An old boss of ours used to stress the benefits of being “proactively reactive”, jargon we never fully understood until we read this story in Friday’s WSJ:
Goldman Braces for Federal Subpoenas
Goldman Sachs Group Inc. executives expect to receive subpoenas soon from U.S. prosecutors seeking more information about the securities firm’s mortgage-related business, according to people familiar with the situation.
Officials at the New York company believe the Justice Department will demand certain documents and other information, possibly within days, these people said. Spokesmen for Goldman and the Justice Department declined to comment Thursday.
And here’s Politico’s Ben White calling it like it is:
The PR mechanics of Wall Street investigations can be dismally predictable. And the Justice probe into Goldman Sachs (based on a referral from Sen. Carl Levin’s committee) is falling right in line. Last night, the WSJ moved a story saying Goldman executives “expect to receive subpoenas” from the DOJ concerning its mortgage business. The report cites “officials at the company.” It’s about as clear a preemptory leak as you will find. Whether anything actually comes of these document requests and interviews is an entirely different question. M.M. would put the odds of criminal prosecution at a very low level but anything could happen if fresh documents or surprising witness statements materialize.
Whatever the case, rather than let Justice (or Hill staff) leak the document requests and create a bigger media frenzy, Goldman tossed the story to the Journal. The impact is now muted because no one wants to follow the Journal and when the subpoenas show up it will be a non-story. … The only drawback to Goldman’s PR approach is that what should have been a fairly small story got played up by the Journal on pg. C1 under a scare headline saying Goldman “braces” for federal subpoenas. This conjures an image of CEO Lloyd Blankfein and his number two, Gary Cohn, pacing nervously by the front door, waiting for the document requests to arrive via the DOJ’s special brigade of winged subpoena-serving steeds
We assume there will be a mild flurry of stories if the subpoenas are issued, but at pixel time neither the NYT nor the FT had published a story on their website. This could be a sign of crisis fatigue, but it’s fascinating to see the lack of palaver here.
Maybe it’s because few think the Levin report will actually lead to prosecutions but a little bit of scoopage is no reason to bury the story. Especially when there’s a broader context: financials, very much including Goldman, continue to struggle relative to the rest of the S&P, weighed down by, well you name it.
PR 101, sigh.
Is Goldman Sachs Doomed? – Curious Capitalist
From vampire squid to 1,100-pound medical emergency – FT Alphaville