Posts Tagged ‘Goldman Sachs’

Got ethics? Some investment bankers do.

April 8, 2011

 

Last year the Senate held hearings into Goldman Sachs’s role in the financial crisis. I wrote at the time that it appeared that Goldman Sachs, the most respected house on Wall Street, had no ethical standards.

Now the other icon of financial rectitude, Berkshire-Hathaway, is under the ethics microscope because of questionable dealings by David Sokol, an executive widely considered to be a possible successor to the revered “Sage of Omaha,” Warren Buffett.

Sokol had purchased shares in Lubrizol Corporation, then recommended to Buffett that Berkshire Hathaway buy the company. He knew (or was pretty confident) that the shares would go up if a deal went through. It did, and they did, netting Sokol a quick $3,000,000 windfall.

Was Sokol unethical? Buffett defended his sidekick, even as he accepted Sokol’s resignation, saying, “Neither Dave nor I feel his Lubrizol purchases were in any way unlawful.” Notice that Buffett was not defending Sokol’s ethics, only his non-criminality.

So was Sokol being unethical? Sure—I think so, but more importantly, so do 21 of 23 top U.S. investment bankers, according to a poll by Reuters. Only one of the bankers in the poll said Sokol’s behavior breached no ethics or rules.

So investment bankers do have ethics. Now if Reuters would only ask them what they think about the top one per cent of the population earning 20 per cent of the national income and owning 35 per cent of the national wealth…

 

Meg Whitman lowers the ethics bar

May 14, 2010

“What’s the right thing to do here?”

That’s the very first line of the autobiography of billionaire Meg Whitman, candidate for the Republican nomination for California governor. She paints herself as the ethical candidate: “No playing things loose or close to the edge. We were going to do things the right way.” That’s an unnamed eBay executive talking in a campaign ad about working for Whitman back then. When Forbes Magazine did a 2007 cover story on Whitman they enthused, “Ebay’s Meg Whitman built a retail leviathan without sacrificing her customers, shareholders or ethics.”


But politicians claiming they’re particularly ethical are like gangsters shouting, “Come and get me, copper.” The press, like the cops, usually accepts the challenge, a la John Edwards, Gary Hart, Eliot Spitzer, and others.


If you watch television in California you already know about Whitman’s ethics, displayed in $60 million worth of the skuzziest campaign ads imaginable. But her hyper-negative campaign against fellow Republican Steve Poizner isn’t the most interesting thing about Whitman’s campaign.


Try googling “Meg Whitman ethics.” It turns up 48,800 entries. There are the articles about her sweetheart deal with Goldman Sachs, in which she moved the banking business of eBay, which she headed, to Goldman Sachs in return for the inside track on an initial public stock offering (IPO) in which she made a quick $1.78 million. When eBay shareholders sued she agreed to give her ill-gotten gains (more…)

Goldman Sachs fails the ethics challenge

April 28, 2010

The Senate held a ten-hour hearing yesterday on Goldman Sachs’s role in the financial crisis. The question for the committee was whether new laws were needed to reform the financial system; the question for me was whether Goldman Sachs—America’s most prestigious investment bank—was serious about ethics.

The hearing was long, the members were irritable, the subject was complicated, and the Goldman Sachs executives were evasive when asked such tough questions as whether they had any obligation to act in the best interest of their clients. But two exchanges tell us unequivocally about ethics at Goldman Sachs. First, Chairman Carl Levin (D-MI) and Goldman Sachs Chief Financial Officer David Viniar.

LEVIN: And when you heard that your employees, in these e-mails, when looking at these deals said, God, what a shitty deal, God what a piece of crap — when you hear your own employees or read about those in the e-mails, do you feel anything?

VINIAR: I think that’s very unfortunate to have on e-mail. [Laughter and groaning from the audience]

LEVIN: On an e-mail?

VINIAR: Please don’t take that the wrong way. I think it’s very unfortunate for anyone to have said that in any form.

LEVIN: How about to believe that and sell them? (more…)

An ethics challenge to Wall Street…from the U. S. Senate, of all places

April 24, 2010

In the wake of Wall Street scandals, collapses, bailouts, bonus billions, record profits, and now, according to the SEC, charges of fraud, the big show moves to Washington on Tuesday when the Senate Permanent Subcommittee on Investigations, chaired by Carl Levin (D-MI) will grill Lloyd Blankfein, Goldman Sachs CEO, and six current and former Goldman people, including Fabrice “Fabulous Fab” Tourre. The show starts at 10 AM EDT.

Levin is a very bright, very tough, inquisitor who is not one of the 46 senators who have gotten major contributions from Goldman. Nor is the ranking Republican, Tom Coburn (R-OK). The committee has a long history of changing Americans’ attitudes and behaviors, going back to 1921. It may well start to change the way Americans think about ethics and business.

Blankfein will testify last. He’ll face an awful dilemma: Will he defend Goldman’s behavior—described by Business Week’s Michael Lewis as creating a billion dollar bond package to fail, tricking and bribing the ratings agencies into blessing the package, then selling it to a slow-witted German?

Or will he say that Fabulous Fab’s deal was inconsistent with Goldman’s ethical standards, and thereby give credence to the SEC’s charge of fraud?

What would you do?

Is it OK to cheat as long as it’s not illegal? Does Goldman Sachs say yes?

April 20, 2010

After the Securities and Exchange Commission last Friday charged America’s most respected financial firm, Goldman Sachs, with defrauding investors, CNN’s Rick Sanchez asked, “Is it OK to cheat as long as it’s not illegal?

Goldman says no: CEO Lloyd Blankfein left a voicemail on every Goldman worker’s phone saying,

“Goldman Sachs has never condoned and would never condone inappropriate activity by any of our people. On the contrary, we would be the first to condemn it and take immediate and appropriate action.”

We’ll see. According to the SEC complaint, Goldman Sachs was approached by hedge fund operator John Paulson (no relation to ex-Treasury secretary and ex-Goldman CEO Henry Paulson), who wanted to bet against sub-prime mortgages—that is, he wanted to bet that their value would fall as their riskiness became clear and as borrowers defaulted.

Working with G-S vice president Fabrice Tourre (“Fabulous Fab,” as he called himself), Paulson hand-picked a billion dollar portfolio of mortgage-backed securities that he considered the absolute riskiest and most likely to fail. (more…)