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Is There a Change In the Weather at Goldman Sachs?

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Perhaps, just perhaps, the opprobrium heaped on Goldman Sachs these many weeks and months has begun to take hold on what had been to date the tone deaf leadership and bizarre rationalizations such as that of Lord Brian Griffiths, Vice Chairman of Goldman Sachs Intl. who instructed us last week that, "We have to tolerate the inequality as a way to achieve greater prosperity for all." This while millions have lost their jobs and have had their homes foreclosed. No, I am not making this up. Goldman's way of dealing with the issues at hand, the issues of reward and fairness, the potential of it all becoming a total disaster to its public image and reputation, even the unbelievable has become sadly believable.

A news item appeared this week that at least seems to offer reasonable hope that Goldman is beginning to use its good fortune to help remedy the foundering fortunes of Main Street America. By helping institutions that deal directly with the mainstream of America's day to day economy is where Goldman can play a truly constructive role. And if the news item is being read correctly, it appears that is what may indeed be happening.
On Friday CNBC reported "CIT Reaches a Tentative Deal With Goldman".

Now CIT is a financial institution on whom myriad small and mid-size American businesses depend to finance their working capital. CIT provides them funding against accounts receivable and inventory of goods and materials without which many small and medium sized firms could not operate. This especially in the current fractured banking environment.

These are businesses and companies to which Goldman would normally have little or no access nor commercial interface. Yet, through working with CIT, Goldman would be able to assist a core part of the American economy, a part of the economy that needs all the help it can get.

Because of the economy, CIT is struggling to restructure billions in debt and stay out of bankruptcy. Unlike Goldman, Morgan Stanley, AIG, Citigroup its failure might not present a systemic and catastrophic risk to the entire financial system. For that reason, government assistance to a CIT restructuring has not been as freely forthcoming as it has to the large banking/insurance/speculation entities.

And here is where Goldman is about to play a highly purposeful role. That by assisting CIT it will be assisting Main Street business's the length and breadth of the land.

According to the news report, Goldman and CIT have reached a tentative agreement over a disputed $3 billion loan. Goldman's accommodation on this issue would open the door for CIT to get billions of new financing from its bondholders, which it could then use to reorganize. In so doing, a vital financing link on which many small to mid size American businesses are dependent, would continue to play its key role. The alternative would add further enormous stress to the American economy.

Just perhaps, Goldman has come around to understanding that given the public support it has received from the government's implicit guarantee that it is too big to fail, and on (please see "Goldman Turns Into A Financial Frankenstein While The Fed Snoozes Away" 10.17.09) that it has responsibilities and at the very least moral obligations that go beyond the bottom line and maximizing the bonus pool. How this all plays out remains to be seen, but if nothing else, in how it does, we will learn a great deal about the players.