There's a lot at stake for Goldman Sachs
If he wants to hang onto the fat Goldman paycheck, it would seem that Lloyd's only choice is to fight. And that's exactly what he's doing.
Since getting whacked with the initial SEC civil suit, Goldman and Blankfein have been on a PR blitz that's included hiring Mark Fabiani of Bill Clinton Whitewater fame and doing a one-hour sit-down with media pundit Charlie Rose.
But the results of the Goldman trial -- both in the courts and in the court of public opinion -- extend far beyond Blankfein and the rest of the current Goldman C-suite. Even though Goldman investors have already taken a hit, a bad outcome could hammer the stock even more. And for investors in other major bank-brokerage hybrids like Bank of America
So how does Goldman navigate these troubled waters? Here are three notable battlegrounds where Goldman needs to dig in if it wants to win the war in and out of the courts.
1. I can do anything you can do better
One of the sticking points that critics like to hit Goldman with is the fact that the company lost a good deal less money than folks like Morgan Stanley
If we look overseas, we can find a similar situation with Deutsche Bank
For Goldman, the key here is convincing people that it's OK to be ExxonMobil, Intel, or Apple. It's OK to just be better.
2. We bring good things to life
No, we're not switching our focus to General Electric, but rather to Goldman's claim that its business helps keep the economy clicking along. While Blankfein has gone to this well many times in his public appearances, the company is also now prominently touting the company's economic contributions on its website.
An introductory paragraph attempts to enlighten misinformed plebs like me:
We are a financial advisor, lender, investor and asset manager. Our role is not always visible to consumers, and we do not engage in many traditional commercial banking activities. We connect buyers and sellers, linking investors and capital with the businesses and governments in need of it. This fuels job creation and innovation, while increasing tax revenue and facilitating economic development.
Is it true? Sure, in part. But as I've pointed out previously, activities like investment banking that provide some clear value-add for the economy have become a very small part of Goldman's -- and really all of the big bank/brokerage's -- business. Of course, in his personal PR tour, Blankfein has also been going to the well-worn investment banking saw that liquidity is magically delicious for the economy and it's always better to have more.
Do I agree with Goldman's stance here? No. But the big banks have been convincing regulators and the public for years that they're providing essential services, so I wouldn't discount the potential for Blankfein to do it again.
3. There's always a bad apple
Finally, Goldman's defense would get a big boost if it can make a convincing case that any ethical lapses were the work of some less-than-truly Goldman caliber employees rather than a sign of greater spoiling of the company's culture. Goldman has long held itself up as a paragon of public service, and Blankfein has been touting the fact that many Goldman employees head off to low-paying public service positions at the peak of their careers.
In the end, it's my belief that the kind of money that is thrown around in Wall Street paychecks has the power to cloud ethical judgment -- whether you're at Goldman, JPMorgan, or J.T. Marlin. But if Goldman can ring fence the sullied employees and convince everyone that the rest of the staff is of AAA quality, it will gain a lot of ground.
Can it be done?
Considering that the SEC's case doesn't seem nearly as damning as some would like to believe, I think there's definitely the potential for Goldman to wiggle out of this with little lasting damage.
But what do you think? Scroll down to the comments section and let me know whether you think Goldman has what it takes to stare down Uncle Sam.
A successful outcome for Goldman might give a nice bump to the stock, but it's unlikely Goldman will be one of the next decade's home run stocks. For that, you need to look here.
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