Trending Content
Career Resources
WSO Free Modeling Series - Now Open Through
April 30, 2024
9 Free Financial Modeling Lessons
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
+Bonus: Get 27 financial modeling templates in swipe file
+Bonus: Get 27 financial modeling templates in swipe file
Edmundo, what say you to his claim that Goldman Sachs absolutely did not need bailout funds and it was forced down their throat by the UST? This was a VERY well known fact at the time when they were discussing the bailout and how they didnt want a crisis of confidence in select companies because they were accepting bailout funds.
It's a fantasy.
Yes, he raised money from Buffett. But the capital markets were toast. By John Thain's own estimation, Merrill was a week away from bankruptcy when he pissed in Ken Lewis's ear and scuttled the Lehman deal. Goldman was probably three weeks behind them.
That's not to say that Goldman wasn't positioned better than anyone else on the street at the time. They certainly weren't going to let a little thing like fiduciary duty and blatant conflicts of interest keep them from recommending toxic shit to their institutional clients while they themselves were building a massive short interest in the same assets. But they weren't insulated. They'd have gone down, too.
In fact, Blankfein never raised a single objection to TARP. The guy who pissed and moaned the loudest was Kovacevich over at Wells Fargo, insisting they didn't need to be bailed out. Which, of course, was total bullshit as well, because they couldn't even pass the stress test.
Goldman is spinning this yarn about how they just took one for the team in accepting TARP money, and it's easy to see through. Just ask yourself: When has Goldman ever done anything that didn't directly and immediately benefit Goldman? Do you think if they had the balance sheet and the resources to separate themselves from the competition by saying, "Thanks, but no thanks." that there would have been even a moment's deliberation?
Finally, why did former Goldman CEO and current Treasury Secretary Hank Paulson feel the need to hold a secret meeting with Goldman's board in Moscow of all places, well outside U.S. jurisdiction, in the months leading up to the crisis? http://seekingalpha.com/article/167565-the-secret-paulson-goldman-meeti…
So you ask what I say to the claim that they didn't need bailout funds? I say bullshit. I say they were arranging bailout funds before anyone even knew there was a crisis.
1- there's no such thing as fiduciary duty in advising someone of investments, at least not in the respect that your mentioning. As if its ethically required for there to be one entity inside a bank to aggregate information on all positions and strategies being considered by the bank's 30,000+ employees and disseminating it with each morsel of market commentary they distribute externally, and as if anyone would even take it seriously?
2- I know the media and layperson finds it repulsive that GS was making money off of shorting MBS while selling MBS to clients, but you should understand the complexity of a large bank better than anyone. There were a few prop traders making bets against MBS that ended up paying off huge. But there were very likely even more prop traders that were making bets on MBS that got burned pretty bad. Besides, they are called proprietary traders for a reason, because their strategy is PROPRIETARY. The people who were selling MBS, without a doubt are not privy to prop trader's trades or the strategy and fundamental assumptions underlying them.
At any given moment inside a bank, there are people betting for and against gold/oil/energy/gas/equities etc... if tomorrow gold fall through the floor, it was unethical for the bank to publish research selling long gold positions, because they had prop traders short gold?
I'm sure Goldman had sales people trying to sell oil at $200 barrel, and I'm sure there were traders betting against oil. The only reason the financial markets work is because there are participants with opposing views. I'm selling something for a dollar because I believe it is or will be worth less than that. Someone is buying it for a dollar, because they believe it is or will be worth more than that. I'm selling it to you because you're stupid enough to buy it. And you're buying it from me, cuz I'm stupid enough to sell it, only one of us will be right. Thats the way the world works.
Velit ea eius vel et dolor hic facilis. Similique et veniam qui recusandae. Consequatur corrupti aliquid est consequatur totam. Exercitationem maxime provident velit ut rerum dolor sed.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...