David Faber's CNBC Program: Goldman Sachs: Power and Peril

I didn't see David Faber's CNBC program Goldman Sachs: Power and Peril, when it first aired on October 6. But I did record it for later viewing.

While I like Faber's wit and style, it seems pretty obvious that CNBC is having difficulty using his intellect for entertainment purposes. It's just not  good fit, and this latest Faber effort illustrates this point yet again.

The hour-long program broke virtually no new reporting ground whatsoever. If you are already familiar with investment banking and trading, this was nearly a wasted hour of your time. If you don't, it was too narrowly focused on Goldman Sachs to really give you a proper, broad sense of the topic.

Faber's House of Cards documentary on CNBC, aired last year, was better, but also deeply flawed, with its complete omission of Fannie Mae, Freddie Mac and Congress as the first movers in America's mortgage finance and, then, general banking system meltdown.

This hour-long examination of Goldman Sachs was, for me, an odd mix of the company's history, now largely irrelevant, combined with what I believe to be an unfair portrayal of the firm in its current state of evolution.

The first and last thirds of the piece merely recounted information you could find elsewhere. While the firm's history from the 1950s was mildly interesting, it's really of no particular import today. The later part of the program, focusing on various mortgage-finance-related activities of the firm before, during and after the 2008 financial crisis, was both unfairly one-sided and largely a repetition of old news.

But, for me, the truly interesting portion of Faber's program was about 10-15 minutes of the middle third of the documentary. This portion contained the most revealing interviews with Goldman personnel, past and present. At this point, Faber also explained that the promised, conclusive, long interview with Lloyd Blankfein had been cancelled.

There are two major aspects of Goldman Sachs which this handful of interviews revealed in a rather startling fashion. Mind you, again, they are not 'news' to anyone remotely familiar with the firm, but they conveyed the points in a rather chilling manner.

First, an ex-Goldman staffer, now an asset manager and CNBC 'contributor,' told a story of being required to attend a 5pm meeting on a Friday starting the Labor or Memorial Day weekend. The partner holding the meeting did not arrive until 10pm, by which time an unspecified, but significant number of the recent hires had left in frustration. The staffer recalled that when the partner arrived, he circulated a sheet for signatures of the remaining employees, then explained the reason for the meeting, i.e., that they were junior in rank to him, a more important person, and this meeting was to teach them patience for when they would, one day, have to wait, or be forced to wait, on some large, important client, with no recourse other than to simply endure until the client allowed them access.

He then replied to Faber that those who left the meeting before 10pm were soon fired from Goldman.

When I heard this story, I knew I'd made the right choice in graduate school by never interviewing for either consulting or investment banking positions. Back then, seeing who applied for those slots, and having a friend at Booz Allen Hamilton, I guessed that, at least early on, success in those two fields was more a matter of submitting to indefinite face time and groveling, more than intellectual prowess and performance. That the main ingredient in the early years of the jobs was simply time, which everyone could provide and, thus, did not play to the strengths of those with particular skills or intelligence.

The other aspect of Goldman Sachs which surfaced from the interviews was perhaps the most important one which now defines the firm, and differentiates it from the days of its last unimpeachable leader, John Whitehead.

Back in Whitehead's day, the firm was explicitly aware of the problems of conflict of interest. So it eschewed proprietary trading, or any activities in which it would knowingly meet its clients elsewhere in the financial marketplace as a principal.

After Whitehead's reign, the firm simply ignored the problems and plunged headlong into a wide range of activities, in order to book proprietary business profits otherwise unobtainable.

Thus, several of the interviewees now give voice to a ludicrous notion that Goldman accepts conflicts of interest as a fact of life, and simply strives to 'successfully manage' them, whatever that means. Despite this charade, several staffers, and Blankfein, in a recorded phone address to the firm's employees, claim that Goldman still puts its clients first, and that this therefore prevents any true conflicts and solves everything.

It's a lie, of course. The Big Lie, if you will. Made worse by the mock-candor with which so many Goldman employees repeat it with a straight face. A very Stepford Wives-like robotic expression of the lie over and over by every Goldman employee.

Faber related that some customers do business with Goldman because they have to, or want the firm's talent working for them, but remain fearful of the firm and, on balance, don't trust it to work in their- the customer's- best interests.

Simply put, Whitehead's clear, simple, true statements regarding conflicts of interest when doing too much principal business, have been conveniently forgotten and trampled.

In their place is a new attitude which seeks to pretend to serve clients while, in truth, serving only one real client- Goldman Sachs itself. In that, Faber was correct as he closed the program.

I've written plenty of posts discussing Goldman's hypocrisy on this point. And that every responsible party who hires Goldman to do work for them, or trades with the firm in any capacity, should be wary and not trust it. So, again, Faber's interviews and assertions are hardly news. And I'm certainly neither the first, nor only other person to have elaborated these views before Faber.

But, in this regard, Faber loads up the program with Congressional members blustering about Goldman's shoddy, deceptive practices. Numerous clips of Congressional testimony and hectoring of Goldman staff by members of the House and Senate are included in the program.

Ironically, the only real video clip of merit in all of it is the few seconds in which Blankfein responded to questioning by Carl Levin that buyers of Goldman's own CDOs didn't know, nor care to know, whether or not Goldman was taking other positions on the same underlying instruments, possibly on the other side of the trade.

When Levin stated that he 'knows how Wall Street works,' then excoriates Blankfein for his answer, Levin only displays his ignorance of the Street's practices, and, further, his arrogance regarding his ignorance.

Blankfein correctly noted that his firm's customers want to buy, or sell, various specific risks. They don't necessarily care who differs with them in assessing those risks. Or whether others, including Goldman, are selling the risk when that party is buying, or vice versa.

That said, Goldman is potentially everywhere in the financial markets, potentially on any side of a particular risk situation. That's what being, in effect, as one guest pundit echoed, a publicly-traded hedge fund means. Which is what Goldman Sachs currently is.

Again, this is hardly news. Entertainment, when packaged sensationally in an hour-long format? Probably for the less-informed viewers.

But certainly not news. Not really fair....and incredibly biased.