Goldman Sachs : Big Profits, Big Questions

AT its nadir last November, Goldman Sachs’s share price closed at $52, nearly 80 percent below its high of around $250. By then, many of its chief competitors — Bear Stearns, Lehman Brothers, Merrill Lynch and UBS — were dead or shadows of their former selves. Even Morgan Stanley, long considered Goldman’s archrival, had nearly died. But somehow, less than five months later, on the heels of a surprisingly profitable first quarter of fiscal 2009, Goldman Sachs is once again riding high, with its stock closing Tuesday at $115 a share.

The question many Wall Streeters are asking is just how Goldman once again snatched victory from the jaws of defeat. Many point to Goldman’s expert manipulation of the levers of power in Washington. Since Robert Rubin, its former chairman, joined the Clinton administration in 1993, first as the director of the National Economic Council and then as Treasury secretary, the firm has come to be known, as a headline in this newspaper last October put it, as “Government Sachs.”

How can one ignore, the conspiracy-minded say, the crucial role Henry Paulson, who followed Mr. Rubin to the top at both Goldman and Treasury, played in the decisions to shutter Bear Stearns, to force Lehman Brothers to file bankruptcy and insist that Bank of America buy Merrill Lynch at an inflated price? David Viniar, Goldman’s chief financial officer, acknowledged in a conference call yesterday the important role the changed competitive landscape had on Goldman’s unexpected first-quarter profit of $1.8 billion: “Many of our traditional competitors retreated from the marketplace, either due to financial distress, mergers or shift in strategic priorities.”

But he was largely mum on American International Group, which, Goldman’s critics insist, is the canvas upon which the bank and its alumni have painted their great masterpiece of self-interest.

SEE HERE :

http://www.rollingstone.com/politics/story/26793903/the_big_takeover/print?a=b

Goldman Sachs, which also had the good fortune, around then, to see its CEO, a bald-headed Frankensteinian goon named Hank Paulson (who received an estimated $200 million tax deferral by joining the government), ascend to Treasury secretary.

Freed from all capital restraints, sitting pretty with its man running the Treasury, Goldman jumped into the housing craze just like everyone else on Wall Street. Although it famously scored an $11 billion coup in 2007 when one of its trading units smartly shorted the housing market, the move didn’t tell the whole story. In truth, Goldman still had a huge exposure come that fateful summer of 2008 — to none other than Joe Cassano.

Goldman Sachs, it turns out, was Cassano’s biggest customer, with $20 billion of exposure in Cassano’s CDS book. Which might explain why Goldman chief Lloyd Blankfein was in the room with ex-Goldmanite Hank Paulson that weekend of September 13th, when the federal government was supposedly bailing out AIG.

When asked why Blankfein was there, one of the government officials who was in the meeting shrugs. “One might say that it’s because Goldman had so much exposure to AIGFP’s portfolio,” he says. “You’ll never prove that, but one might suppose.”

Market analyst Eric Salzman is more blunt. “If AIG went down,” he says, “there was a good chance Goldman would not be able to collect.” The AIG bailout, in effect, was Goldman bailing out Goldman.

Eventually, Paulson went a step further, elevating another ex-Goldmanite named Edward Liddy to run AIG — a company whose bailout money would be coming, in part, from the newly created TARP program, administered by another Goldman banker named Neel Kashkari.

AND HERE :

http://www.marketwatch.com/news/story/whos-profiting-crisis-goldman-sachs/story.aspx?guid={C177EA75-3EB8-4631-B1EC-6EBAE68CDCB7}

During all of this, Goldman Chief Executive Lloyd Blankfein was in the middle of talks about the future of another crippled company, American International Group Inc. (AIG), at the New York Federal Reserve. As Gretchen Morgenson reported in the New York Times last week, those talks resulted in an $85 billion bailout of AIG via a government loan, and, oh yeah, the deal may have saved Goldman $20 billion in losses due to its trading position with the insurer.”

AND HERE :

http://www.slate.com/id/2214407/

The government decision to bail out AIG was made after the private parties, supposedly at risk, had declined to structure a private series of investments that might have avoided the need for use of public money. Perhaps they knew the impact of an AIG default would be small, or perhaps they knew that the federal officials in the room would blink and ante up. In a post-Lehman moment when panic, not reason, was dominating the discussion, perhaps they figured they could walk away with extra billions—and, indeed, they did.

This issue cries out for immediate government inquiry. Maybe one or two of the more than two dozen government entities now beating their chests about bonuses can redirect their energies to this much larger issue confronting us: Who signed off on this $80 billion bailout—now approaching $200 billion—and why?

AND HERE :

http://consumerist.com/5082406/goldman-rips-off-non+profits-endowments-foundations-and-charities

A Goldman Sachs trader recently told me that he constantly rips off endowments, charities, and foundations when they would call up and want to invest. “Whenever I hear it’s a non-prof, then you just ladle on the extra fees,” he told me.

That’s because he knew they were usually unsophisticated investors and wouldn’t do comparison shopping or know how to properly analyze a fee schedule. He justified it by saying it was, “their fault... when you only call up one place, what do you expect?”

To some extent he’s right. If you don’t shop around for your investments or learn to how to make sure you’re getting the best deal, you do set yourself up to be taken advantage of. If you’re getting into an actively managed fund, you better learn all about fees, loads, 12b1 fees, marketing fees, transaction fees, all the fees in the fee rainbow. Don’t think that because you’re a non-profit all of a sudden everyone puts on their happy hats and kid gloves and is going to help you out.

And if you manage the investing on behalf of a non-profit, endowment, foundation or charity, and have an account with Goldman, or any brokerage for that matter, and you’re not 100% certain you understand all the fees on your investment, now would be a great time to check them out.

It still doesn’t make what he does any righter. If you’re reading this, Goldman guy, you should really think about who you’ve become and what worse creature you’re on the path the turning into.

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