Less on the conflict, and more on the screwing-the-client side, the Times finds an excellent anecdote from a nonprofit hospital treasurer who got hosed by Goldman (an Audit funder) in the now-infamous auction-rate-securites market. Those are the instruments that banks like Goldman told clients were “safe as cash” but which shut down—creating huge losses and liquidity problems early in the crisis.
By mid-January 2008, U.P.M.C. was concerned about the viability of the market and asked Goldman if the hospital should get out. Stay the course, Goldman advised U.P.M.C. in a letter, a copy of which Mr. Heppenstall read to a reporter.
On Feb. 12, less than a month after that letter, Goldman withdrew from the market — the first Wall Street firm to do so, according to a Federal Reserve report. Other firms quickly followed suit.
With the market in disarray, the interest rates that U.P.M.C. and other issuers had to pay investors skyrocketed. Rather than pay the rates, U.P.M.C. decided to redeem the securities.
Although Goldman had fled the market, it refused to allow a redemption to proceed, Mr. Heppenstall said, warning that its contract with the hospital barred U.P.M.C. from buying back the securities for at least another month.
This is tremendous work by the Times.
— Further Reading:
The Opening Bell on auction-rate securities as the market collapsed in February 2008.
Goldman’s Forked Tongue: The bank talks out of both sides of its mouth.
To Ryan Chitum and whomever on the CJR editiorial staff, just thought you may find the following a little interesting......
FROM Lisa2U2:
UPDATE-2: Great opening to another wonderfully informative article on the WWW: first, is the excerpt from article on Bloomberg's website, May 19, 2010...1:45pm. cst.
Goldman Sachs Hands Clients Losses in ‘Top Trades’ (Update1)
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By Ye Xie
May 19 (Bloomberg) -- Goldman Sachs Group Inc. racked up trading profits for itself every day last quarter. Clients who followed the firm’s investment advice fared far worse.
Seven of the investment bank’s nine “recommended top trades for 2010” have been money losers for investors who adopted the New York-based firm’s advice, according to data compiled by Bloomberg from a Goldman Sachs research note sent yesterday. Clients who used the tips lost 14 percent buying the Polish zloty versus the Japanese yen, 9.4 percent buying Chinese stocks in Hong Kong and 9.8 percent trading the British pound against the New Zealand dollar.
The struggles for analysts at Goldman Sachs, which is fighting a fraud lawsuit from U.S. regulators who accuse the company of misleading investors in a mortgage-linked security, show the difficulty of predicting market movements as widening budget deficits, a fragile global economic recovery and tighter financial regulations increase volatility. Stock and currency fluctuations rose to the highest in a year this month as Europe pledged about $1 trillion to stop a debt crisis in the region.
“This says that Goldman’s guys are only human,” said Axel Merk, who oversees $500 million as president and chief investment officer of Merk Investments LLC in Palo Alto, California. “No one is always right. There are a lot of cross currents in this market.”
Gia Moron, a spokeswoman for Goldman Sachs, declined to comment.
Then, here is link to article://www.bloomberg.com/apps/news?pid=20601109&sid=aF5tV7uvY0FU
………..
Now, my comments.....
The MISINFORMATION that is available by leading commercial websites is getting absolutely ridiculous. Has any Bloomberg EDITOR even read the article-----Goldman Sachs Hands Clients..... by Ye Xie.????
You have got to be kidding that " Gia Moron" is the the SPOKESWOMAN???? for Goldman??? Say the name out loud, "ONCE",I beseech who ever is reading this comment. No further comment is necessary. Right?????
Bloomberg has just joined the ranks of Jim Cramer....... Even if there is a slim chance, and I am NOT betting on it, that there is in fact a female, named Gia Moron as spokesperson for Goldman Sachs, or any other U.S. company/ investment, or otherwise, Bloomberg needs to be careful WHO is actually cited on a worldwide website.......this is not just a “pie in the face” type of worldwide scenario for worldwide viewer distraction, especially Americans.
Here is my personal opinion/conclusion of that above, few bits of an article-, for what it’s worth, which in the real world is absolutely nothing.
So, as a reader, the only conclusion that I can make is this: not only do I not, won’t, never have, trust in any activities by Goldman Sachs Group et al, whether or not there are ANY legal binding agreements, through commercial association or transactions of any of the “so-called” corporate investment representatives, and of course traders of monies of the public worldwide, because of course, the public are moronic and need skilled others to negotiate fund transactions for them. (Please note, I don’t have the money and never will have, just like 99% or so of the rest of the world citizenry.) But also, I now conclude, without reading any further, that the reporting of the Worldwide investing/ trading FARCE has also become farcical! (Whew, that sure was a mouthful!!) And, yeah, I know, my opinion
#1 Posted by lisa pula, CJR on Wed 19 May 2010 at 02:50 PM
Lisa, her name may be unfortunate, but she appears to be cited in many other pieces including ones on Goldman's own site. http://www2.goldmansachs.com/our-firm/press/press-releases/archived/2008/working-mother-award.html
#2 Posted by TM, CJR on Wed 19 May 2010 at 05:46 PM
Not only is the insider question relevant, in this really well done article, but as Goldman put together the mortgage backed securities, another relevant question is the valuation of the underlying collateral and mortgage backed and other securities that were included in the derivative bets for the demand for additional capital.
It's still hard to value the underlying collateral in MBS and CDO securities, and mark to markets are very subjective, as they are so thinly traded, and the third party models for valuing pools of mortgages in '06 and '07 were, really, really flawed. The analogy here is the way muni valuations on serial munis that are bought by institutions and held to maturity--very subjective, based on comps to issuer criteria. So if Goldman is doing those valuations on the mortgages themselves, those could be quite widely subjective.
It would be interesting to see how those were valued, by whom, dates, and the long/short positions and dates of valuation for the synthetics that are backed by these mortgages. The information-value-long-or-short issue timeline could be very interesting here.
#3 Posted by Kate McBride, CJR on Thu 20 May 2010 at 10:59 AM