Another thing that binds people together is adversity. Last month I questioned whether Goldman Sachs was losing its edge. "Is this an era where Goldman is no longer as glossy and smug as it once was?" However, not even I, the vixen columnist of the markets, could have envisaged the hell that would be unleashed on the firm in mid-April when the SEC charged it with civil fraud arising from a CDO transaction executed in 2007. Goldman says the allegations are completely unfounded in both law and fact and that they will vigorously contest the action. Nevertheless, the case and any related lawsuits that might arise will be a huge distraction for management.
From the outside, it looks as if the SEC has sunk its fangs into Goldman in vampire squid-like fashion and will not let go easily. As far as I’m concerned there had to be a whistle-blower who filled the regulator in on the details of the deal.
Some criticize Goldman’s chief executive, Lloyd Blankfein, for letting a minor incident become a full-scale war. "Goldman should have been much more craven and done everything possible to settle," a well-placed source told me. We will see what transpires in the next few months. I don’t rule out the possibility that the SEC will bring similar suits against other banks. However, in the meantime, Goldman will no longer be the safe choice or even the first choice for clients. Morgan Stanley and JPMorgan should make hay while the sun shines.
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In April, the ash plume from a volcanic eruption in Iceland closed a large part of European airspace and caused chaos for bankers’ schedules. In general, senior bankers are control freaks, and being at the mercy of the weather was an unsettling experience. Barking down the phone at hapless underlings was strangely ineffective. One bank chief was marooned in Asia. After three days, Chief decided enough was enough and flew to Dubai. He was then ushered on to a private jet and flew to Nice in southern France. A limousine transported him to Calais where, horror of horrors, Chief was forced to mingle with the masses and queue for a ferry to cross the Channel. Another senior financier, who was marooned in Toronto, hastened to New York to have a broader choice of flights but to no avail. He was stranded, anxiously awaiting the whim of the ash. By chance, both the bank’s chairman and chief executive were also in New York and each offered senior financier safe passage on their private aircraft. "I couldn’t face it," senior financier whimpered. "Fortunately, I was able to secure a commercial flight home."
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