Financial "Miranda Warning" for Goldman Sachs Clients?

Oops, They Did it Again!

If we're not going to shut down rogue investment banks like Goldman Sachs, or break them up into smaller, less economy-threatening pieces, how about at least requiring that they give their clients (hard to believe they still have any) the equivalent of a financial "Miranda warning."

Something like this perhaps:

You have the right not to borrow or otherwise do business with us. However, if you do, everything we learn about your financial condition can and will be used against you, by us or our affiliates, to maximize our profit. Oh . . . and the financial products we sell you . . . may be dangerous to your financial health (and everyone else's!)

In the unfolding saga of Greece's sovereign debt mess, consider -- once again -- who seems to be at the dirty little epicenter (and apparently, cashing in again):

Goldman Sachs and J.P. Morgan, and perhaps others, sold financial instruments to Greece that were designed to artificially depress its borrowing and budget deficits.
Goldman and Morgan declined to comment. Greece says what it did was legal at the time.

Now Greece is under attack in the markets, and the major countries in the euro zone are trying to force it to clean up its act and to keep it from defaulting. There is little agreement on how to do that. Traders who bet against Greece — by shorting Greek bonds while buying German ones, for example — have made a lot of money as the market realized just how much trouble Greece was in.

The European Union is now asking Greece for details of what it did. But it should go further. It should seek to find out if the banks that helped Greece lie — and thus knew its numbers were false — made money betting against it. If so, do those banks deserve to keep those profits?

--Floyd Norris, "Helping Governments Deceive"; The New York Times (2/16/2010)

One more time, louder and all together:

A-r-r-g-h-h!

How to Break Up Goldman Sachs

How to Break Up Goldman Sachs?
Let Them Figure it Out

As we drill down into the details of ideas for breaking the economic and political power of over sized banks, we need this litmus test against which serious suggestions should be judged: Does a proposal, at the end of the day, imply that Goldman Sachs should break itself up?. . . . If the answer is yes, we are making progress in moving our financial system back toward where it was in the early 1990s, when it worked fine . . . and was much less threatening to the global economy. If the answer is no, we are merely repainting -- ever so gently -- the deckchairs on the Titanic.

--"Obama’s Plan to Be Judged by a Goldman Breakup: Simon Johnson"; Bloomberg (1/22/2010)

My award for "quote of the week" (even year, at least so far)?

The one above from Simon Johnson, former chief economist at the International Monetary Fund and now MIT Business School professor. In other words: one smart guy!

Even people who agree with his sentiments are likely to be tripped up by the complexity of the undertaking.

They shouldn't be.

I personally don't have a blueprint for breaking up Goldman Sachs into say, $20 billion relatively nonthreatening "Baby Sachs" (given its current balance sheet, it would spawn about 30(!) progeny).

But I can think of a great way to come up with one: let them figure it out.

After all, they're supposed to be smart guys (or at least, they keep telling us).

Just to keep it on the up and up :) . . . let a three-person Super-VIP Commission sign off on whatever Goldman proposes.

My nominees: Paul Volcker, Nell Minow, and Simon Johnson.