If Only Goldman Sachs Had A Town Hall . . .
By David Weidner
A DOW JONES COLUMN
Town-hall meetings have been flashpoints for America's debate over health
care, but what if a certain Wall Street firm accused of gaming the system faced
its critics in public...
Lloyd Blankfein: OK, everyone take your seats. Thanks for coming today to our
annex here at the U.S. Treasury Department. Special thanks to Goldman Vice
Chairman Timothy Geithner for setting this up. Just kidding people, that's not
happening for another couple of years.
Anyway, my name is Lloyd, and I'm chief executive of Goldman Sachs Group Inc.
(GS). Big institutional clients, you should have already known that via our
"trading tips" program.
Today we've invited investors and the public in to clear up some
misconceptions about the firm, about Goldman's conduct on Wall Street and its
benefit from the bailout. Time is money, and Goldman is short time, so let's
get right to the questions.
Question 1: Is it true that the $180 billion bailout of American
International Group Inc. (AIG) was really a bailout of Goldman? You made more
than 20 phone calls to then-Treasury Secretary Henry Paulson in the week
leading up to the initial AIG loan that resulted in $10 billion flowing
directly to your firm?
Blankfein: As we've tried to make clear, our AIG exposure was hedged - hedged
by our deep influence in Washington.
Question 2: Is it true you are, as Rolling Stone magazine said, a "great
vampire squid wrapped around the face of humanity?" If so, should we be buying
squid calls, puts and shorting other small sea animals including urchins and
king crab?
Blankfein: Good question. A common misconception. Just because we have former
bankers at almost every level of the government and the ability to trade ahead
of investors in every part of the marketplace does not make us vampire squids.
Vampires don't care for the water. Squids do not know how to program algorithms
for high frequency trading. Robert Rubin does have tentacles and sharp incisors
but he despises humanity. And I look more like Wallace Shawn than any
cephalopod.
Question 3: Let's say a former Goldman executive leaves to take control of
the New York Stock Exchange and captures all the Big Board's trading
information for Goldman's use. Then I, uh, I mean, he goes and accelerates the
decline of one of Goldman's biggest rivals, selling the diminished rival to a
stodgy commercial bank. That executive would get some kind of reward down the
road, right? I mean you wouldn't expect him to be out of a job for more than a
year?
Blankfein: Not sure who you're talking about, Mr. Thain, but I'd suggest he
clears up any pending litigation about how he may have misled Bank of America
Corp. (BAC) about Merrill Lynch first. Then, he might run for public office or
wait for an appointment from the White House.
Question 4: Mr. Blankfein, as a Congressman who spends most of his time on
this planet, I would like to know exactly how you can justify more than $11
billion in bonuses that you have set aside for year-end. Take into
consideration the profit you have earned on the backs of taxpayer aid - not
just to your firm, but to the industry in which you operate. In addition, may I
just say your rivals at Bear and Lehman did not get this aid and basically have
vanished as real competitive threats.
Blankfein: That sounds sinister. It also sounds like I'm going to have to
shell out more than the $53,500 I gave to Democratic senate candidates during
the last cycle.
Question 6: Wasn't Goldman...
Blankfein: Excuse me, where's question 5?
Question 6, I'm front-running question 5.
Blankfein: I don't condone that at all. See me after the meeting about our
recruiting program. Go ahead.
Question 6: Wasn't Goldman supposed to become a bank-holding company subject
to greater Federal Reserve oversight and less risk-taking? And isn't the firm
supposed to be gathering deposits and making progress toward meeting new
capital requirements?
Blankfein: Oh, we're more bank-like than you might think. Our leverage ratio
was just 8.8, down from more than 20 a couple of years ago. We've bolstered our
Tier 1 capital ratio to 13.8%, well above the 6% called for by regulators. We
had to change our fiscal year. Yet, those are just small ways. We borrow from
the Federal Reserve. We use the government like our own ATM. We work bankers'
hours, which means we have time for just one more question.
Question 7: Mr. Blankfein, with all due respect, I stand before you without a
gun or a threat of violence, but like many Americans I am angry. I know that
you have said you are somewhat bewildered about the backlash against your firm.
To many of us, we feel that Goldman helped cause, and then made tremendous
profits in a landscape razed by, the financial crisis. Your traders reportedly
bet against securitized mortgages as your underwriters were selling them to
unsuspecting investors. You've told your own employees not to show off with
their wealth as if you understand on some level that it is at this nation's
expense that you have returned to profitability. Yours is a company careful
about law and cavalier with ethics. Without anyone in government holding you
accountable, is there anyone to whom you listen?
Blankfein: I answer to God and Warren Buffett, and not necessarily in that
order. Thanks for coming. We'll see you at the end of the third quarter. And
though I never try to manage earnings expectations, I would not be surprised if
our numbers come out better than anticipated. |
