Goldman Sachs has been much in the news the past few days, what with Greg Smith's Muppets op-ed and the passing of the Fed's stress tests. Now Hank Greenberg, the former head of AIG who saw the firm he built completely destroyed during the financial crisis, comes pretty close to accusing Goldman of fraud, in the above clip from Bloomberg TV. He also says Goldman got a back-door bailout during the financial crisis — at the terminal expense of AIG.
Worth watching, just to see what an old Wall Street hand — one no stranger to controversy himself — thinks of the new Wall Street.
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That's not a Goldman Sachs executive behind the wheel.
Yesterday's big news in the financial world wasn't Apple stock climbing above $600 per share — it was the op-ed resignation letter to end all resignation letters penned by former Goldman Sachs executive Greg Smith, in which he savaged the Vampire Squid and accused it of betraying its clients.
According to Smith, Goldman clients aren't clients — they're routinely referred to as "Muppets."
Goldman lost $2 billion of market value in a hurry as the news circulated through the Muppet Theater.
No word on whether there is or ever has been a Vampire Squid Muppet in the works. They've already got Count von Count, after all. You could probably just add a few more arms and a blood funnel.
However, it turns out that calling clients Muppets, in Goldman-speak, isn't necessarily the insult that it sounds like at first. Because the Muppets are Goldman clients. I'm not kidding.
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Goldman Sachs calls them "clients."
A bomb went off on Wall Street this morning when Greg Smith, a now former London-based executive for Goldman Sachs, published an op-ed in the New York Times saying that the firm has completely betrayed its responsibilities to its clients. According to Smith, who worked at Goldman for over a decade, "if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence."
It's the resignation email to end all resignation emails.
And just what Goldman needs! Another PR crisis, hot on the heels of yesterday's good, share-price-improving news that it had passed the latest round of Federal Reserve stress tests. As Smith puts it:
Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail. Even after the S.E.C., Fabulous Fab, Abacus, God’s work, Carl Levin, Vampire Squids? No humility? I mean, come on. Integrity? It is eroding. I don’t know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact.
It astounds me how little senior management gets a basic truth: If clients don’t trust you they will eventually stop doing business with you. It doesn’t matter how smart you are.
Yelp.com is a crowd-sourced review site.
Yelp, that restaurant-review startup that everyone kinda sorta uses but that no one really feels all that passionate about (it's no Foursquare, it's just always, you know, there) staged a very successful IPO today, with its stock price rapidly rising well above the offer price of $15.
Sounds great, except of course that Yelp hasn't made any money since 2004 and has a business model that entails massive outlays on local ad sales staff to keep the cash coming in. At Business Insider, Henry Blodget is utterly appalled.
I'm surprised he didn't address the "low float" and IPO-underpricing questions (he has before, regarding LinkedIn's IPO). Yelp sold a little more than 7 million shares. I don't have the exact number, but if recent history is any indication, this is only about ten percent of the company.
Back in the 1990s, I spent some time writing about military affairs and policies, with a focus on the future of warfare. My research and reporting led me naturally to a then-new firm called Stratfor, whose CEO, George Friedman, had written a book with (to me) the catnippy title, "The Future of War." In those days, Stratfor provided analysis on geopolitical events and various flavors of outlook that was basically free. (You can watch Friedman doing his thing, talking about another book in 2009, in the video above.)
Strafor was a feast. When 9/11 happened, I was living in New York. That entire morning, as I watched the Twin Towers burn and then fall, I monitored Stratfor's website for information. Gradually, however, Stratfor's profile became more elevated and the company began charging for its services. At which point I drifted away.