April 22, 2010
A Feeding Frenzy…

…among the simple folk of Wall Street is foreseen by The Epicurean Dealmaker, and should certainly be fun to watch. Unhappily it will only end in the triumph of a new Great Vampire Squid with a different name. In the long run we will all be, once again, drained.

I must agree with Felix Salmon and others, who claim that the real damage to Goldman Sachs has already been done, with its formerly venerated name being dragged publicly through the mud with an accusation of fraud. While this may have little effect on the majority of Goldman’s business on the sales and trading side of the house — where counterparties are generally too smart to raise a stink about the 800 pound gorilla of the global financial markets (and often too unprincipled themselves to care) — it should and will have an effect on Goldman’s extensive investment banking business with governments, corporations, and other entities.

The Great Vampire Squid has been living for years off the simple fact that, like the fabled IBM of yore, no-one ever got fired (or sued) for picking Goldman Sachs. That calculus has been changed, and I and every one of my red-blooded peers in the industry who is not currently drawing a paycheck signed by David Viniar are making damn sure that CEOs, CFOs, government officials, and Boards of Directors know it.

For those of you who were wondering, this is the real reason why Goldman’s market capitalization has taken the vapors to the tune of more than ten billion dollars in response to an action likely to cost it no more than a tiny fraction of that amount: its reputation premium is quietly and rapidly evaporating.

There is no shortage of competent investment banks and adequate investment bankers available to conduct the financing and M&A business of the global corporate and government economy. No longer can Goldman rest assured that it will win mandates simply because it is Goldman Sachs. In fact, it may lose many for that very reason…

Although just wait and see what happens if enough of them sense that Goldman is mortally wounded. They’ll gang up and rip it to shreds without a second thought, just like they did to Bear Stearns and Lehman Brothers and almost did to Morgan Stanley. Live by the sword, die by the sword, baby. Booyah!


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Posted by Jerome Doolittle at April 22, 2010 02:56 PM
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Thank you, sweetie!

Everyone I know is shorting them.

Even a few commenters at my blog!

Love ya,

S

Posted by: Suzan on April 23, 2010 11:32 AM

Now that GS money is going to the Republicans, the next item on President Obama's agenda will be to rein in the financial sector. I think many are going to be surprised at how much new legislation is going to be introduced to bring back former legislation, updated to meet modern realities that will be introduced in the House and Seante to bring back responsiblity in the financial sector as well as to diminish its pernicious influence. Last night I attended an organizational meeting in which the Obama administration is gearing up to see that the former group that helped him get elected is brought back to life and we had quite a turnout, many more people than expected were at the meeting. It's quite possible that the tea party crowd will be dumbfounded at what is going to be taking place in the next year or two. I hope not to be disappointed but this issue will undoubtedly play better than the health care overhaul. I think we should all get ready again to start putting pressure on our Senators and members of Congress to see that important safeguards going back to the Roosevelt era that have been systematically destroyed and taken down by the Republican party may once again become reality, at least partially anyway, if we Democrats can retain our majorities in the House and the Senate.

Posted by: Buck on April 23, 2010 1:03 PM

One of the things I love most about investment banking and bankers is there's nothing they do that couldn't be handled much, much better by mandatory graft and patronage schemes at the lower levels of state representation. It would be cheaper for us too. That's capital allocation done right! The efficiencies are self-evident and broad. The upper houses of representation would wither, as they should. They're holdovers from plantation days.

Every so often, the feds could come in randomly round up the beneficiaries. Not for prosecution, but to shake them down. The money from that would pay for health care, and so forth, which has enough graft and patronage already. There'd be no need to enforce it.

Posted by: Jim on April 23, 2010 11:34 PM

That's good to know, Buck. That whole outfit faded away to nothing fast, didn't it?

I had a fund-raising call from the DNC the other night, and the poor guy got an earful. I told him I'd start sending money again when they revived the 50-state strategy and sent us a DNC organizer again. They've wasted a lot of advantages.

Posted by: Joyful on April 24, 2010 4:14 AM
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