Floyd Norris -- A Slap-Down of Goldman Sachs

Norris is at his best here.

It gets at the public's anger quite adequately, and drills down to the core misrepresentations implicit in Goldman's fatuous public statements:

http://www.nytimes.com/2009/04/17/business/economy/17norris.html?_r=1&ref=business

From the above:

Yet its denial that it profited from the government’s bailout of the insurance giant is greeted with scorn. People may not be sure about just what Goldman did that was improper, but many seem to think there must have been something.

Why is this happening? David A. Viniar, Goldman’s chief
financial officer, sounded bewildered when I asked him that. “We are so careful in what we try to do. We are so careful about compliance and following rules, and doing all the things we should do,” he said. “I read the stories and I scratch my head.”

Let me try to help. Goldman’s explanations sometimes do not ring true, even if they are. When it announced
its profits this week, it buried an important fact in the tables on page 10 of a news release, and did not mention
it in the text of the release. That fact was that Goldman had lost a lot of money in December, which would have
been part of the quarter had the firm not changed its fiscal year. As a result, that loss does not show up in any
quarterly number. Goldman won’t say if a December-to-February quarter would have been profitable.

Was Goldman’s disclosure misleading? Legally, no. There was full disclosure. But the existence of the orphan month, with its big loss, was largely overlooked
in the initial news stories. When it was reported later,
Goldman was left looking as if it had tried to pull a fast one.

Something similar happened with regard to Goldman’s relations with A.I.G., which owed Goldman a lot of money that it was able to recover thanks to the bailout. Mr. Viniar says that Goldman was fully protected if A.I.G. did default, and that A.I.G.’s bailout had little if any effect on Goldman’s earnings. When I talked to Mr. Viniar, he conceded to me, as he had to others, the obvious fact that Goldman would have been affected if an A.I.G. collapse had led to a systemic failure. But Goldman has not emphasized that, and at times has
seemed to be denying it, as when it said that collateral put up by other firms would have protected it if those firms had collapsed as a result of A.I.G.’s failure.

Then there is the matter of the $10 billion government
investment under the TARP program. Goldman has proclaimed that it wants to pay it back, and get out from government control of things like bonus payments. But it did not mention the $28 billion it has borrowed with a
guarantee from the government’s Federal Deposit Insurance Corporation, a guarantee that is worth a lot to
Goldman.

Mr. Viniar told me Goldman expected to borrow more, probably hitting the maximum $35 billion.