Capital, Lloyd, Capital

Goldman chief Lloyd Blankfein in the FT Monday gave a modified "wea" culpa, saying:

Much of the past year has been deeply humbling for our industry. People are understandably angry and our industry has to account for its role in what has transpired...Financial institutions have an obligation to the broader financial system. We depend on a healthy, well-functioning system but we failed to raise enough questions about whether some of the trends and practices that had become commonplace really served the public’s long-term interests.

But in a 1000 word piece he had scarcely a word for capital adequacy. If all the casino gamblers on Wall Street had been forced to rely on equity instead of leveraging up 30 or 40 to 1, the impact of a price decline in one asset sector -- housing -- could never have brought down the entire economy. How can one of the chiefs of Wall Street weigh in and not make this central to the lessons he says we should learn?

Blankfein also is a master of understatement:

...complexity got the better of us. The industry let the growth in new instruments outstrip the operational capacity to manage them. As a result, operational risk increased dramatically and this had a direct effect on the overall stability of the financial system.

Well said. Still, it will be interesting to see how Goldman lobbyists react to efforts to sensibly reign in bank discretion in these matters.