Michael Hiltzik: But where are the customers’ yachts?
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That’s the old punchline about the stockbroker showing a friend all the good things his profession has brought him. In that vein, the spectacle of investment bankers and brokers explaining to Congress why it would be a mistake to hold them to stricter rules and regulations threatens to last the summer long, as lawmakers work their way through a large pile of amendments to their financial reform bills.
As I observed a few days ago and revisit in Sunday’s column, Wall Street is endlessly creative at cooking up arguments against tougher disclosure rules, new regulations and new penalties, and even more creative at evading the rules and regulations already in existence. The pattern in the real world has been that more regulation almost always leads to more professionalism and more public confidence, and ergo to greater profits, over time. Let’s hope Congress doesn’t get taken in.
The column starts below.
At a congressional hearing a couple of weeks ago, Sen. Susan Collins of Maine asked a lineup of current and former Goldman Sachs executives a simple question: Did they have a duty to act in their clients’, not their firm’s, best interest? The query elicited some impressive verbal contortions. ‘I believe we have a duty to serve our clients well,’ one witness replied to the Republican senator. ‘It’s our responsibility . . . in helping them transact at levels that are fair market prices and help meet their needs,’ said another. ‘Conceptually it seems like an interesting idea,’ said a third. The witnesses could have avoided their discomfiture by sticking to the simple truth. The correct answer to the question of whether investment bankers have a duty to act in their clients’ best interest is ‘no.’
-Michael Hiltzik
