85 Broad Once Again at Center of Manipulation Allegations
Is Goldman Sachs (GS-NYSE) up to its old tricks? Earlier this year several BuySide managers fingered Goldman as the executioner of Bear Stearns:
March 11th
That morning Goldman Sachs’s credit derivatives group sent its hedge fund clients an e-mail announcing another blow. In previous weeks, banks such as Goldman had done a brisk business (for a handsome fee, of course) agreeing to stand in for institutions nervous, say, that Bear wouldn’t be able to cough up its obligations on an interest rate swap. But on March 11, Goldman told clients it would no longer step in for them on Bear derivatives deals. (A Goldman spokesman asserts that the e-mail was not a categorical refusal.)
“I was astounded when I got the [Goldman] e-mail,” says Kyle Bass of Hayman Capital. He had a colleague call Goldman to see if it was a mistake. “It wasn’t,” says Bass, who is a former Bear salesman. “Goldman told Wall Street that they were done with Bear, that there was [effectively] too much risk. That was the end for them.”
Alan Schwartz confronted Lloyd Blankfein over vague rumors of Goldman's London-based traders taking short positions in Bear's stock ahead of the Goldman e-mail being sent. Of course, it could have been just a coincidence, but it appears lightning has struck twice as another Wall Street CEO takes Blankfein to task:
Richard Fuld Jr., whose firm’s shares also have been battered, also has contacted Mr. Blankfein. “You’re not going to like this conversation,” Mr. Fuld told Mr. Blankfein, according to people familiar with their talk, but he was hearing “a lot of noise” about Goldman traders who allegedly spread negative rumors about Lehman. In recent months, Mr. Fuld has contacted traders he felt may have been bad-mouthing his stock, according to someone familiar with the matter. WSJ
Goldman has bristled at the suggestions it has done anything improper, and it sounds like they might have even sent flowers to Bear’s funeral:
“We went out of our way to be supportive of Bear and were rigorous about conducting business as usual,” spokesman Lucas van Praag said. He said Goldman never altered its terms for doing business with Bear, even as lenders pulled their financing and some trading partners retreated during the troubled securities firm’s struggles in early March.
Schwartz’s conversation with Blankfein was probably more polite than the one Lloyd endured with Dick Fuld, but apparently Lloyd is going senile in his old age:
Mr. Blankfein responded that he had no knowledge of any alleged manipulation, this person said, adding that he told Mr. Schwartz he would respond severely if he ever discovered such behavior by Goldman traders. Through a spokesman, the Goldman CEO says he doesn’t recall the conversation with Mr. Schwartz. Goldman strongly denies wrongdoing.
The SEC’s subpoena sweep on the Street is unlikely to improve Lloyd’s memory, but I do have a suggestion for the aging CEO.
Lloyd has essentially told Bear and Lehman employees to “eat cake”, but I would recommend Lloyd eat Salmon. It is known as brainfood, and might help his memory return.
Goldman Is Queried About Bear’s Fall
WSJ
SEC Subpoenas Wall Street in Hunt for `Manipulators’
Bloomberg
How Bear Stearns Went Down
1440 Wall Street
Goldman in the hotseat
Fortune
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