Goldman's Traders Have No Obligation To Serve Their Trading Counterparties

This article in The Financial Times argues that Goldman and other Wall Street banks serve two types of clients. The have a fiduciary responsibility to clients that they advice on investments. On the other hand, they trade with hedge funds as well as pension funds and municipal clients who are less sophisticated. Goldman is playing poker with their trading counterparties and their only obligation to them is to make sure that they are not playing with marked cards. Some of these players should not be permitted to play poker with Goldman. They are the "muppets" that are described in Smith's resignation letter. The Dodd-Frank bill provides some protection for them but the banks would rather play poker with them than with the hedge funds. The implication in this article is that we should expect derivative sales people to fleece the suckers at the poker table. I wonder, however, if Smith was so naive that he did not distinguish between the poker players and other Goldman clients.