The Wall Street Journal (Link) - Annalena Lobb & Heidi N. Moore (March 25, 2009)
Finance executives expressed anger and betrayal at Washington's latest anti-Wall Street rhetoric during Tuesday's sessions of the Future of Finance Initiative, a conference hosted by The Wall Street Journal.
The conflict suggested that the lines of communication between government and the private sector remain limited just as government is hoping to expand cooperation with private investors. Those tensions flared over the last week, as the U.S. House passed a bill taxing bonuses by 90% for banks and other companies receiving large government capital injections.
"Washington and Wall Street are the equivalent of Gettysburg and Antietam right now," said Glenn Hutchins, co-chief executive of private-equity firm Silver Lake.
"To point the finger at one group means, No. 1, you're not understanding the problem, two, you're stretching our social fabric thinly, and you're throwing the baby out with the bathwater," Mr. Hutchins noted. "Trust goes both ways."
The divide between Main Street and Wall Street surprised even Arthur Levitt, a former chairman of the Securities and Exchange Commission.
"This is an issue of 'we' and 'they,'" Mr. Levitt said. "Compensation is a part of it, but a symbolic part of it. We are a centrist nation ... We're now shifting to the left pretty far in terms of business-bashing and it has reached extremes of incivility that are intolerable."
Meanwhile, President Obama plans to meet Friday with about a dozen of the U.S.'s top banking chiefs in an unusual gathering designed to discuss the administration's plans to shore up the financial sector.
Attendees are expected to include Goldman Sachs Group Inc., J.P. Morgan Chase & Co. and Citigroup Inc.
At the conference, Goldman's president and co-chief operating officer Gary Cohn spoke in support of his firm and its investment-banking focus. Mr. Cohn said that profitability is still possible for investment banks.
"Wall Street is alive and well," Mr. Cohn said.
Asked if Goldman Sachs would be the first financial institution to return funds granted by the Treasury's Troubled Asset Relief Program, Mr. Cohn said he didn't know, adding that he couldn't speak for the other banks that had accepted TARP money. He also said he would be surprised if any institution repaid TARP funds "until ... stress tests and first-quarter earnings are out of the way."
Mr. Cohn also said Goldman wouldn't have lost money had insurer American International Group been allowed to fail. He said the firm's greatest exposure at any one time was about $2.5 billion and that Goldman's credit-default swaps and collateral would have covered those sums in the event of default. "We would have been 100% fine," he said.
Fund manager George Soros dismissed many of the proposals discussed at the conference as "tinkering." Mr. Soros sought a thorough overhaul of regulation of the markets. "The idea that the markets are self-correcting has been proven false. ... The market, rather than reflecting the underlying reality, is always distorting it."
Paul Volcker, former Federal Reserve chairman, spoke for many of the attendees when he acknowledged that "we're in a government-dependent financial system; I never thought I'd see the day."