July 28,2009/1

All of a sudden, questions are being asked of Goldman Sachs from every side. The big firm has its critics and its defenders. I suppose I count among the former.
I'm simply trying to see GS plain. I think that firms, being composites of human nature, have a DNA of their own that ultimately determines their outcome. Lehman Brothers was a hotbed of self-destructive dissension when I was there (1961-1973), and after a number of attempts at suicide, finally succeeded. There was always something cheesy about Bear Stearns. Goldman seemed always to operate on the principle that if you're going to work within a system, you might as well work the system itself. Here's an example of what I mean. During my Wall Street time, Gus Levy was simultaneously managing partner of GS and Chairman of the New York Stock Exchange. It so happened that Gus and I found ourselves opposed in a tender offer for United Fruit, I on behalf of Zapata, Gus representing the late Eli Black. father of Apollo's Leon Black. In those days, the NYSE had a rule that firms (in this instance Lehman and GS) acting as dealer-managers in a tender could only accept "unsolicited orders" in the shares of the target company (United Fruit.) In other words, you couldn't just go out and round up the target shares, you were supposed to wait for thm to come to you. I was in my office one day when it was reported to me that GS had just crossed (had both sides of a buy-sell order) what looked like half the common stock of United Fruit. I called Gus. "Congratulations," I said, "that has to be the goddamdest unsolicited order ever." "well, Mike," Gus drawled in that syrupy Confederate way of his, "you know how these things are."
Well, if I hadn't before, I did now. But I've always wondered about the ethic of playing fast and loose with the rules of an organization you're the chair of. In 1929, Albert Wiggin, President of Chase, was shorting his bank's stock even as he was offering bland public assurances that all was well. Nothing changes.
What needs explaining to me is the rapidity with which GS has returned to fat profitability. Last all, it was theoretically on the ropes. Today, it's practically back to the level of profit it enjoyed back before anyone knew how to spell "subprime"(I exaggerate, for historical purposes, but readers will know what I mean.) That was a mere 9-10 months ago. Logic suggests that GS was in nowhere as desperate shape as was represented. Between the time Buffett made his deal and March, 2009, GS stock went from around $100 to around $50, even as TARP funds had been aded to Buffett's and Goldman was at the government trough, snout buried in virtually free taxpayer money. Its trading computers were whirring ceaseless and its competition had been decimated. Even though it was now a bank , it had no depositors, in the conventional sense, to look out for.
Great big firms simply don't turn around on a dime. One can only assume that GS was in nowhere as bad shape it let the bailout boys believe.