Goldman’s GSTrUE Has a Responsibility to Public Companies

Posted on May 25, 2007. Filed under: Investing, U.S. Equities |

Goldman Sach’s innovative private market for firms that want access to capital markets without the regulatory burdens of the NYSE sounds like a winning idea from a company that is accustomed to having winning ideas.

My first take on this idea is that I think it’s good on the face of it for U.S. investors. The reason is that it may take some of the volitility out of our “public” equity markets. My other reaction is that public companies that trade in these private stocks ought to be required to disclose their investments to their public shareholders. If they don’t have to, then investors will never know how exposed their investments are to this highly volitile market. By the same token, these private firms ought to be limited to holding investments in other private stocks. This won’t happen, but I don’t think that it’s right for private stocks to create volitility in the public market without any of the regulations that public companies face.

The most important asset our financial markets have is their insistence that information be available to everyone, not just a priviledged few. Goldman’s private market participants profit handsomely from the public markets. There is no question that trades on this exchange will impact stock prices on the NYSE. Regulators ought to look at this thing very carefully.

  • Quotes of the Day

    "Writing editorials is like wetting your pants in a blue serge suit. It feels good, but nobody really notices."

    --Jack Germond

    "Famous men and women, by the act of putting themselves on display, whether as politicians, actors, writers, painters, musicians, restaurateurs, or whatever, invite public appraisal. They are all, impressively or pathetically, acting on the presumption that their ideas, their fantasies, their music, their bodies are more original than those of, say, a plumber or a certified public accountant. They are all exercising the impulse, as Mencken put it, ‘to flap their wings in public.’ This is so obvious to the critic–and, I believe, to the ordinary reader or spectator–that it seems hardly worth saying. But resentment of the practice of criticism itself is strong among professional artists (and all Presidents of the United States). There is a psychological type among them that hates critics on principle as parasites or failed performers. This is very natural but surely very childish and, in any country claiming to be civilized, actually anti-social. The existence of critics, good, bad, or indifferent, is a firm clause in the social contract between the governors and the governed in any nation that is not a dictatorship. Public figures should accept with good grace the public response to their invitations to be admired and resist the temptation to retort, except in the face of flagrant malice."

    --Alistair Cooke

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