Goldman Sachs: “A Bunch of Clever Thugs”

Goldman Sachs has a PR problem.

I want to direct you to a few of the more interesting articles discussing these. Let’s start John Gapper writing in the FT — that’s where I pulled the headline for this post — who observes:

“For believers in Goldman’s ethical standards and way of doing business, these are difficult times. Although it avoided the mistakes that brought down Bear Stearns and Lehman Brothers, forced Merrill Lynch into Bank of America’s arms, and prodded Morgan Stanley further into lower-risk retail broking, Goldman has become a whipping boy.

There is outrage that, having taken government money to survive the crash, Goldman is in such rude health that it will hand out billions in bonuses. Matt Taibbi, a Rolling Stone writer, caught the mood memorably by describing Goldman as “a giant vampire squid wrapped around the face of humanity”. . .

Goldman executives were wounded by how seriously Mr Taibbi’s piece was taken despite their riposte that vampire squids are small creatures that present no danger to humanity. He accused it of profiting from bubbles such as the US internet and housing booms, and of repeatedly “selling investments they know are crap” to retail investors.”

Gapper notes that Taibbi “mischaracterised Goldman” — their success has not been based on “pump and dump,” but on “sticking obstinately to the institutional, less-regulated elite end of the market.”

There may be something to do that, but there can be no doubt that Taibbi perfectly captured the Zeitgeist of the moment.

The second article is in this morning’s WSJ, published before the blockbuster $5.25 earnings versus $4.24 consensus estimates:

“On Thursday, Goldman Sachs Group Inc. will announce that life is pretty much back to normal: billions of dollars in quarterly profit and record pay set aside for employees at the firm known for running circles around the rest of Wall Street.

Hoping to defuse a politically combustible situation, Goldman officials have been mounting a soft-sell campaign that pushes the usually reticent company into the spotlight. For months, the New York firm has been working to dispel what it sees as misperceptions about itself to make its profit and bonuses go down easier, from a lobbying push in Washington to media interviews in which Goldman Chief Executive Lloyd Blankfein reminisces about his humble roots . . .

Amid political disparagement of the pay culture on Wall Street, Goldman’s fast rebound from the worst of the financial crisis has made it a lightning rod. Even though the firm repaid the government, it has access to short-term lending from the Federal Reserve’s discount window that wasn’t available before the collapse of Bear Stearns Cos.”

The Journal also mentioned the Taibbi article:

In June, a Rolling Stone magazine article — which was passed up and down Wall Street — called Goldman a “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” New York Attorney General Andrew Cuomo’s denouncement of banking-industry pay practices in a July report titled “No Rhyme or Reason” noted that 953 employees at Goldman got bonuses of at least $1 million in 2008.

Lastly, I have to point you to the third and least important column, CEO Lloyd Blankfein’s self-serving defense of Wall Street in the FT: To avoid crises, we need more transparency.

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Sources:
A credibility problem for Goldman
John Gapper
FT, October 14 2009 22:34
http://www.ft.com/cms/s/0/bb9b743e-b8f3-11de-98ee-00144feab49a.html

Goldman’s Soft Sell: Its Warm, Fuzzy Side
SUSANNE CRAIG
WSJ,OCTOBER 15, 2009
http://online.wsj.com/article/SB125556536458586219.html

To avoid crises, we need more transparency
Lloyd Blankfein
FT October 13 2009
http://www.ft.com/cms/s/0/3de2aab8-b78f-11de-9812-00144feab49a.html

Goldman Sachs Bonus Stigma May Overshadow Charitable Endeavors
Christine Harper and Patrick Cole
Bloomberg Oct. 15 2009
http://www.bloomberg.com/apps/news?pid=20601088&sid=a4kkzhodTkEE