Here's a revealing interview by Larry Kudlow of Ben Stein who essentially believes that major brokerages are tricking their clients to help their shareholders. The financial dealings described might be a bit inscrutable, so I'll translate them after the quote.

BEN STEIN: Well, wait a second. First of all, all the credit over this goes to Alan Sloan who did a brilliant piece on this whole subject for Fortune. And it was that that cued my whole interest in the subject. His piece is just brilliant journalism. But apparently, if I am to understand said Mr. Sloan right, and a further raft of comments by Goldman Sachs spokesmen further, they were selling the collateralized mortgage obligations [while] simultaneously selling short either the same obligations or an index based on the same kind of obligations. That went into high gear in 2007 as they were still selling CMOs. They were also selling, and on a big scale, indexes against those CMOs. So they were on the one hand pushing the product and on the other hand, to me, seemingly indicating that they did not have confidence in the product, by shorting either the product, or a similar basket of securities.

KUDLOW: Now Ben, some would say that this kind of shorting of securities sold out, they packaged them and sold them, essentially represents a prudent hedging strategy to defend shareholders’ capital. Your thought on prudent hedging strategies?

STEIN: Well there are two things. One, I think that’s what’s known as the green shoe operation. And it’s a fairly well known thing. I don’t consider it ethical frankly. I don’t consider it ethical to on the one hand, tell your people to whom you owe a fiduciary duty, we’ve got a product for you and we stand behind it, and at the same time, short it. I question whether that is an ethical thing to do. And I think the people to whom they owe a fiduciary duty, in the way of pension funds, nurses unions, those people, stand ahead of the stockholders in terms of fiduciary duty. That’s one thing.

Second thing is as I understand the comments by the Goldman Sachs spokesman correctly, and I may not, they shifted those short sales into very high gear in 2007, maybe even earlier, way beyond what prudent, normal hedging would be in an underwriting operation. So I think we’ve got to find out more about it. But from what I understand their operations were on both sides of the deal. And that is not, it seems to me, cricket.

Translation: brokerages have obligations to two groups, their clients and their shareholders. Brokerages are supposed to steer their clients towards profitable investments, and they're supposed to generate profits themselves to pay to their shareholders. Ben Stein believes that Goldman Sachs has been selling investments to its clients that it expects to go down in value and then "selling short" those same investments so that when they do go down Goldman Sachs shareholders will turn a profit.

If this is the case, then yes, I believe the practice is highly unethical. Brokerages do have to make money for their shareholders, but they should do so by providing honest advice to their clients, not by fleecing them. Brokerages charge their clients fees, which is where their profit should come from. In addition to those fees, Ben Stein believes that Goldman Sachs is selling their clients bad investments and then profiting when those investments lose value.

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