their ego “Oh. That is debt. We only do M&A”. It was hysterical and sickening to listen to this garbage.
“Dude you cut and paste text to be in compliance. You are not curing cancer and providing education, food, and water to billions of poor people”. Our standards for financial service industry providers need to be higher. There are many companies to choose. Whatever happened to the client is king.
I guess they never worked with Wall Street Investment Bankers.

Pension Funds-All talk and little to no action

The PRI has been in existence for nearly 3 years.What has been achieved, fundamentally. Extremely little. Constant chatter, letters sent to Obama, more declarations of better governance, blah, blah.

If you take the one fundamental issue of the PRI:
We will be active owners and incorporate ESG issues into our ownership policies and practices.

This has been a total failure. Recently, the Dutch minister of finance was chastising the institutional investors for not being active owners, with respect to the financial sector. He claimed that the asset owners were partly to blame for the financial disaster.  They owned a great deal of financial stocks, but weren’t vocal or critical while the financial sector created the gasoline fire. It burned really bright but it went out very fast, and created a toxic mess.

Case in point.

APG was a major shareholder of Fortis, after being asked to buy shares to show a sign of confidence. After the price dropped nearly 95% in a few months, and the Dutch government stripped the assets and left the junk on the stock market. What was the response of APG at the shareholder meeting in Brussels, about selling to BNP. They don’t vote for. They didn’t vote against. They abstained. Not really the signs of an active shareholder.

Most of the asset owners say they are committed to integrating ESG in their whole portfolio or in a significant part. After many years of chit chat, they are proud if they reach 2 or 5%, or they claim the whole fund is ESG because they are chatting to management, or have eliminated cluster bombs. That is pathetic and ridiculous.

Most of the asset owners have signed the PRI as a sign of membership to the fitness club os ESG investment. The only problem is they forget to exercise and get on the scale to see how much weight they have lost.
As long as Asset Owners use PRI as aspirational and not a clear commitment in the short term, very little will fundamentally change. I can live with that, but at least we need to be honest. At present, the PRI and its asset owners who have signed have created a massive bulls eye on their backs, just waiting for civil society to pounce.

As Yoda said in Star Wars:

Do or do not.
There is no try.