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 article is 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
George Soros And The Human Uncertainty Principle
The division between academic economics and the way traders look at the market is deep. The efficient market hypothesis assumes that markets and valuations are always pushing towards an equilibrium, and evidence to the contrary gets pushed aside as fluctuations or statistical deviations. But the dot com bubble, the
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 article discussing that topic http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4882281.ece
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”.
To read the rest of my article on Guru Focus click here
Disclosure: Long GS and long JPM for some of my clients