About eighteen months ago, I wrote a piece titled “Smiling All The Way To The Bank” that featured commentary about the Congressional testimony of one Lloyd Blankfein, the CEO of Goldman Sachs.
“Blankfein seemed to be having fun, smiling as he detailed how much his firm had cut the compensation of their employees, up to and including himself…
…Listening to Commissioner Byron Georgiou’s mile long, multi-part question about mortgage loan origination, a question that seemed to indicate a desire to pinpoint the one specific area responsible for the entire financial meltdown, I understood why Blankfein was smiling so much. The politicians asking the questions didn’t understand the mortgage business well-enough to ask about anything that could be truly embarrassing, and even if they did, it would unlikely that much of the viewing public would either.”
After typing “Goldman Sachs” into the search bar of this very same blog to look up the other comments I’d written about Goldman Sachs over the last two years, I discovered that most of what I wanted to say today, now that Blankfein has hired the same criminal defense lawyer Bernie Ebbers at WorldCom used, had already been written.
“No one wants to say it, but in this climate, in this economy, where a big scapegoat is needed to assuage an increasingly agitated nation that feels Wall Street has paid no price for the pain it has inflicted on the average citizen, Lloyd Blankfein’s investment bank presents a very real target, even though his firm's operational policies can be found in all the major banks. The reality is, no one wants to imagine the world without a Goldman Sachs, but the people at Arthur Anderson never thought their firm would collapse either.”
In fact, if you have a few minutes, and you really want to get a better sense of why Lloyd Blankfein is not smiling today, I would click the link below and take a look at a transcript that shows how Senator Carl Levin characterized the Goldman Sachs mortgage security transactions the Justice Department and the Manhattan District Attorney are now giving closer scrutiny:
“We’ve heard in earlier panels today example after example where Goldman was selling securities to people and then not telling them that were taking and intended to maintain a short position against those same securities. I’m deeply troubled by that, and it’s made worst when your own employees believed that those securities are junk, or a piece of crap, or a shitty deal, words that those emails show your employees believed about a number of those deals.
Billion dollar Timberwolf Synthetic CDO squared. CDO’s get squared now. A senior executive called it a shitty transaction, but the Goldman sales force was told it was a priority item for two straight months. Goldman sold $600 million dollars worth of Timberwolf while at the same time holding a short position – in other words betting against it.
Your investors lost big time. Goldman won on that deal.”
I wouldn't count Blankfein out just yet, especially since no one is sure just what legal challenges the Wall Street chieftain may be facing, but there is no doubt to anyone watching this that the heat just got turned up.