Beware of banks, they can do things aginst your interest

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Beware of banks, they can do things aginst your interest

Postby Dennis Ng » Fri Mar 16, 2012 10:54 am

Hi all,

actually, this is already a well-known fact. In year 2007, while Goldman Sachs was actively re-packing sub-prime mortgages to be sold as AAA rated Mortgage-backed securities (something similar is Lehman Brothers min-bond), Goldman Sachs was also busy in the market 'shorting" mortgage-backed securities!

Imagine on one hand they sell you something, and tell you this is good and you should buy, yet behind your back, they are selling SHORT the very thing they ask you to buy!

For me, I always tell my staff that our business Philosophy is to take care of clients, to put clients' Interest First, even before company's interest. I let them know the truth that I'm NOT paying them their salary and feeding their families, it's our clients. Without our clients, the company will have no revenue and have to close business and all of them will lose their jobs. So I remind them to always remember this fact and this is also why we must put clients' interests first.

And this is probably why for the last 12 years since I started out on my own, my business just grew and grew, even during recessions, my business grew as satisfied clients refer their families, friends and colleagues to us, knowing that we will take care of their interest.

So it's so sad to read that a Big institution such as Goldman Sachs is acting against clients' interests.


Dennis Ng

Op-Ed Contributor
Why I Am Leaving Goldman Sachs
Published: March 14, 2012

TODAY is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.

To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money.
Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.

It might sound surprising to a skeptical public, but culture was always a vital part of Goldman Sachs’s success. It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients. The culture was the secret sauce that made this place great and allowed us to earn our clients’ trust for 143 years. It wasn’t just about making money; this alone will not sustain a firm for so long. It had something to do with pride and belief in the organization. I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years. I no longer have the pride, or the belief.

But this was not always the case. For more than a decade I recruited and mentored candidates through our grueling interview process. I was selected as one of 10 people (out of a firm of more than 30,000) to appear on our recruiting video, which is played on every college campus we visit around the world. In 2006 I managed the summer intern program in sales and trading in New York for the 80 college students who made the cut, out of the thousands who applied.

I knew it was time to leave when I realized I could no longer look students in the eye and tell them what a great place this was to work.

When the history books are written about Goldman Sachs, they may reflect that the current chief executive officer, Lloyd C. Blankfein, and the president, Gary D. Cohn, lost hold of the firm’s culture on their watch. I truly believe that this decline in the firm’s moral fiber represents the single most serious threat to its long-run survival.

Over the course of my career I have had the privilege of advising two of the largest hedge funds on the planet, five of the largest asset managers in the United States, and three of the most prominent sovereign wealth funds in the Middle East and Asia. My clients have a total asset base of more than a trillion dollars. I have always taken a lot of pride in advising my clients to do what I believe is right for them, even if it means less money for the firm. This view is becoming increasingly unpopular at Goldman Sachs. Another sign that it was time to leave.

How did we get here? The firm changed the way it thought about leadership. Leadership used to be about ideas, setting an example and doing the right thing. Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence.

What are three quick ways to become a leader? a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) “Hunt Elephants.” In English: get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.

Dennis Ng - When You Master Your Finances, You Master Your Destiny

Note: I'm just sharing my personal comments, not giving you investment advice nor stock investment tips.
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Re: Beware of banks, they can do things aginst your interest

Postby viswanathan » Sun Apr 15, 2012 12:14 pm ... re=related
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Re: Beware of banks, they can do things aginst your interest

Postby lootster » Sun Oct 21, 2012 9:17 pm

What is the fractional reserve banking system?

Posted on November 19, 2011

Once upon a time, gold was used as money. In a small town, goldsmiths had the best safe deposit boxes. Hence, residents would deposit their gold with their local goldsmith and in exchange, they would receive notes that serve as proof for their gold deposits. The residents would then use these notes to conduct their daily transactions and stored these notes at home.

The goldsmiths who held the residents’ gold would lend the gold to borrowers and earn interests. Usually, the residents rarely redeem their notes for gold unless they moved to other towns. Hence, residents have faith and trust these notes as money.

Sensing this trend, instead of lending out gold, the goldsmiths started to issue out notes to borrowers and kept their gold in their safe. These new notes created were actually not backed by gold but borrowers are required to pay interests to the goldsmith. This monetary system continued as long as the goldsmiths were able to keep enough gold to pay back the residents when redeemed. That is the birth of fractional reserve banking system.

In 1913, the Federal Reserve (Fed) was created and served as the foundation of the fractional reserve banking system in the United States. Initially, with a reserve ratio of 40 percent, every $ 20 gold coin the Fed owns, it can create $ 50 of currency in circulation. Then, the $ 50 currency would be lent to big banks. With a reserve ratio of 10 percent, the big banks can create another $ 450 to circulate currencies of $ 500.

The $ 500 would then be lent to smaller banks and again with reserve ratio of another 10 percent, it can create $ 4,500 worth of currencies to be lent out to the public, thus creating $ 5,000 worth of currency in circulation starting from just a $ 20 gold coin.

This continued until 1971. President Nixon took the U.S. Dollar off the gold standard. That means the Fed does not need any gold to create the U.S. Dollar. In other words, it is the Fed’s birthright to print as much money as they want to, thus, directly gaining control over the economy of the United States.

Let say, the Fed set the initial reserve ratio to be 10 percent. That means banks can create an additional $ 90 for every $ 10 printed by the Fed, hence, making $ 100 in currency circulation.

If the Fed wants to boost the economy, the Fed would revise the reserve ratio to be 5 percent. Now, for every $ 10 printed by the Fed, the banks can create an additional $ 190 to lend out to borrowers who would use the money to build more businesses, hire more employees, encourage property, automobile and retail sales.

However, if the Fed wants to slow the economy, it will tighten money supply by increasing reserve ratio to let say 20 percent. When that happens, every $ 10 printed by the Fed, the banks can only create an additional $ 40. Tight money would hike up interest rates, making borrowings expensive, discouraging people to spend and borrowing money and eventually, this would slow down the economy.

What does it mean to you?

There will always be more money printed. For example, after the dotcom bubble burst, the U.S. economy entered into a recession. To save the economy, the Fed pump in money into the economy and all the money would enters into the property market, thus, lifting the U.S. out of recession.

Increasing property prices encourages people to refinance their homes for more shopping and even invest in more properties for capital gain. Banks got greedy when they lent money to sub-prime borrowers, package these debts into investment and sold them to investors around the world.

In 2007, the Fed tightened money supply. Interest rates increased and millions of homeowners found their homes declining in value and also found difficulty in meeting mortgage payments. Hence, they declared bankrupt. Defaulted loans made investments which were made out of debt became worthless and thus millions lost trillions of dollars investing.

Billion Dollar financial institutions such as AIG, Lehmann Brothers, Merrill Lynch and Fannie Mae and Freddie Mac went bust. Since they are too big to fail, once again the Fed stepped in and pumped in trillions of dollars to bail them out. As a result, the big boys win. The little guys lost.

As you can see, in good times, money is printed. In bad times, even more money is printed. Every time money is printed, it will devalue the existing money printed in circulation. That is why the U.S. Dollar lost 90% of its purchasing value since 1971 and it won’t take much longer before it loses its value.

When the Dollar fails, people would rush to exchange their dollars for precious metals such as gold and silver which is why they are the best investment opportunities in today’s economy.



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