OPM


After reading Professor Gruver’s article I sort of didn’t know how to react! I really resonated with the idea of “other peoples money” and how this should foster more sense of responsibility among Wall Street when dealing with investments. There always should be care taken with investments made on behalf of other people, and it shocked me that sometimes there really was not as much care taken as should have been.

Something I thought that was really interesting was the initial Goldman Sachs Trading Company, and the level of complexity that this instrument of trading had. They expected normal people to understand what they were buying if it was a “highly complex, layered, highly leveraged instrument”. There are probably some finance majors who couldn’t completely understand the facets of this instrument, yet they opened these options to the public to buy?

This is a huge problem that is especially relevant today. With all the derivative instruments that are out on the market and the opaque-ness about how these instruments are created, what can an interested customer trust to purchase? And once they purchase something, can they trust the company they invest in to actually make responsible choices regarding what other options they choose to make available to the market?

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6 Responses to OPM

  1. Jordi says:

    Edit: peoples money
    people’s money

  2. Jordi says:

    Opaque-ness! Kudos for effort.

    Opacity! Opposite would be clarity or transparency or…?

  3. Jordi says:

    Why do you say that OPM “should foster” more responsibility in Wall Street towards clients? I thought Gruver’s point was that with the shift from partnership to going public, Goldman Sachs had less of an incentive to be stewards of their clients. For a paper possibility, how would Milton Friedman look at the two ways of organizing Goldman Sachs? Can his unitary purpose of a firm approach be applied to Goldman Sachs when it is publicly traded and the firm serve its clients better than they did recently?

  4. nrz002 says:

    You would expect more care to be taken when dealing with other people’s money; however, it’s obvious that people are first looking out for their own best interest. I agree with the fact that Goldman Sachs Trading Company was so complex that one could not imagine a normal person buying into that. However, I would think that the “highly complex” depiction would attract some unaware buyers. But the main issue of course being trust in the companies which people invest their money in. I think that external factors that occur in our economy have a direct impact on the investors’ trust levels as well.

  5. mmilne23 says:

    I agree that when dealing with investment firms they need to have greater care with people’s money. In the past I believe companies were careless with others’ investments. Just look at the cases that we’ve read. Both Enron and AIG are guilty of this. The highly complex products that companies like Goldman Sachs make available to the general public, although are probably difficult to understand to an average person, probably are not going away anytime soon. Derivative based products is how GS and JP Morgan make a good portion of their profits. What it comes down to though is increasing trust in these financial institutions. It’s related to the “13 Bankers” article that we had to read. People just do not seem to trust the too big to fail banks anymore after the credit meltdown. The government has been doing a good job trying to regain that trust through regulation, but ultimately these big banks will choose their own destiny and determine how they will want to be viewed by the general public.

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