With regard to the following post …
Message 26491688
… my understanding of a “Market Maker” is someone who oversees the buying or selling of a stock or instrument. He sets the buying price as well as the selling price and will match a buyer with a seller and vice versa. If a buyer or seller wants to transact at ‘Market Price’ and not at 'Limit Price’, the Market Maker’s responsibility is to match that deal even if he has to be the buyer or seller should he not be able to find one in the market place.
Therefore he will always set the buy or sell price at a level that he would be prepared to transact at, bearing in mind that he has access to all the bids and offers for that stock or instrument.
Now if that was what GS did in the “Paulson case” then they shouldn’t have anything to answer for because that’s their business.
But from what I’ve read, GS were perfectly aware of the very poor quality of the instruments that they were recommending for their clients because Paulson informed them of that fact and in addition he bet against those instruments via GS.
Needless to say, it’s not GS’s responsibility, as Market Makers, to give their client’s advice as to what they believe is the quality of an instrument in normal circumstances, based, for example, on their own fundamental or technical analysis.
BUT, when they have been involved with the creator of those instruments, who has put together complete junk and parcelled it up to look much better than it is, and has also bet heavily against those instruments via GS, then, surely, there must be a conflict of interest when GS favourably recommend that junk to their clients.
One would have to be very naïve to believe that an experienced player such as Paulson would bet very heavily against an outcome if he wasn’t 100% sure that he was betting in the right direction.
That’s not to detract, in any way, from the responsibility of those in a Regulatory Capacity to have done something about the creation of those toxic instruments in the first place, which were largely based on the suicidal sub-prime mortgage process.
I would certainly agree that those who should have done more in that regard should also be hauled up in front of Senatorial committees and made to answer for their actions, … or lack of them. |
