Posts Tagged ‘Goldman Sachs’

Goldman and Greece

February 23, 2010

… and I ain’t talkin’ about the musical.

There was an interesting article by the BBC’s Robert Peston on what financial services Goldman offered the Greek government. The services themselves are pretty dubious, giving the Greek government little real benefit aside from reducing its on-book debt. Even Goldman do not seem to pretend that it was anything other than, ahem, financial engineering.

Peston’s question was: is it ethical.

The answer is: probably not. But ethics are troublesome, and I don’t mean troublesome in that “oh dear that stops us making lots of money” way, but in that “oh dear ethics is inherently based upon a point of view and therefore is difficult to capture in an abstract sense which can be applied equally to all parties and all cases” way. Typically, clients’ transactions are judged in terms of “but would their or our government think this a bit dodgy” kind of way (a test the Greek trades would have failed). But when there is no government it becomes a bit of a tougher test to apply.

“Efficiency” is a key selling point of any financial product; typically that means the product is easier to manage, has lower risk, has lower transaction costs and, sometimes, less tax. In a Daily Mail sort of way this must  seem unethical – but this is no different to a retail bank saying “you can have an ISA (which is tax free) or a savings account (which isn’t)”. Is it wrong for that bank to help its customers minimise their tax bill?

Goldman, presumably, felt the emphasis was on the Greek government. Interestingly, their ethics don’t seem to be under debate.

Goldman Sachs, Goldman Sachs, clicking in the votes?

February 11, 2010

» Goldman Sachs, Goldman Sachs, clicking in the votes?

Between 3.41pm and 3.57pm yesterday, little more than 24 hours after the Robin Hood tax campaign’s high-profile launch, supporters noticed a sudden spike in the number of people rejecting the plan in their online poll. More than 1,700 came from a Goldman-registered server, with the rest from what appeared to be a personal address. It was unclear whether the stunt involved an individual or a number of people. Goldman said: “We have just received this information, and we are investigating the matter fully.”

Someone at Goldman Sachs has far too much time on their hands. They may find that may not be a problem for much longer.

I doubt Goldman would particularly care what we voted for in a poll, and certainly wouldn’t waste more than ten minutes trying to influence it: even Goldman is firmly aware that, as an industry, most individuals rate us lower than the leech.

Paulson repeats claims that Britain ‘screwed’ US over Lehman rescue

February 1, 2010

» Paulson repeats claims that Britain ‘screwed’ US over Lehman rescue

In On the Brink, the first book by a key player in America’s $700 billion banks bailout, Mr Paulson concentrates on the crazy months surrounding Lehman’s filing for Chapter 11 bankruptcy protection on September 15, 2008.

Barclays negotiated to buy Lehman during the weekend before the bank’s collapse, but the talks fell apart after both countries put up obstacles to a rescue deal. The British bank eventually bought Lehman out of Chapter 11.

Yes, all those barriers. Surely buying the firm that is about to be the world’s biggest bankruptcy is not really that big a deal? Do we really need to vote on it?

Not being a shareholder, it’s hard to speak on their behalf. One of the few things I own is this laptop – if it had decided to buy Lehman Brothers (and, let’s face it, that would be weird in so many ways) then I might feel some resentment at not being consulted, but then my laptop screws me over in all kinds of ways so it wouldn’t surprise me if it was planning a short squeeze (oo-er) on Goldman as I write. Perhaps I should have a say, But then I am just the owner.

It is odd, a few years ago people thought Paulson was machinating on behalf of Goldman Sachs. Now it seems he was just a nutter.

Goldman staff have the last laugh on bonuses

January 27, 2010

» Goldman staff have the last laugh on bonuses

They’ve called it the $30bn speech – that’s the value wiped off shares in top US companies in the minutes after President Obama announced on Thursday that he was to introduce measures to reduce the size of financial institutions and limit their ability to take on risk.

Almost without exception, big bank shares headed south on the news, with stock in Goldman falling some 8% Thursday and Friday. But Goldman staff are doubtless delighted at the effect Obama’s statement had on the firm’s shares, as the award price used for calculating the number of shares that go into individual bonus packages (as deferred equity) is thought to have been based on Friday’s close. In other words, thanks to the President’s obsession with bankers and their bonuses, Goldman staff will actually receive around 8% more stock in their bonus sacks than they would have before he opened his mouth. Such is The Law of Unintended Consequences.

It seems too neat to be true – which probably means that it isn’t. It’s a sign of our obsession with Goldman that a speech which implies the end of its business model, has its stock fall significantly and put its very future in doubt is seen as being in its favour.

The blood-sucking vampire squid

January 22, 2010

… or Goldman Sachs, as they are more affectionately known (surely being blood-sucking and a vampire is a bit of a truism?). The alternative moniker came from Rolling Stone magazine, not a publication widely noted for insight into financial affairs, but that’s just being picky. Some may consider it a slander on vampire squids.

So is this awe (and disgust) shared by those within the industry? After all, relationships in this industry are a bit like those in a soap: constantly changing, complicated and sometimes stretching credulity.

Well, no. But is this surprising? They’re not like MI5 or the Mafia: you are actually allowed to leave once you enter. And when they leave, they join competing firms … and vice-versa. Do these ex-Goldmanites have an aura (the mystical kind, not the strange sensation that pre-empts an epileptic fit)? A strange other-worldly knowingness which can be applied to financial markets with profitable consequences? Tentacles? Well, no. I’ve found them disappointingly dim and, more irritating, lacking in subtlety (shouting at people seems to be their only method of managing people). When I speak to them as competitors / clients / cooperator is there a bit of a lisp from their vampiric canines? Well, no.

I once went for an interview there (the following may contain elements of fabrication mixed with elements of truth, such as the fact people were speaking):

“Ninja, you’ve come across well in all the interviews, but I just get the impression you want a job. You should want to work for Goldman.”
“That seems reasonable. You are just another investment bank.”
“But we’re Goldman.”
“Indeed. My life would be an unhappy one if my only wish in life was to work for yourself, as currently I do not.”
“But we’re Goldman.”

Needless to say, I didn’t get the job. You can dismiss the rest of this blog as sour grapes, but some things are undeniable: they’ve made loads of money and they are perennially successful. So if it’s not their people, perhaps it’s their culture? And on that subject, there are three commonly raised “facts”:

  • They subject people to hundreds (well, maybe not hundreds, but more than average number) of interviews before hiring them;
  • They have a “dead wood” policy of trimming a certain number of people every year, i.e. making it easy to get rid of poor performers;
  • They’re a giant hedge fund with a bit of customer business attached to the side.

I’ve never really bought the first item as a good thing, if true. In fact it makes them sound as if they have Alzheimer’s. The second one, though, does make me wonder. Firing someone is a difficult thing to do, aside from the purely humane there’s the problem of being without a member of staff for several months, the bad morale and the possibility you may not be allowed to hire a replacement.  The idea of having it built into the culture would overcome a lot of these advantages and would make it a lot easier to get rid of poor performers. It is, though, ruthless, unhelpful, morally ambiguous, and quite possibly not true, as well as being far from certain to succeed: a climate of fear has its downsides, although, I suppose, if you’re supremely self-confident then you will think it will never happen to you.

As for the final “fact”: I am not convinced. When I bump into Goldman as a competitor their actions seem to be more than just a sham … or, at least, a very good sham with made-up clients and everything, and really this is heading towards paranoia.

There is one other possibility: luck. Are Goldman just lucky? I doubt it’s that simple. Will they continue to be “lucky”. Perhaps. But now their reputation as the investment bank is coming back to haunt them, perhaps it’s not the kind of luck they’re after.

Goldman says reports of CEO testimony improper

January 17, 2010

» Goldman says reports of CEO testimony improper

There are two ways to interpret Goldman Sachs’ activity here:

  • They ruthlessly and unpleasantly sold products they knew were going south
  • They hedged their position

Personally, I believe the latter. Mostly because, as a broker, Goldman’s main job is to help its clients buy or sell the assets the client wishes to buy and sell. Deciding an investment strategy is the client’s job (or their adviser, or asset manager, or whatever). Judging the quality of the assets is the job of a credit ratings agency. Obtaining the assets is Goldman’s job.

If you go to a fishmonger and want to buy salmon – and the fishmonger tells you he thinks salmon is disgusting and you’d be better off going for cod – then you may be wondering when you invited the fishmonger to lunch or asked him for advice on your menu (you may do many other things, from follow his advice or, if you are a serial killer, batter him to death [batter – food pun, ha ha] with a lump of fish, but you get my point). You want salmon, he sells you salmon. He then buys more salmon from his supplier to restock – and his activities of buying and then selling at the same time are unlikely to lead to him being denounced by, well, everybody.

The fact is, investment banking is not a commune. Some hedge fund wants to go long CDOs or the latest cool stocks? Let them. Just don’t expect the broker to do the same thing. We don’t expect our doctors to get our illness, lawyers to become a party to our contracts, estate agents to move in with us. Brokers are risk averse. They’re not going to pin their entire profits on their clients’ investment strategies or even ask them what they are. Many businesses are the same – they are there to help you buy and sell, they are not there to share your tastes. It is when those riskless businesses screw-up, like Lehman, that things get very fishy indeed.

Goldman Sachs teams could quit the city over taxes and regulations

January 4, 2010

» Goldman Sachs teams could quit the city over taxes and regulations

Would anyone miss them?

Alongside its results last year Goldman highlighted that it paid £1.1bn in UK corporation tax, the biggest contribution from the UK financial sector. Its 5,000 London employees had also contributed hundreds of millions of pounds in income tax.

Well, yes, apart from that. The news is less serious than it seems: the organisation appears to be thinking aloud, and rather than making idle threats is wondering if it is viable to move (Switzerland is the most likely candidate) and if so, whether or not to do so. Hmmm, that’s actually a lot less comforting than an idle threat. Still, even Goldman appear unconvinced about the idea of moving, which means London may be safe – or, if that is your view, burdened – for a while yet.