I was traveling yesterday and listened to a portion of the Goldman Sachs CEO testimony before the Senate that was broadcast on Bloomberg radio.
My god, the Senators don’t understand Wall Street. And I’m no authority.
First was Carl Levin, who seems to not understand hedging, and thinks that any security should come with a warranty like a washing machine. He was repetitive and really didn’t understand what a market maker does: a market maker will buy and sell securities even if they think the security is a bad one. It is the job of the buyers and sellers of that security to gauge what that security will do for them in their portfolio and the quality of the security will be reflected in its price. The market maker’s job is to ensure that the buying and selling happens efficiently. Nothing more. The senator didn’t get that despite it being explained over and over and over.
McCain didn’t impress me as he was pushing the idea that since Goldman had TARP money, they should have done more to help community banks and homeowners in trouble. What?
And these guys put the legislation together. Ouch.
Here is a good post that is more comprehensive: http://www.powerlineblog.com/archives/2010/04/026171.php