I’ve been procrastinating about blogging, and I’ve got to run out to dinner in a few, so I’m throwing this post together a little quickly.
More Goldman Sachs links:
– Matt Taibbi, who gave Goldman Sachs the memorable sobriquet “Vampire Squid” in his Rolling Stone cover article last year, opines on current developments, “The Feds vs. Goldman”. Excerpt:
Just under a year ago, when we published “The Great American Bubble Machine” [RS 1082/1083], accusing Goldman of betting against its clients at the end of the housing boom, virtually the entire smugtocracy of sneering Wall Street cognoscenti scoffed at the notion that the Street’s leading investment bank could be guilty of such a thing. Attracting particular derision were the comments of one of my sources, a prominent hedge-fund chief, who said that when Goldman shorted the subprime-mortgage market at the same time it was selling subprime-backed products to its customers, the bait-and-switch maneuver constituted “the heart of securities fraud.”
CNBC’s house blowhard, Charlie Gasparino, laughed at the “securities fraud” line, saying, “Try proving that one.” The Atlantic’s online Randian cyber-shill, Megan McArdle, said Rolling Stone had “absurdly” accused Goldman of committing a crime, arguing that “Goldman’s customers for CDOs are not little grannies who think a bond coupon is what you use to buy denture glue.” Former Wall Street Journal reporter Heidi Moore hilariously pointed out that Goldman wasn’t the only one betting against the housing market, citing the short-selling success of – you guessed it – John Paulson as evidence that Goldman shouldn’t be singled out.
The truth is that what Goldman is alleged to have done in this SEC case is even worse than what all these assholes laughed at us for talking about last year.
Prior to the “Bubble Machine” piece, I had heard rumors that Goldman had gone out and intentionally scared up toxic mortgages and swaps in order to get short of them with sucker bookies like AIG. But – and this seems funny in retrospect – I foolishly dismissed those tales as being too conspiratorial. I thought it was bad enough that Goldman was shorting the subprime market even as it was selling toxic subprime-backed securities to chumps on the open market. The notion that the bank would actually go out and create big balls of crap that would be designed to fail seemed too nuts even for my tastes.
– The WSJ says Warren Buffett expects to get heat over his Goldman investment at Berkshire Hathaway’s annual meeting, “Buffett is expected to fire at will”. An excerpt:
Mr. Buffett continues to earn huge profits from his Goldman investment, which pours more than $900 a minute into Berkshire’s coffers, or $500 million a year. “If he could do [the Goldman investment] again he’d do it in a heartbeat,” said Glenn Tongue, a partner with T2 Partners, a New York hedge fund that owns Berkshire shares.
– Whoever does PR for Glenn Tongue, his T2 partner Whitney Tilson, and their friend Mohnish Pabrai, is a real champ for getting them continually quoted in articles about Buffett, just because they happen to own some shares in Berkshire Hathaway and claim to be influenced by Buffett’s investing style. As far as the substance of the Tongue quote, a question and a comment: How does Tongue know if Buffett would make that Goldman preferred investment again? Buffett wants to be liked as much as he wants to make money; I suspect he regrets burdening his legacy with another tie to the housing bust mess (to go with his investment in Moody’s, etc.).
– I started a thread on the Short Screen message board noting the criminal investigation into Goldman and asking if anyone was thinking of shorting it. No response there, at press time, but from the smattering of blog posts and tweets I’ve seen this week, the consensus has been that 1) The government is being mean in looking Goldman e-mails, and 2) Goldman always wins. One of the exponents of that view is the pseudonymous stock blogger The Fly1. I’m not so sure about that this time. Goldman has won in the past largely because of its government connections; those seem to have withered as Goldman has made itself a PR liability.
– Speaking of which, I offered my idea for how Goldman should have handled itself last year in the comment thread of a post on Howard Lindzon’s blog yesterday (one in which he quoted “The Fly):
2009 would have been a great year for Goldman Sachs to lay low and be good citizens. Take some of the record profits they made off of the Fed’s free money and do something other than give themselves huge bonuses. Just for one year maybe play it cool. Leave some money on the table.
Take some of the cash not spent on huge bonuses and hike the dividend. Take a little of it and start a foundation or something for wounded veterans (Yeah, I know GS already does philanthropy, but the average American wouldn’t give a crap about the big nature park GS bought in Tierra Del Fuego even if he knew about it). Have Owen West run it. Have Owen West get more TV time than Lloyd Blankfein.
If GS played it that way in ‘09, maybe they wouldn’t be in the jackpot today.
1I’m not familiar with all of the characters in The Fly-o-Sphere, as I’m not a regular reader of his blog, but I found this animated clip he put together somewhat amusing:
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