Tuesday, April 27, 2010

Blankfein Wins on the Hill

The full day of questioning of Goldman Sachs employees and former-employees by Senator Carl Levin's Permanent Committee on Investigations finally ended at 8:42  ET. The final witness was Goldman Sachs CEO Lloyd Blankfein

Despite sometimes tough questions and sometimes confused questions, Blankfein clearly won the battle. He patiently answered the questions, refused to be intimidated and tried to get across what it means to be a market maker, and what Goldman's business is really all about

The video of this full day of testimony could be turned into a college course (with the right teacher). You  have Senators with their anger, fury, posing and "average man's" confusion about market making. The video   
 starts off with the relatively young mortgage traders who clearly have trouble handling the questioning of the older seasoned but confused Senators, and  ends with the seasoned Blankfein handling the same questions much more smoothly.

If you have the time, watch the full hearing. And keep in mind that Blankfein isn't throwing up smoke. All of Wall Street sees things the way Blankfein is explaining them.

Update: I should add that the one point where I am suspiciuos of Blankfein's testimony is when he discussed the AIG bailout. He claimed that the Goldman only receieved, net, $2.5 billion from the government  (via AIG) that would have othewise be provided by insurance. The other $10 billion that Goldman recieved was was collaterized by various assets, so AIG recieved those assets in exchange. But, as Janet Tavakoli points out, you can't determine whether the swap of $10 billion cash for $10 billion in assets was an even exchange until you know what those assets were. It is very possible those were illiquid assets that were falling in value that Goldman would have not been able to recieve anywhere close to $10 billion through open market transactions.  

1 comment:

  1. Blankfein clearly stumbled when pressed by Sen. Coburn about releasing employee's private e-mails. Coburn said the committee didn't release the information, Goldman did.

    Sacrifice the individual, save the company.