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Sun 9 May 2010 04:00 AM

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Goldman death fight may explain Lloyd’s words

If we take Lloyd Blankfein’s word for it, Goldman Sachs must be guilty of worse behaviour, says Jonathan Weil.

Goldman death fight may explain Lloyd’s words

If we are to take Lloyd Blankfein’s word for it, and that’s always a big if, then there must be a lot worse behaviour by Goldman Sachs that has yet to be discovered, beyond what was publicly unearthed at last month’s Senate hearing.

Here’s what Goldman’s chief executive told Tom Coburn of Oklahoma, the ranking Republican on the Senate Permanent Subcommittee on Investigations, when asked if he had any “legal, ethical or reputational” concerns about any of the activities undertaken by Goldman employees that were described during the day-long hearing. “I heard nothing today that makes me think anything went wrong,” Blankfein said.

Now flash back to November 2009, when Blankfein spoke at a New York conference sponsored by Directorship magazine, which named him its CEO of the year.

“We participated in things that were clearly wrong and we have reason to regret, and we apologise for them,” Blankfein said then, referring to Goldman’s role in the financial crisis, without mentioning any specifics.

So, using simple algebra, we can deduce from those two statements by Blankfein that he must have been referring to some “things” back in November that didn’t come up for discussion at the April 27 Senate hearing. What were these things? Only Blankfein knows, it seems.

What we do know, though, is that they must have been far more unseemly than anything we heard about two days ago, at least by Blankfein’s fuzzy definition of right and wrong.

In Blankfein’s morally hazardous world, it would seem that there’s nothing wrong with selling hare-brained subprime-mortgage schemes of the bank’s own invention to Goldman clients, while disparaging the same deals in emails to colleagues as “crap” and other more vulgar terms for human waste.

From Goldman’s perspective, there was nothing wrong with helping John Paulson’s hedge fund devise a synthetic collateralized debt obligation to meet his designed-to-fail specifications, and then selling $150m of the notes to a German bank without telling the bank about Paulson’s identity or role — notwithstanding that the Securities and Exchange Commission has said Goldman’s actions were fraudulent.

There was also nothing wrong with telling the German bank that the investment portfolio underlying Abacus 2007-AC1 was selected by an independent company called ACA Management, while telling Goldman employees internally that the portfolio was selected by ACA and Paulson.

And it wasn’t technically wrong for Goldman co-defendant Fabrice Tourre to write this in an email, while Abacus was being hatched: “Only potential survivor, the fabulous Fab… standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstrosities!!!”

It makes you wonder: what did the Senate investigators miss?

Blankfein had a chance in January to publicly explain what it was he had apologised for, when the chairman of the Financial Crisis Inquiry Commission, Phil Angelides, asked him at a hearing to elaborate in detail. Blankfein dodged the question.

The good news now, though, is that Goldie, Fab and Lubricious Lloyd are fighting back. To which we, a grateful public, should lift our voices and shout: ‘Please, Goldman, keep fighting to the death, even if it’s not the good fight.’

And please — please! — don’t settle the SEC’s lawsuit. Take it to trial. Go for vindication. Appeal all the way to the Supreme Court if you have to. We want to see everything that comes out during discovery. All the deposition transcripts. All the embarrassing emails. The whole story.

And, please, Carl Levin, chairman of the Senate panel that gave us this delightful hearing, how about some more? How about two years more? The 1930s had the Pecora Commission. We could surely have a full-fledged Lloydapalooza.

Turn loose the millions of pages of documents you got out of Goldman — and all the other banks you sent subpoenas to, as well. We saw the 901 pages of exhibits from the Goldman hearing on your website. It wasn’t enough. Nothing will be, until we get to see precisely what it was Goldman did during the credit bubble that was so horrible, and so offensive, that Blankfein felt compelled to publicly and vaguely apologise for it.

Or maybe Blankfein didn’t really mean what he said back in November, in which case he should take his apology back.

Not that it would matter much now. Nobody believed him when he said he was sorry, anyway.

Jonathan Weil is a Bloomberg News columnist. The opinions expressed are his own.

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Madhav Bodas 10 years ago

When it comes to Morals and Ethical practices, where to begin on Wall Street becomes a cumbersome task. Be it the likes of Goldman, Paulson, ACA, IKB or any other wall street player, aren't they birds of the same flock? Havn't they read the same books and aren't they following the best practices as laid down by the industry. Even if they knew Paulson's intentions, Goldman may not be in a position to disclose because of NDA. Customer service being their Suo-moto, they have to protect best interests of their client. While they brought out the product, a rating agency chose to rate Abacus as AAA. IKB had demand for AAA paper as stipulated by their asset call, and so they bought it. So, as Fareed Zakaria has put it in Newsweek, thats the way Wall Street works. For every sale, you need a willing buyer. Goldman has just played the role of a Kazi !

John 10 years ago

Some of my best friends work for Goldmans, and they are job hunting as we speak. If Obama doesn't crush this evil then it will simply refind itself and become something else, some other ectoplasm to hate.