Approximately two months ago Hank Greenberg( former CEO of AIG) came out with some nasty comments regarding Goldman Sachs. I was immediately inspired to write an article on Seeking Alpha about the hypocrisy of Hank Greenberg attacking Goldman Sachs(the articleis here.
My basic argument was that AIG had no moral high ground from which to criticize Goldman Sachs. The article was extremely popular on Seeking Alpha. However, most readers had such a blind hatred of Goldman Sachs that they were highly critical of my article. Some of the readers accused Goldman Sachs of being behind everything evil under the sun. The readers missed my argument and thought I was defending Goldman Sachs' actions. I was merely pointing out that Hank Greenberg was a hypocrite and I stated clearly I thought no investment bank including Goldman Sachs was ethical.
I loved Warren Buffett's recent quote stating "I mean, they're going to rewrite Genesis and have Goldman Sachs offering the apple, I mean, pretty soon." That basically summed up my feelings regarding the recent populist hatred against the company.
One of the readers who read my column on Seeking Aplha commented that Goldman Sachs was responsible for Lehman Brothers' collapse ( This is not the first time I have heard the claim many Goldman Sachs haters have claimed this). In response to this comment I wrote
JP morgan from all the accounts I have read so far had a lot more to do with bringing down Lehman than Goldman. Here is an aticle discussing that topic .
I do not in any way consider myself to be an expert on the financial crisis. However, readers who have been following my columns know I have read over a dozen books on the financial crisis. In addition I have read many articles on the topic, as it is one that interests me. From all accounts I had read Dick Fuld (Former CEO) and Joe Greogry's( Former President) arrogance were the main cause of the collapse of Lehman Brothers. When it came down to the final few weeks of Lehman Brothers' existence, a lack of confidence helped bring down the mess that the Fuld and Gregory created. Fuld of course denied wrong doing and blamed the firm's collapse on short sellers spreading rumors . The final straw as I noted above was JP Morgan's demand of more collateral from Lehman Brothers. This was the nail in the coffin that finished off Lehman Brothers. JP Morgan was similarly responsible for nailing the coffin on Bear Sterns. According to the article I linked above JP Morgan "froze $17 billion of cash and securities belonging to Lehman on the Friday night before its failure." This created a liquidity crisis that caused the demise of Lehman. Where Goldman comes into the picture boggles me.
A report spanning over 2,200 was recently released regarding the causes of Lehman Brothers' collapse. The report was released from the bankruptcy examiner from the Manhattan Federal Court which handled the Lehman Brothers' bankruptcy. The bankruptcy examiner referring to JP Morgan and Citigroup stated “The demands for collateral by Lehman’s lenders had direct impact on Lehman’s liquidity”. The report also stated that Lehman Brothers' was insolvent weeks before its bankruptcy. The reported accused Dick Fuld and other top executives of gross negligence. This further indicates my theory that the top executives caused Lehman's collapse and not any short sellers or investment banks like Goldman Sachs. Lehman Brothers' collapse was due to inept management and JP Morgan facilitated the company's crisis by their demands on Lehman when it was on its knees.
This is not the first accusation against Goldman Sachs. In an absurd article published Rolling Stones, columnist Matti Tibbi accused Goldman of being behind almost every financial crisis since the great depression. Tibbi regarding Goldman " stated The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money." Roger Lowenstein a writer who I have much more respect for blamed, Goldman Sachs for helping bring down Long Term Capital Management in 1998( I will be posting a reviewWhen Genius Failed
by Roger Lowenstein, and will discuss more about this accusation in the book review).
I think the claim that Goldman Sachs caused Lehman Brothers collapse should be put to rest. If anyone is to blame it is Dick Fuld, Joe Gregory and other top management. If you want to put a blame on a single bank it would be JP Morgan. I however understand Jamie Dimon's actions as he was interested in protecting his shareholders from a bank on the verge of collapse. Therefore I think it would also be unfair to blame JP Morgan.
This brings me back to one of my central points that Dick Fuld was the person most responsible for Lehman's collapse. As President Truman famously stated " the buck stops here". I hope this lays rest to one of the Lehman Brothers conspiracies.
However there are still many more wackier claims including the charge that Goldman Sachs agents control our Government. For now one conspiracy theory about Goldman put to rest only 999 to go!
Disclosure Long GS and Long JPM for some of my clients
My basic argument was that AIG had no moral high ground from which to criticize Goldman Sachs. The article was extremely popular on Seeking Alpha. However, most readers had such a blind hatred of Goldman Sachs that they were highly critical of my article. Some of the readers accused Goldman Sachs of being behind everything evil under the sun. The readers missed my argument and thought I was defending Goldman Sachs' actions. I was merely pointing out that Hank Greenberg was a hypocrite and I stated clearly I thought no investment bank including Goldman Sachs was ethical.
I loved Warren Buffett's recent quote stating "I mean, they're going to rewrite Genesis and have Goldman Sachs offering the apple, I mean, pretty soon." That basically summed up my feelings regarding the recent populist hatred against the company.
One of the readers who read my column on Seeking Aplha commented that Goldman Sachs was responsible for Lehman Brothers' collapse ( This is not the first time I have heard the claim many Goldman Sachs haters have claimed this). In response to this comment I wrote
JP morgan from all the accounts I have read so far had a lot more to do with bringing down Lehman than Goldman. Here is an aticle discussing that topic .
I do not in any way consider myself to be an expert on the financial crisis. However, readers who have been following my columns know I have read over a dozen books on the financial crisis. In addition I have read many articles on the topic, as it is one that interests me. From all accounts I had read Dick Fuld (Former CEO) and Joe Greogry's( Former President) arrogance were the main cause of the collapse of Lehman Brothers. When it came down to the final few weeks of Lehman Brothers' existence, a lack of confidence helped bring down the mess that the Fuld and Gregory created. Fuld of course denied wrong doing and blamed the firm's collapse on short sellers spreading rumors . The final straw as I noted above was JP Morgan's demand of more collateral from Lehman Brothers. This was the nail in the coffin that finished off Lehman Brothers. JP Morgan was similarly responsible for nailing the coffin on Bear Sterns. According to the article I linked above JP Morgan "froze $17 billion of cash and securities belonging to Lehman on the Friday night before its failure." This created a liquidity crisis that caused the demise of Lehman. Where Goldman comes into the picture boggles me.
A report spanning over 2,200 was recently released regarding the causes of Lehman Brothers' collapse. The report was released from the bankruptcy examiner from the Manhattan Federal Court which handled the Lehman Brothers' bankruptcy. The bankruptcy examiner referring to JP Morgan and Citigroup stated “The demands for collateral by Lehman’s lenders had direct impact on Lehman’s liquidity”. The report also stated that Lehman Brothers' was insolvent weeks before its bankruptcy. The reported accused Dick Fuld and other top executives of gross negligence. This further indicates my theory that the top executives caused Lehman's collapse and not any short sellers or investment banks like Goldman Sachs. Lehman Brothers' collapse was due to inept management and JP Morgan facilitated the company's crisis by their demands on Lehman when it was on its knees.
This is not the first accusation against Goldman Sachs. In an absurd article published Rolling Stones, columnist Matti Tibbi accused Goldman of being behind almost every financial crisis since the great depression. Tibbi regarding Goldman " stated The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money." Roger Lowenstein a writer who I have much more respect for blamed, Goldman Sachs for helping bring down Long Term Capital Management in 1998( I will be posting a reviewWhen Genius Failed
by Roger Lowenstein, and will discuss more about this accusation in the book review). I think the claim that Goldman Sachs caused Lehman Brothers collapse should be put to rest. If anyone is to blame it is Dick Fuld, Joe Gregory and other top management. If you want to put a blame on a single bank it would be JP Morgan. I however understand Jamie Dimon's actions as he was interested in protecting his shareholders from a bank on the verge of collapse. Therefore I think it would also be unfair to blame JP Morgan.
This brings me back to one of my central points that Dick Fuld was the person most responsible for Lehman's collapse. As President Truman famously stated " the buck stops here". I hope this lays rest to one of the Lehman Brothers conspiracies.
However there are still many more wackier claims including the charge that Goldman Sachs agents control our Government. For now one conspiracy theory about Goldman put to rest only 999 to go!
Disclosure Long GS and Long JPM for some of my clients
