Goldman Sachs Pushes Back Against Senate Report As Commentators Flip

NEW YORK -- Goldman Sachs is quietly pushing back against accusations that it may have broken the law, as employees of the firm have met with a pair of famous financial commentators and helped convince them the "vampire squid" is actually a victim.

Nearly two months after a Senate panel released a scathing assessment of Goldman Sachs, referring the findings to the Justice Department for possible criminal prosecution, Goldman's PR machine appears to be in full, if covert, swing. This week, celebrity journalist Andrew Ross Sorkin and widely cited analyst Richard Bove each changed his mind about the firm after meeting with Goldman employees.

"I have completely changed my attitude about whether they did something wrong," Bove told The New York Times. "Goldman Sachs is the scapegoat of our time."

Bove, who had placed a "sell" rating on Goldman's stock and had loudly expressed his pessimistic views on the company, recently got some special assistance: Goldman walked with him through the report, the Times says.

And now he has apparently recanted, releasing a new note that opens: "It is becoming increasingly apparent that a terrible wrong may have been done to Goldman Sachs."

This reversal comes just days after a similar revelation from the editor of the Times' financial blog, DealBook. Sorkin had earlier questioned Goldman's integrity, in a column he links to in his latest post. But now, he says, his mind is changed. He, like Bove, apparently met with Goldman:

But upon further reporting -- talking with executives at Goldman, who pointed me to other documents, and with officials in Washington, and then poring through the report, following the footnotes to the original sources and then cross-referencing them against other public records -- I have come to a different and perhaps unsatisfying conclusion for those readers looking for a big scalp: Mr. Blankfein wasn’t lying.

The whopping 639-page Senate report on the financial crisis, stuffed with damning emails from financial players, accuses Goldman of profiting off a massive bet against the housing market, misleading clients to whom it sold the investments it was betting against.

Not only that, but executives also misled Congress when asked to explain their actions, alleged Sen. Carl Levin (D-Mich.), chair of the Senate Permanent Subcommittee on Investigations, which composed the report.

New York City prosecutors served the bank with subpoenas this month, demanding additional documents. The Manhattan district attorney joined the Justice Department and the Securities and Exchange Commission in investigating the firm, Reuters reported.

When the Senate report was released in April, Goldman put up a relatively rote defense. A Goldman spokesman said the firm's executives were truthful in their testimony, and added that the firm disagreed with many of the panel's conclusions.

But now, in meeting with prominent commentators, it appears the firm is attempting to dismantle the conclusions the report has drawn.

The key dispute is over the nature of the bank's "short" position on the housing market. In testimony before Congress, chief executive Lloyd Blankfein said the Goldman "didn't have a massive short against the housing market, and we certainly did not bet against our clients." The statement seemed contradicted by emails printed in the report, which repeatedly refer to the firm's "net short" position.

In a 2007 email, Goldman's chief financial officer David Viniar referred to other banks' suffering, writing, "[It] tells you what might be happening to people without the big short," according to the Senate report.

But the Senate panel got its numbers wrong, Sorkin says. Goldman's 2007 revenue was actually much larger than the Senate panel said, suggesting that the percentage gained from mortgage-related products was less than the Senate had made it seem, Sorkin concludes, citing a Goldman filing with the SEC.

Sorkin says he approached Robert L. Roach, a counsel and chief investigator for the Senate subcommittee. Sorkin says Roach told him, "We made a mistake," calling the error a "typo." Elsewhere in the report, the figure for the 2007 revenue is consistent with Sorkin's finding.

Sorkin's conclusion is that Goldman's bets against the housing market were effectively a hedge against losses, not a net position. Bove concurs.

"Evidence is now mounting that the company did not have a net short position at the crucial time under study," Bove says in his recent note.

But even in light of that evidence, Bove thinks Goldman's outlook isn't bright: he maintains his "sell" rating on the company's stock.

Comments

[Squiggie]

01:27 AM on 06/14/2011

Lloyd BlankBrain!

[BartRoberts]

09:52 PM on 06/13/2011

Commentators???

We used to call people who would do anything unethical for the right price "wh_0_res."

Who is there left to trust? DC is now owned lock, stock and barrel by Wall Street, and the MSM is now, also, for sale. Trust is rapidly eroding. When that goes, Katie bar the door.

[FoxIslander]

04:53 PM on 06/13/2011

...looks to me like the vampire squid wrote a check.

[BartRoberts]

09:54 PM on 06/13/2011

The time may come when the American people will need to march on Gold-Sacks corporate HQ in the same way the French people marched on Versailles and the Russian people marched on The Winter Palace.

[Oginikwe]

02:43 AM on 06/28/2011

We need to march on a lot of places and let them know we know where their hidey-holes are and gated communities will not keep up out.

[neige]

03:28 PM on 06/13/2011

Maybe we need to have a come to Jesus talk in America? These guys, our politicians, and our media are using the simpletons, let's face it we have many, in our country to keep their game going. I think the more we put stuff like this on our facebook, twitter, etc... that can reach many people. The more informed people become, they are less likely to fall victim to the manipulation. Maybe even get a little pissed off.

[Mafdet]

02:24 PM on 06/13/2011

Henry Paulson, lloyd Blankfein, Jamie Dimon, Vikram Pandit, Richard Fuld and a handful of other investment bankers set out with the single purpose of capturing as much of the global money pool as they could. Toward that end, they colluded with the consumer banks to buy as many loans as could be ginned out for a whole decade so that they could bundle them and sell them as low risk securities. They knew very well that the loans they were buying were less and less stable and that the securities they were issuing higher and higher risk, but rather than market them at the appropriate risk level, they DEFRAUDED their investors by telling them that the securities were low risk and THEN TO COVER THEMSELVES, they took out insurance against the inevitablity of the collapse of the housing markets around the world that would make these "low-risk" securities worthless overnight. And they knew these markets would collapse, because their breakneck purchase of home mortgages created the artificial perception in the development communities that there was a heightening demand for houses, and when every last person who could possibly be put into a mortgage by whatever hook or crook had been, they knew the collapse would occur. And the good news is that no matter what the New York Times says, the American people - almost every single one of us - now know what these criminals did.

[Squiggie]

01:34 AM on 06/14/2011

I agree with everything you just said, except, " the American people - almost every single one of us - now know what these criminals did.
Most Americans know exactly what Kim Kardashian ate for breakfast but haven't a clue about how the ruling-class-thieves are raking us over coals.
Fanned...

[atalex]

12:33 PM on 06/13/2011

There is very little wrong with America that could be cured overnight if a single banker got lynched by an angry mob full of people he's screwed.

[Mafdet]

02:24 PM on 06/13/2011

Yes. That is correct.

[Squiggie]

01:36 AM on 06/14/2011

Yes, but it would be therapeutic and fun...

[NevaforLeadership]

07:59 AM on 06/13/2011

That's what happens when senate members, who know absolutely nothing about derivatives, get involved and are too arrogant to admit they don't understand.

[Kai-HK]

03:19 AM on 06/13/2011

Excellent. Good to see that despite a highly jaundiced press, as well as HP, that Goldman Sachs is being vindicated. Nothing better than seeing high-profile critics admitting that the fiction put forth by Congress just does not hold up to any degree of scrutiny. The funniest part about this article is that despite how much everyone wants it to be true that Goldman Sachs is the evil behind all our troubles, the truth is a lot more simple: Congress does not want to admit that its own bad polices (Freddie, Fannie, HUD, CFA, Tax Credits), combined with bubble-inducing monetary policy is the real culprit behind both the housing crisis, the financial crisis, and the follow-on recession. No amount of spin by the White House, Congress or the Fed can change that.

Kai

[BartRoberts]

09:59 PM on 06/13/2011

Thinks for the joke. Yours is one of the funniest things posted here in a long time.

You're a riot. Please keep us laughing.

Bart

[Kai-HK]

02:59 AM on 06/14/2011

I know. You do not want to believe it. It is easier to think that Goldman Sachs has been following you around in black helicopters and putting listening devices in your head as they lead a secret cabal of evil bankers from a undisclosed desert isle where they are hatching nefarious plans to undermine the economy of the United States and their own profit model with sinister trading activity. It is much easier to believe that ridiculous fiction than to believe the more plausible fact that bad monetary policy and bad regulatory policy, mainly run through Freddie and Fannie but augmented with HUD, CRA, and housing credits and deductions, created moral and financial hazards in the market which resulted in perverse incentives. Banks behaved exactly as they should have given the host of perverse incentives and market distortions caused by these wrong policies. Laugh all you want, it won’t change the facts. Goldman Sachs did not cause this financial crisis, and a bulk of their actions and trades supported that they were skeptical believers in the housing market, though hedged, right up to the point it started going south. Should they be held accountable for selling exposure to housing risk to professional investors that were seeking out this type of risk? Not at all. These guys should have known better and if they lost money it is their fault, not GS’s

Kai

[Jack Glastra]

10:52 PM on 06/12/2011

They should all be shot.

[execuman1]

10:09 PM on 06/12/2011

these goldman guys are so guilty its hard to believe that they have changed sorkins mind or anyone elses.

victims of a terrible wrong ? just doing gods work ? i dont think so.

goldman was the big player in these derivative financial markets and walked out of the collapse pretty much smelling like a rose compared to their competitors -- like lehman brothers or bear sterns.

they are real pros at the snow job, and we americans are subject to being seduced -- like the music man or bernie madoff....

the victims in all this are the american people, some of whom will have to be working into their 80s to feed themselves due to the collapse of the marketsin 2008 and the loss of their savings. no 60 million bonuses for them.

hopefully reason and good judgement at the Fed will prevail. its pretty clear who is guilty and how bad the results were. its not even over yet as we face another downturn.

these guys need to go to jail.

[Dez3]

04:26 PM on 06/13/2011

F&F

[BartRoberts]

10:01 PM on 06/13/2011

Lloyd Blankfein would make a lovely prison wife.

Some hardcore felon needs to do "God's work" on him.

[AmySeow]

06:12 PM on 06/12/2011

Poor Goldman Sachs. How DARE anyone try to hold them accountable for their outright theft.

[HSC55]

04:21 PM on 06/12/2011

I had to do a double take at that picture. I almost thought he was holding a joint.

[Grimway]

04:15 PM on 06/12/2011

I want just one rich person to type in that they let GS care for there cash! I want to see if dumb and rich still exists or were they finally all eaten?

[Mafdet]

02:35 PM on 06/13/2011

The aspect of the investment banks crimes that you don't see in the press much is that they did not sell their toxic securities to rich people. Lehman had about 435 and Goldman Sachs, Citi, and Chase each had more than 2000 Enron-like shell companies in Europe through which they sold their securities to average people looking for a 5% return on their retirement accounts or their children's college funds.

[maxfax]

03:55 PM on 06/12/2011

"Goldman Sachs is quietly pushing back against accusations that it may have broken the law, as employees of the firm have met with a pair of famous financial commentators and helped convince them the "vampire squid" is actually a victim." HuffPost should begin a page for Wall Street Criminal Justice only, let's see how many articles pop up on the page.

[bessielil]

01:47 PM on 06/12/2011

It must be cheaper to pay for public relations moves than doing business with ethical moves.

[maxfax]

03:57 PM on 06/12/2011

Cheaper? It's a business practice, part and parcel of doing business.