Tag Archives: goldman sachs

A matter of trust

The banking industry looked pretty ugly in the hearing on Capitol Hill yesterday as Senate leaders on the left and the right slammed Goldman Sachs for allegedly defrauding investors.

In case you missed it, PBS NewsHour analyzed the proceedings and this short video from The Huffington Post mashes up the hearing into five minutes of accusations and rebuttals… you’ll get the gist.

But the kernel that the industry has to take away from the screaming matches in the news today is that trust is all but gone between consumers and the traditional banking system. So how can the finance industry move ahead? Perhaps the answer rests with consumers taking more responsibility for their own financial future. This was one of the themes of a conference I attended this week called The Future of Money and Technology. I moderated a panel at the San Francisco event, where I met leaders in the financial and tech worlds who are working on creative, innovative ways to improve and expand on how consumers and companies manage their money.

Former Union Bank executive and entrepreneur Arno Hesse spoke about Bernal Bucks a new project in a San Francisco neighborhood that encourages people to spend money in their community and reinvest in businesses they know and frequent.

A fellow at the social entrepreneur organization Ashoka Bruce Cahan is creating GoodBank, which aims to put a mirror on investors and show them where their money is really going. Do you actually support the causes you say you do? GoodBank plans to serve as a moral compass for your money:

Rob Garcia, who won the Twitter “Shorty Award” in finance, discussed his company Lending Club, a site that allows people to borrow money from people they trust, resulting in lower interest rates and a community of smart investors.

While gaming might be seen by some as frivolous, especially when it comes to money, John Bates talked about Entropia Universe, the only cash –based virtual game, which allows players to invest in a virtual world and see actual monetary results. Bates reminded the panel that the future of banking doesn’t have to be so serious; it can have a fun element to it as well.

Some of the biggest issues that came up with each of these diverse projects were around defining community, creating sustainability for these new projects, and determining what the needs in the market will be to gain investors’ trust in these new ideas.

Are you more likely to invest in organizations that you have a direct connection with, like the coffee shop on the corner, or is your community more broadly defined by people who care about similar philanthropic causes? What kinds of parameters need to be put in place to regain trust and share financial information online?

What did they know?

Finger-pointing about the economic crisis won’t get us out of it, but Congressional hearings aim to provide some clarity around the latest analysis of the Lehman Brothers collapse and the SEC fraud charges against Goldman Sachs.

The NewsHour’s Rundown blog polled leading economists on what they would ask Treasury Secretary Tim Geithner and Federal Reserve chair Ben Bernanke ahead of the hearings.

Some of their responses:

Mark Calabria – director of financial regulation studies at the Cato Institute
Chairman Bernanke: If Lehman had been rescued what would be different today? Would employment be any higher or credit more widely available?
Russ Roberts – J. Fish and Lillian F. Smith Professor of Economics Chair, Mercatus Center, George Mason University
I would ask Ben Bernanke: What would have happened had you let Bear Stearns go bankrupt? How would that have changed Lehman’s behavior between March and September of 2008? What evidence is there that the bankruptcy of Bear Stearns would have had systemic effects?

WNYC’s The Takeaway had New York Times reporter Louise Story explain the Goldman Sachs fraud suit.

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In December, Story reported on how Goldman and other banks bet against collateralized debt organizations (CDOs), which may have worsened the housing crisis.

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What questions would you ask the Geithner and Bernanke about the financial crisis and bank regulation?