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American Morning
Minding Your Business: Dick Grasso Under Fire, Again
Aired October 03, 2003 - 07:41 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
SOLEDAD O'BRIEN, CNN ANCHOR: Dick Grasso stepped aside recently as chairman of the New York Stock Exchange amid a furor about his huge paycheck. Now, he is at the center of a new controversy.
Andy Serwer is "Minding Your Business" this morning. Hello.
ANDY SERWER, "FORTUNE" MAGAZINE: Hello. Welcome back.
O'BRIEN: Thank you.
SERWER: Good to see you.
"The Wall Street Journal" is reporting this morning that Dick Grasso is involved in another controversy indeed; this time, involving some of the biggest names on Wall Street, including a unit of Goldman Sachs and AIG, a name you might not be familiar with, but a giant insurance company. There is Dick Grasso.
Here is how it worked. A guy named Hank Greenberg, the CEO of AIG and a very, very powerful figure on Wall Street, complained to Grasso that trading in his stock wasn't going particularly well, and that he wanted Grasso to step in and get the specialists -- this Goldman Sachs unit -- to go in and buy and make sure the stock was trading better.
The problem is that Greenberg was on the board of directors of the NYSE, and, in fact, even on the Compensation Committee. This kind of intervention, Soledad, is very, very unusual, and it really speaks to the whole problem, I think, at the New York Stock Exchange, which is not necessarily governance and not necessarily a transparency, but the whole specialist system itself. And let me explain what is very quickly.
When you place an order on the New York Stock Exchange, it goes down to an actual human being, as opposed to the Nasdaq which is all computer trade. This specialist matches buy and sell orders. If there are imbalances, this person steps in and takes positions to make sure trading is efficient.
You can also make a very, very good living being a specialist on the stock exchange, and people complain that that very good living comes out of our pockets -- the investors' pockets. They wonder if this is an antiquated system. So, that's why this is an important story for investors.
O'BRIEN: You said it's unusual, but is it illegal (UNINTELLIGIBLE)? SERWER: It is probably not illegal at all. And, again, it looks -- it smacks of a conflict of interest, you know, and, of course, Grasso is gone. He's not going to face anything with this necessarily. And Hank Greenberg in "The Wall Street Journal" acknowledges this. Goldman Sachs says it cost the company millions of dollars in trading to make sure that the stock was traded efficiently.
So, you know, kind of an interesting Wall Street insider's story, but it also affects all investors as well.
O'BRIEN: Yes, because we end up paying for it at the very end.
SERWER: That's it. That's correct.
O'BRIEN: All right, Andy, thank you so much.
SERWER: OK.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com.
Aired October 3, 2003 - 07:41 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
SOLEDAD O'BRIEN, CNN ANCHOR: Dick Grasso stepped aside recently as chairman of the New York Stock Exchange amid a furor about his huge paycheck. Now, he is at the center of a new controversy.
Andy Serwer is "Minding Your Business" this morning. Hello.
ANDY SERWER, "FORTUNE" MAGAZINE: Hello. Welcome back.
O'BRIEN: Thank you.
SERWER: Good to see you.
"The Wall Street Journal" is reporting this morning that Dick Grasso is involved in another controversy indeed; this time, involving some of the biggest names on Wall Street, including a unit of Goldman Sachs and AIG, a name you might not be familiar with, but a giant insurance company. There is Dick Grasso.
Here is how it worked. A guy named Hank Greenberg, the CEO of AIG and a very, very powerful figure on Wall Street, complained to Grasso that trading in his stock wasn't going particularly well, and that he wanted Grasso to step in and get the specialists -- this Goldman Sachs unit -- to go in and buy and make sure the stock was trading better.
The problem is that Greenberg was on the board of directors of the NYSE, and, in fact, even on the Compensation Committee. This kind of intervention, Soledad, is very, very unusual, and it really speaks to the whole problem, I think, at the New York Stock Exchange, which is not necessarily governance and not necessarily a transparency, but the whole specialist system itself. And let me explain what is very quickly.
When you place an order on the New York Stock Exchange, it goes down to an actual human being, as opposed to the Nasdaq which is all computer trade. This specialist matches buy and sell orders. If there are imbalances, this person steps in and takes positions to make sure trading is efficient.
You can also make a very, very good living being a specialist on the stock exchange, and people complain that that very good living comes out of our pockets -- the investors' pockets. They wonder if this is an antiquated system. So, that's why this is an important story for investors.
O'BRIEN: You said it's unusual, but is it illegal (UNINTELLIGIBLE)? SERWER: It is probably not illegal at all. And, again, it looks -- it smacks of a conflict of interest, you know, and, of course, Grasso is gone. He's not going to face anything with this necessarily. And Hank Greenberg in "The Wall Street Journal" acknowledges this. Goldman Sachs says it cost the company millions of dollars in trading to make sure that the stock was traded efficiently.
So, you know, kind of an interesting Wall Street insider's story, but it also affects all investors as well.
O'BRIEN: Yes, because we end up paying for it at the very end.
SERWER: That's it. That's correct.
O'BRIEN: All right, Andy, thank you so much.
SERWER: OK.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com.
