There have been rumours. Sly asides. Whispered suggestions. Goldman’s results aren’t all they’re cracked up to be.
There was the insinuation of some funny accounting going on. Goldman chose to mark more of their assets as “level three” under accounting standards than any other Wall Street firm.
Then there were questions over the bank’s scruples. Stan O’Neal was one notorious critic.
And now, even the SEC is thought to be harbouring doubts. Just how did the bank manage to get it so spectacularly right in choosing when to short the subprime market? The New York Post suggests that there may be an insider trading issue here. A hole in a Chinese wall somewhere.
People are uncomfortable with that spectacular bet (or series of bets) Goldman made just before the crunch hit home – shorting subprime securities and hedging against its own exposures in the market. The bank seemed to perform a canny volte-face right before Bear Stearn’s two funds went bellyup. Says the Post:
One person who discussed the matter with the SEC says the investigator seemed curious as to whether the investment banking side of Goldman’s business could have tipped off the trading side of that brokerage firm to the extent of the problems that would soon be encountered by Bear and others.
But of course, it wasn’t all easy riding for Goldman. Global Alpha, remember, dropped 23 per cent in August alone and saw $4bn wiped off its value. And Goldman’s own trading success – broken down – was pretty volatile.
Maybe – just maybe – the people at Goldman are good at their jobs.
It’s a terrible thing, success.