What do you do when you win the Super Bowl of financial profiteering? Let's ask Goldman Sachs. The Wall Street investment firm just announced earnings of $3.3 billion in the first quarter of 2010, beating analyst predictions and scoring a 91 percent improvement over last quarter's paltry $1.81 billion. Do you take that money and go to Disney World? Do you buy Disney World? No -- if you're Goldman Sachs, reigning master of Wall Street, you use some of that money to hire former White House Counsel Greg Craig to defend you in your upcoming court battle with the SEC. The Daily Beast:
Over the weekend, Goldman held meetings to figure out a PR strategy for dealing with the SEC’s case, which involves collateralized debt obligations sold before the housing bubble burst. Craig—who left the White House after trouble closing the Guantanamo detention facility by deadline—will likely be a key component in the firm’s counterattack, which will attempt to paint the SEC’s case as politically motivated, coming just as President Obama is pushing hard for financial regulatory reform. Goldman employees are staying off TV, instead feeding info and spin to the press as well as their many alumni working in high-level government positions. The goal is to avoid looking “arrogant.”
Emphasis added, and good luck with that, Goldman Sachs!
The firm's strategy, as reported by Politico and further revealed in their statements on the SEC charges, seems to be something akin to the William McKinley Front Porch Campaign of 1896. While McKinley sat placidly on his front porch, welcoming throngs of supporters for speeches and lemonade, his strategist, Mark Hanna, was busy raising tons of money ($4 million in 1896!) from wealthy elites and organizing free trips for those supporters to see McKinley.All the while, William Jennings Bryan was barnstorming the country, talking about the silver standard, and generally looking somewhat less than presidentially placid about the whole thing. McKinley won.
Likewise, today, Goldman Sachs is apparently going to try and keep its people off TV (though Politico somewhat snarkily reports they're very interested to see The New York Times's wunderkind Andrew Ross Sorkin when he shows up on CNBC) and at their desks, working diligently to prove they've been the victims of politically created charges. They do not want this battle, do you understand? But they will fight it, if they must, because it is the right thing to do, and the will of the people, that they succeed! Patriotism, Protection, and Prosperity!
They may just win. The NYT has a piece up today about the difficulties the SEC faces in convincing a jury not that Goldman Sachs sold a bad product, but that it didn't tell customers how the bad product was put together. Essentially, the portfolio that they were selling was obviously a risky deal, so they're not being sued for that; they're being sued because they didn't disclose to investors that the risky deal was set up under the direction of someone who profited from its failure.
The Times says "It is the rough equivalent of asserting that an antiques dealer lied about the provenance, but not the quality, of an old table." Not an easy case to make to a jury. When you wrap that argument in the cloak of the former White House counsel and Goldman's mega-star reputation, you have more than an uphill battle ahead for the often over-matched SEC. You have a rock wall built by billionaires, and only an old pair of soccer cleats to help you climb.
Makes me want to go to Disney World.