ORIGINAL SIN: How prices of initial public offerings were manipulated by Goldman Sachs through the illegal practice of "Laddering"
May 13, 2002 10:14 AM   Subscribe

Seriously, when will people learn to stop trusting those who have a financial interest in ripping them off?

I worked for a an broker based insurance company for a year and I could never understand why anyone would trust a broker. They work on a percentage commission so they are motivated in the opposite direction of your self interest. They make more money if they don't find you a good deal. Yet thousands and thousands of people still trusted a broker to hook them up with insurance.
posted by srboisvert at 10:18 AM on May 13, 2002

There's a story about Cramer and SEC in today's Times
posted by matteo at 10:52 AM on May 13, 2002

My challenge is this: if the financial systems are rigged, (e.g. many major i-banks are being fined or investigated) then logic entails that one shouldn't use the dominant financial system to house or grow your investment. But how do we manage our money outside of Wall St.?
posted by gen at 10:55 AM on May 13, 2002

agreed with srboisvert on this one. I also can never figure out why people don't prefer to use the few analyst firms who eschew investment banking and the inherent conflict of interest it represents, and yet, these independents seem to have to chase people for business while the big firms which engage in this sort of sketchy behavior just sail on, raking in the money while they play both sides to the detriment of the investor. I'll never understand why that is.
posted by zoopraxiscope at 10:57 AM on May 13, 2002

Help me out - which firms are those? I dont have a whole bunch of cash just right now, but I need to start investing soon.
posted by Irontom at 11:03 AM on May 13, 2002

enronic - Nominated for: Best. Buzzword. Ever.
posted by SpecialK at 11:20 AM on May 13, 2002

there are a few, Irontom. The two that come to mind right off are Lipton Financial Services and Sanford C. Bernstein + Co. There are other big firms that do little investment banking (such as AG Edwards + Prudential) who tend to have a better handle on keeping the analysts separate.

But personally, I am verrrrry skeptical of stock analysis that comes out of places like Goldman Sachs or other firms that have large investment banking interests, often with the same companies they analyze. That's a recipe for bias in my book, and I really believe that the SEC shouldn't allow this relationship to continue the way things are now.
posted by zoopraxiscope at 11:22 AM on May 13, 2002

Perhaps I would put more credence in this story if he'd gotten the name of the company correct. It's Cramer Berkowitz, not "Cramer and Company".

I am not saying there's no corruption on Wall Street. I'm not saying Cramer isn't a madman (watch CNBC and decide for yourself). I'm definitely not saying the IPO market wasn't stupid crazy before about mid-2000. All I'm saying is this so called news item needed about 2 minutes more fact checking than took place.
posted by ilsa at 11:39 AM on May 13, 2002

It seems to me that the author was using Cramer and Company as a stylistic item, as opposed to being an error. He claims to have been employed there for a significant period of time, so one can assume he knew the name of his employer.
posted by Irontom at 12:00 PM on May 13, 2002

Conflict of interest? And people only worked this out now? Gawd almighty, it was so obvious you could paint your walls with it.

And Irontom: look for people who do precious metals, according to the people on the city desk. Shares are too volatile now, especially on New York.
posted by riviera at 12:36 PM on May 13, 2002

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