Welcome to a special Sunday edition of Global Megabank NA’s Consistent Inconsistencies. Today, we’re talking about an interview with Goldman Sachs’ chairman Lloyd Blankfein, published in The Financial Times Friday:
Q: What lessons do you draw from the problems at the Bear Stearns hedge fund?
A: That it is very dangerous to be in very concentrated positions.
And now over to Matt Stichnoth, at Bankstocks.com. Matt, I believe you had a comment?
Incorrect! The reason Bear’s mortgage-backed fund imploded isn’t that it held concentrated positions—the fund invested in CDOs, for goodness sake, which come pre-diversified. Rather, the problem has to do with leverage. This is what happens when there’s a hiccup in a market that you’re levered up in by 15 to 1. Blankfein must not have understood the question...
Thanks Matt. Excuse me. This just in: something about grevious bodily harm, and the next time Tom wants to load up some more FMD at Goldman. (Nervous chuckle). I’m sure they’re just kidding. Now we’re pleased to welcome back NakedShorts. Naked?
Well, Matt got filled mostly on the bid—probably for the last time, hahahaha—but he left an order hanging out there: Goldman Sachs’ balance sheet is levered up 25-times or so. Blankfein understood the question perfectly—he’s no fool!—but didn’t want to embarrass Bear by saying the fund just wasn’t levered up enough. And nobody’s going to call Lloyd out on a little thing like Porkie of the Week—which took some doing this week! Hell, he might never come back, or cut off access to the “people familiar with the situation” who ladle out scoop from Goldman’s dish dish.
Porkie? I'm not familiar with that.
Cockney rhyming slang. Pork pie. Lie.
So let me be clear here. You’re calling Blankfein a liar?
Of course! It’s in the job description! It’s a principles-based world, and the principle is keep the dream alive, man! And never ever do anything that would get drekk marked to the real world!
Well, thanks Naked. (Nervous chuckle). And that’s today’s special Sunday edition of Global Megabank NA’s Consistent Inconsistencies. Be sure to join us Tuesday, when we’ll be covering Bare (ph.) Sterns (ph.) in the Caribbean! And now back to the studio...
View from the Top
by Chrystia Freeland and David Wighton
The Financial Times Jun. 22 2007
Bankstock.com’s Daily Weblog
Jun. 22 2007