Goldman Sachs has a PR problem.

I want to direct you to a few of the more interesting articles discussing these. Let’s start John Gapper writing in the FT — that’s where I pulled the headline for this post — who observes:

“For believers in Goldman’s ethical standards and way of doing business, these are difficult times. Although it avoided the mistakes that brought down Bear Stearns and Lehman Brothers, forced Merrill Lynch into Bank of America’s arms, and prodded Morgan Stanley further into lower-risk retail broking, Goldman has become a whipping boy.

There is outrage that, having taken government money to survive the crash, Goldman is in such rude health that it will hand out billions in bonuses. Matt Taibbi, a Rolling Stone writer, caught the mood memorably by describing Goldman as “a giant vampire squid wrapped around the face of humanity”. . .

Goldman executives were wounded by how seriously Mr Taibbi’s piece was taken despite their riposte that vampire squids are small creatures that present no danger to humanity. He accused it of profiting from bubbles such as the US internet and housing booms, and of repeatedly “selling investments they know are crap” to retail investors.”

Gapper notes that Taibbi “mischaracterised Goldman” — their success has not been based on “pump and dump,” but on “sticking obstinately to the institutional, less-regulated elite end of the market.”

There may be something to do that, but there can be no doubt that Taibbi perfectly captured the Zeitgeist of the moment.

The second article is in this morning’s WSJ, published before the blockbuster $5.25 earnings versus $4.24 consensus estimates:

“On Thursday, Goldman Sachs Group Inc. will announce that life is pretty much back to normal: billions of dollars in quarterly profit and record pay set aside for employees at the firm known for running circles around the rest of Wall Street.

Hoping to defuse a politically combustible situation, Goldman officials have been mounting a soft-sell campaign that pushes the usually reticent company into the spotlight. For months, the New York firm has been working to dispel what it sees as misperceptions about itself to make its profit and bonuses go down easier, from a lobbying push in Washington to media interviews in which Goldman Chief Executive Lloyd Blankfein reminisces about his humble roots . . .

Amid political disparagement of the pay culture on Wall Street, Goldman’s fast rebound from the worst of the financial crisis has made it a lightning rod. Even though the firm repaid the government, it has access to short-term lending from the Federal Reserve’s discount window that wasn’t available before the collapse of Bear Stearns Cos.”

The Journal also mentioned the Taibbi article:

In June, a Rolling Stone magazine article — which was passed up and down Wall Street — called Goldman a “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” New York Attorney General Andrew Cuomo’s denouncement of banking-industry pay practices in a July report titled “No Rhyme or Reason” noted that 953 employees at Goldman got bonuses of at least $1 million in 2008.

Lastly, I have to point you to the third and least important column, CEO Lloyd Blankfein’s self-serving defense of Wall Street in the FT: To avoid crises, we need more transparency.

>

Sources:
A credibility problem for Goldman
John Gapper
FT, October 14 2009 22:34

http://www.ft.com/cms/s/0/bb9b743e-b8f3-11de-98ee-00144feab49a.html

Goldman’s Soft Sell: Its Warm, Fuzzy Side
SUSANNE CRAIG
WSJ,OCTOBER 15, 2009

http://online.wsj.com/article/SB125556536458586219.html

To avoid crises, we need more transparency
Lloyd Blankfein
FT October 13 2009

http://www.ft.com/cms/s/0/3de2aab8-b78f-11de-9812-00144feab49a.html

Goldman Sachs Bonus Stigma May Overshadow Charitable Endeavors
Christine Harper and Patrick Cole
Bloomberg Oct. 15 2009

http://www.bloomberg.com/apps/news?pid=20601088&sid=a4kkzhodTkEE

Category: Bailouts, Earnings

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

60 Responses to “Goldman Sachs: “A Bunch of Clever Thugs””

  1. bsneath says:

    Clever Thugs Dept.

    “Goldman Sachs May Reap $1 Billion in CIT Bankruptcy”

    http://www.bloomberg.com/apps/news?pid=20601103&sid=agRAQzb5M3cg

  2. some_guy_in_a_cube says:

    Look at Goldman’s numbers from today. Their basic business fell off a cliff. They made nearly all their money trading fixed equities. I’ll translate that for you: they put it all on black and it came up black (with all other players locked out and the Fed spinning the wheel for them).

  3. some_guy_in_a_cube says:

    Sorry, meant to say “fixed income” not “fixed equities”. Heading to the Mr.Coffee now…

    http://www.bloomberg.com/apps/news?pid=20601087&sid=anlN_s2PhQ0g

  4. Bruce in Tn says:

    http://finance.yahoo.com/tech-ticker/article/354271/Christina-Romer-%22Cringes%22-at-Talk-of-Ending-Stimulus-Fears-1937-Redux?tickers=tlt,tbt,xlf,spy,dia,qqqq

    Christina Romer “Cringes” at Talk of Ending Stimulus, Fears 1937 Redux

    “As an economic historian, Romer is similarly steadfast in her view that those calling for the Fed to end its special programs and ultra-easy monetary policy risk repeating the mistakes of 1937. From 1933-1936, loose monetary policy helped the economy recover sharply from the depths of the Great Depression. But the Fed’s decision in 1937 to raise reserve requirements “turned out to be part of a disaster” and the economy fell back into severe contraction, Romer says. “It’s a cautionary tale.”

    …Here’s the deal with the WH and the investment banks. I watched this video and the comments afterward. Romer, while watching the video, appeared to me to be saying that the FDR whitehouse after 5 YEARS of stimulus, started tightening too quickly. Were I an investment banker, after watching this, I would be rubbing my hands together in anticipation of more of the same. I am not sure how low the value of the dollar can go, Lefty would have a better idea, or Barry, but I am sure it can be pushed much lower than it is today. She also implies that inflation isn’t really possible until the economy picks up, but if you asked folks in the old Rhodesia if this is a necessary precondition, I suspect you’d get a different answer.

  5. bsneath says:

    Clever Thugs Dept.

    Goldman Sachs, Welfare Queen

    Wall Street’s most storied firm is surviving on taxpayer dollars.

    http://www.newsweek.com/id/190111

  6. mister_x says:

    @8:14/8:16

    Did you just wake up from a coma? They have been relying on FICC and Equities for a long time. Trading *is* their basic business. IB, Asset Management, Principal Investments = drop in the bucket.

    Notice the token $200m in charity. Couldn’t even bring themselves to contribute the $1b “whisper” number.

  7. bsneath says:

    Definition of a Clever Thug:

    “And remember, where you have a concentration of power in a few hands, all too frequently men with the mentality of gangsters get control. History has proven that. All power corrupts; absolute power corrupts absolutely.” – Sir John Emerich Edward Dalberg-Acton

  8. Rikky says:

    goldman doesn’t have a snowball’s chance in hell of improving its image with the general public, however following the historically successful script with our government officials will be successful and really isn’t that all that matters anymore?

  9. danm says:

    So good PR will fix their problem?

    “Just remember kids, it’s not how you feel, it’s how you look… and you look marvelous!”

  10. bsneath says:

    A Short History of the Absolute Power of Wall Street:

    Wall Street’s Free Pass In Congress
    By Robert D. Novak
    Thursday, April 10, 2008

    http://www.washingtonpost.com/wp-dyn/content/article/2008/04/09/AR2008040903403.html

    ~~~

    BR: The Dark Prince speaks from beyond the grave!

  11. davefromcarolina says:

    It’s easy to be really great at trading when you cheat. Remember this?

    http://www.ritholtz.com/blog/2009/07/king-report-more-goldman-intrigue/

  12. Transor Z says:

    GS may make $200 mil in annual corporate giving, but what is not widely known is that it is expected that all GS employees will contribute 15% or more of annual salary to charities.

    And the reason it is not widely known is that I just made it up.

  13. emmanuel117 says:

    Congratulations to Government Sachs for once again beating analysts’ quarterly estimates.

    “Goldman Sachs has a PR problem.”

    No, we have a TBTF problem.

  14. number2son says:

    Lloyd Blankfein actually titled his article “We need more transparency” ?

    How grotesquely ironic.

  15. some_guy_in_a_cube says:

    x said “Trading *is* their basic business.”

    For what, the last 5 years? Trading as a business model. Now that’s sustainable.

  16. vasco7777 says:

    http://www.bloomberg.com/apps/news?pid=20601087&sid=abo3Zo0ifzJg

    Clever boys indeed…and ever so generous for a “lead consultant” who ends up right next to Turbo in D.C.

    Goldman Sachs paid Sperling the $887,727 for advice on its charitable giving. That made the bank his highest-paying employer. Even Geithner’s chief of staff Patterson, who was a full-time lobbyist at the firm, did not make as much as Sperling did on a part-time basis. Patterson reported earning $637,492 from Goldman Sachs last year.

    “My sole work for Goldman Sachs was as lead consultant on the creation, design, and initial implementation of ‘10,000 Women,’ their $100 million philanthropic effort to give business and leadership education to poor women around the world,” Sperling said.

  17. HarryWanger says:

    The best or elite in any occupation be it sports or investment banking are always suffering from public opinion. Again, we see blockbuster results, as the best are prone to perform well, yet envy rears its ugly head. Instead of celebrating that the numbers this morning from GS and improving employment, once again it’s the dark side that emerges from its hole. I completely believe this is all part of the Failure Caucus that was so aptly described by Business Week in mid summer.

  18. ItalicBold says:

    @HarryWanger – If you leave skeletons in your closet they will always rear their ugly heads…

  19. number2son says:

    Hey Harry, you putz, give me the same access to Treasury and the FED that GS enjoys and I’ll happily stop my complaining.

    Deal?

  20. vasco7777 says:

    You really have to be “the best” to earn nearly a million bucks as “lead consultant” for a “philanthropy effort.”

    They must also lead the league tables in issuance of expensive powerpoint presentations.

  21. Chance T. Gardener says:

    While Goldman certainly has considerable PR concerns, what continues to matter most is whether they have committed some (or all) of the acts that articles like Taibbi’s allege. If I were Goldman, I would actually want to play the PR angle because it confines 0ur interest to nebulous fretting over whether to like or dislike Goldman. If they lose the PR battle, they may still win the war by directing our attention away from two fundamental questions:

    1) Have the firm’s former employees, many of whom have held or now hold influential government positions, unduly influenced a government policy that favors Goldman Sachs?

    2) Has Goldman done anything to violate the law?

    Unlike the PR angle, both of these questions could be verified by a process that takes seriously the claims made by a growing chorus of reporters. This process is important because the integrity of our economic and political systems are implicated by it.

  22. vasco7777 says:

    Harry Wanger said — “Instead of celebrating that the numbers this morning from GS and improving employment..”

    —-

    By improving employment I assume you mean:

    Economists surveyed by MarketWatch expected initial claims to fall to about 510,000 but the actual number was 514,000, a bit worse than expected by my reckoning.

    The level of initial claims in the week ending Oct. 3 was revised up by 3,000 to 524,000, predictable as has been the consistent trend all year for most key stats.

    Compared with a year ago, initial claims are up 11%, while continuing claims are up 66%. Say, now that’s definitely a sign that things are looking swell!

  23. Transor Z says:

    The best or elite in any occupation be it sports or investment banking are always suffering from public opinion.

    That must be why the elite surgeons who reattach limbs, transplant faces, save people with traumatic injuries get so much bad press for their work. And elite fire jumpers are so hated by society. And personally, there’s nothing I hate more than an elite marathon runner. It’s all about the glamor with them and they never sign autographs.

  24. HarryWanger says:

    When people finally pull their heads out of the sand and see the rapidly improving economy, maybe we won’t have to hear all the nonstop whining about GS. It’s tiresome and way beyond getting old.

  25. call me ahab says:

    TZ says-

    “there’s nothing I hate more than an elite marathon runner. It’s all about the glamor with them and they never sign autographs.”

    that’s some funny stuff TZ- and a very good observation-

    easily “slaps down” the bogus argument you reference

  26. The Curmudgeon says:

    “When people finally pull their heads out of the sand and see the rapidly improving economy, maybe we won’t have to hear all the nonstop whining about GS. It’s tiresome and way beyond getting old.”

    It’s also tiresome to listen to morons that think returning things to the way they were pre-2008 will result in anything more than the same problems. You could just use 2007 WSJ headlines over again for where we are now, excepting of course, that instead of there being a veneer of free-markets, all these profits are now directly (instead of indirectly, as before) attributable to the schumcks they call taxpayers underwriting the risks. Pfft!

  27. Rikky says:

    this is all going to end badly, of that there should be little question. you can’t hide trillions of losses in off balance sheets forever hoping that improved on balance sheet numbers and time will make the graveyard of skeletons in the closet go gently into that good night. these things take years and years to play out. what should be clear is there are no viable solutions to fixing the current predicament we’re in. we can’t pay our debts off and we can’t default and we can’t print as they all have very dire consequences. unfortunately for the USA they aren’t like a person where you can carry debt until you die then it all gets wiped out.

  28. Robespierre says:

    “The Golden Years of the Capone Era
    Al Capone and Rocky Point Mexico – Puerto Penasco
    At the age of twenty-six, Al Capone assumed control of the Torrio Organization, with over one thousand people on the payroll of $300,000 a week. The profits continued to roll in because the majority of people felt that betting and bootlegging were minor vices and the man that made these things possible was a public servant who did what he could to meet the needs of the people. Capone, himself attempted to put his feeling in regards to his business by stating, “This American system of ours, call it Americanism, call it capitalism, call it what you will, gives each and every one of us a great opportunity if we only seize it with both hands and make the most of it.”

    “ Public service is my motto. Ninety percent of the people in Chicago drink and gamble. I’ve tried to serve them decent liquor and square games. But I’m not appreciated. I’m know all over the world as a millionaire gorilla.”

    http://www.rockypointmexico.info/index.php?option=com_content&task=view&id=53&Itemid=65

    Now does that sound familiar to anyone?

  29. call me ahab says:

    “Harley-Davidson Profit Tumbles, Shares Fall”

    duh-

    so much for expensive toys

  30. JustinTheSkeptic says:

    Gee, hitting home-runs is easy if your being told what pitch is being thrown…

  31. Mannwich says:

    But they totally “deserve” all that bonus money. Heck, they deserve MORE for being such “brilliant” crim….., I mean, “business-people”, yeah, business-people. That’s the ticket.

  32. Mannwich says:

    @ahab: If Harley had all the advantages that Goldman does, they’d be hitting it out of the park too. Unfortunately real companies have to fend for themselves in this economy. “Bucks for Bikes” anyone?

  33. HCF says:

    My opinion on GS has remained the same. If they are risking their own money and making a bundle, then it’s within their right to bonus themselves to the sky. However, their very existence at this moment is due to massive bailout of AIG and TARP, and their profitability is being subsidized by 0% Fed funds rate, access to the discount window, massive liquidity, and lack of competition due to Lehman and Bear Stearns going kaput… If they were able to make the profits they are now without those favorable conditions, then I would have no qualms about what they pay themselves…

    HCF

  34. rootless_cosmopolitan says:

    Harry Wanger,

    “…. and improving employment”

    Calling about 500,000 new weekly unemployment claims, i.e., the employment situation is still getting worse, an “improving employment” points toward heavily deluded perception.

    rc

  35. call me ahab says:

    manny-

    i guess my only observation is- in the real world- where they make stuff- its brutal-

    and Intel may have BTE earnings- but- they sell to the world- the US economy- in tatters-

    so we may have outsized bank profits- but why wouldn’t they- and what do they make that we need-

    nothing

  36. Mannwich says:

    My take exactly, HCF.

    @ahab: And the weak dollar really helps INTC overseas a lot. It really helps to goose their numbers. It’s ’04 – ’07 all over again, but this time on STERIODS and HGH.

  37. [...] Ritholz has an apt reaction to this latest piece of Goldman Sachs [...]

  38. call me ahab says:

    Justin says-

    “hitting home-runs is easy if your being told what pitch is being thrown…’

    good analogy- sums it up in a few words

  39. The Curmudgeon says:

    How ’bout “Handouts for Hogs”?

    We can’t have aging, balding, fat middle-aged doctors, lawyers, accountants, architects, dentists, etc., without a fantasy toy for recapturing the joy of youthful abandon such that they can create the illusion of time standing still. Sort of like with the Fed and money printing. Without it, whither goes those “animal spirits” that makes Goldman rich?

  40. bsneath says:

    some_guy_in_a_cube Says:
    October 15th, 2009 at 9:26 am

    x said “Trading *is* their basic business.”

    So in essence they are government sponsored and financed Hedge Fund?

    Yep, who said capitalism was fair?

  41. Mannwich says:

    @bsneath: That’s disguised as a “commercial bank”. Gotta love it.

  42. mobiaxis says:

    @harry wanker

    “When people finally pull their heads out of the sand and see the rapidly improving economy…”

    The market is not the economy.

    …and if you understand that but still really think the ‘economy’ is getting better, you need to get out more.

  43. Moss says:

    @Harry

    The point u are missing or refuse to understand is that the results at GS are the direct result of unfair competition. I am glad things are not still falling off the cliff, the damn safety net, which is in place at the expense of the taxpayers, is directly responsible for the GS success. Trading and all the other opaque activities of GS do little to help the real economy.

  44. bsneath says:

    Rikky Says:
    October 15th, 2009 at 10:08 am

    this is all going to end badly, of that there should be little question.

    Lets step back for a minute and assess our situation:

    1) Tens of millions of Americans are out of work and are draining their life savings to pay for basic necessities.
    2) Millions of American have lost their dream of owning a home where they can raise their families.
    3) Millions are losing their access to credit for the next 7 years.
    4) One half of an entire generation that is coming of working age cannot find jobs.
    5) The Dollar will (and now it must) continue to fall in order to balance a horribly distorted economy. This will have the effect of increasing the costs of basic goods (selective inflation) thus further reducing the real incomes of the average American.
    6) The human pain and suffering is simply going to continue to increase as more and more people run out of support from savings, family or the government.
    7) Property crime and theft is and will continue to increase as more and more people become desperate (our county & municipal jails literally are repidly becoming debtors prisons)

    And yet in this environment, investment banks stand to pay the highest bonuses ever.

    I agree fully with Barry that with respect to fixing the disfunctional financial markets, bonus provisions are not the issue that we should be focusing our energies on . Rather these bonuses are the most visible symptom of a very sick and diseased patient. In a truly “free market- capitalist system”, for these bonuses to exist, they would need to be the result of outstanding performance and return on investment capital in the real economy, not in the trading pits. I hope a cure is found in time.

    As a word of caution, please beware of Goldman Sachs’ next clever foray called “Cap & Trade”. If you strongly believe in global warming, then please advocate for a carbon tax with offsetting corporate tax rate reductions in order to give industries the incentives to switch and conserve. On the other hand, if you wish to encourage additional opportunities for the investment banking community to trade markets and make their bonuses, C&T is the way to go.

  45. bsneath says:

    Clever Thugs Dept.

    “Geithner aides made millions on Wall Street”

    http://www.ft.com/cms/s/0/f012c4b2-b8f6-11de-98ee-00144feab49a.html

  46. rootless_cosmopolitan says:

    “2) Millions of American have lost their dream of owning a home where they can raise their families.”

    As bad as this is for many who got screwed by buying into a totally overpriced housing market and the following crash, millions had lost this dream during the housing bubble, since they just couldn’t afford buying a house or apartment anymore. Now, many of the other millions will have a chance again.

    rc

  47. The Curmudgeon says:

    Let’s see, before Bush-Obama, there were several sectors of the economy that could still be said to operate more or less independently, i.e., free-marketish. The tech sector comes to mind. Now, a partial list of sectors that are now either de facto or de jure governmental entities, so deep is the government’s involvement in them:

    Commercial Banking
    Residential Real Estate
    Automobile manufacturing (if done by either of the two weasles)
    Investment Banking

    Proposed government entities:

    Health care
    Anything that emits carbon

    Thus food, shelter, health and air are quickly becoming monopolized by government, with the money undergirding it all completely at the whim of a few bureaucrats in the Treasury and on the Fed board of governors. Only clothing, of the necessities of life, remains as the last bastion of capitalism (with possibly food delivery, i.e., grocery store operations, as a still competitive market.)

    This sort of societal organization had once been relegated to the ash-heaps of history, because it’s been tried and it has failed before. Ask Mikhael Gorbachev, if he’s not off collecting another Nobel prize. I wonder how it will work out for us.

  48. wally says:

    “On Thursday, Goldman Sachs Group Inc. will announce that life is pretty much back to normal: billions of dollars in quarterly profit and record pay set aside for employees at the firm known for running circles around the rest of Wall Street.”

    OK… but here’s the problem: spending a few trillion to put them in that position has helped nobody else. It hasn’t helped the economy or employment or trade or retail or construction or manufacturing or hospitality.
    It was not worth it.

  49. HarryWanger says:

    mobiaxis: I am so sick of the “market isn’t the economy” line that many here throw out because they heard Roubini or some other doomer repeat ad nauseam. It’s a direct reflection of the mood of the economy. Obviously if the economy is getting stronger, which it irrefutably is, then the market is going to reflect that. We’re still undervalued. The market will truly be reflecting the current economic conditions at about 11,500. We’ve got quite a way to go just to get to fair value.

  50. rootless_cosmopolitan says:

    Harry Wanger,

    “Obviously if the economy is getting stronger, which it irrefutably is, then the market is going to reflect that. We’re still undervalued.”

    Based on what metric is the market “undervalued”? Care to explain? Care to provide some data to back up this claim? Probably not.

    rc

  51. Rikky says:

    wagner you never have any facts to back up your opinions. if they’re just opinions that’s fine but please don’t paint it as something else.

  52. rootless_cosmopolitan says:

    Harry Wanger,

    “I am so sick of the “market isn’t the economy” line that many here throw out because they heard Roubini or some other doomer repeat ad nauseam. It’s a direct reflection of the mood of the economy.”

    So you are saying, that the stock market rally proves that there is an economic recovery. And since there is an economic recovery, it justifies the stock market rally, doesn’t it?

    rc

  53. HarryWanger says:

    rootless: The economic recovery does indeed justify the market rally.

    Rikky: I’ve backed up my posts with facts for weeks. Doesn’t matter here. The Failure Caucus is in full swing here and no matter what facts I post, they’ll find a Roubini or other, better yet, Denninger, to come out with some “here’s why the world is ending post”. It’s tiring after a while. Just look at the facts, earnings and economic reports – they speak for themselves.

  54. rootless_cosmopolitan says:

    Harry Wanger,

    “The economic recovery does indeed justify the market rally.”

    And the market rally proves the economic recovery, doesn’t it?

    Are you going to provide some hard data to support your claim that the market was “undervalued” at this point? I guess not.

    I guess you neither won’t tell me where you allegedly have provided all the detailed responses backed by analysis and hard data on the subject where the great recovery is going to come from once the unprecedented government stimulus to the economy is faded.

    rc

  55. highside says:

    Come on guys and girls the probability is Harry is a paid troll.

    GS et al are fully aware of blogs like this and surely wish to try and influence opinion even if they know it will only have a small effect.

    Look at the complaints about the “Failure Circus” and the attempts to link discussion here to Denninger. Classic troll arguments

  56. JT says:

    Harry is a tool and the only person on this forum spouting this non-sense.

    He is the same guy that thought house prices would keep rising in 2007 after prices deviated by six standard deviations.

    We experienced a six standard deviation move in the markets this year…care to tell me how this will turn out different that the housing market?

    Troll.

  57. vasco7777 says:

    Harry reminds me of Larry the Mayor of Amity in Jaws. “Water’s fine, get back in there people and you Brody, quit scaring them!”