Barron's Andrew Bary says Wall Street's reaction to the Goldman Sachs (GS) fraud charges is...

Barron's Andrew Bary says Wall Street's reaction to the Goldman Sachs (GS) fraud charges is overblown. "Patient buyers of Goldman stock probably will come out ahead, given the company's low valuation and the likelihood that even a defeat at the hands of the SEC probably will be financially tolerable."

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Comments (31)
  • Jake Huneycutt
    , contributor
    Comments (1422) | Send Message
    Wall Street's reaction to this one particular scandal is overblown; but what would worry me more is that Goldman Sachs' sinking reputation would limit their ability to recruit top talent over the long-term.


    Is anyone proud to say, "I work for Goldman Sachs" right now?
    17 Apr 2010, 05:57 PM Reply Like
  • Poor Texan
    , contributor
    Comments (3527) | Send Message
    Good point. Is anyone proud to say "I work for AIG". The ACORN busses may be travelling to GS homes right now.
    17 Apr 2010, 07:16 PM Reply Like
  • Will DiJohn
    , contributor
    Comments (42) | Send Message
    No... Tiger Woods' story was overblown... Goldman needs to be blown-up even more by political & consumer pressures... until it bursts into 10 separate businesses that can earn their living without needing the advantage of owning the market. Anything that is too big to fail is obviously a prime candidate for anti-trust investigation by the Fed. Shareholders beware, we will keep our free market competition sharp as a knife. Compete or yield.
    17 Apr 2010, 06:45 PM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
    I kind of like the words "Goldman" and "blown up" in the same sentence.
    18 Apr 2010, 12:55 AM Reply Like
  • MarketGuy
    , contributor
    Comments (3983) | Send Message
    It's NOT overblown when you concider everone was waiting for the shoe to drop with GS. The market sentiment, I believe, will be, "This is just the tip of the iceberg with Goldman".


    Other than that, it seems to me Andrew Bary from Barrons may have a few shares in ol' Goldie.
    17 Apr 2010, 07:00 PM Reply Like
  • phxcrane
    , contributor
    Comments (752) | Send Message
    I once again have to thank the Obama administration. I hope they can beat GS down to around 150. They did the same favor for me with the Swine Flu scare. The Don't drive your Toyota scare. Now its GS turn. Keep them coming I will be able to retire earlier then anticipated. It was just a coincidence that the announcement came while the market was open. Oh Yea aren't they trying to get a financial regulation bill passed? Just a coincidence Im sure. ROTFLMAO all the way to the bank.
    17 Apr 2010, 07:07 PM Reply Like
  • Hendershott
    , contributor
    Comments (1754) | Send Message
    I don't own Goldman and don't care if it goes the way of AIG, Soloman Brothers, Lehman, Bear Sterns or a host of others. But I don't see why anyone would sell their other stocks because Goldman gets accused by the SEC of malfeasance. By the way, can we get the bonus that M. Tourre recieved for coming up with Abacus? I dare say the he recieved several years of large bonuses for bringing that business to Goldman Sachs.
    17 Apr 2010, 08:04 PM Reply Like
  • dondon
    , contributor
    Comments (295) | Send Message
    "even a defeat at the hands of the SEC probably will be financially tolerable."


    What about the lawsuits from investors that were defrauded?
    17 Apr 2010, 08:41 PM Reply Like
  • Jeff Nielson
    , contributor
    Comments (2449) | Send Message
    This was written at the end of last year:


    "U.S. Tidal-Wave of Litigation Begins"
    18 Apr 2010, 12:33 PM Reply Like
  • FloridaBoy2
    , contributor
    Comments (307) | Send Message
    I will just wait and see what happens. There isn't a house on the street that does not have dirt in the closet.


    Goldman has good brooms.
    17 Apr 2010, 10:17 PM Reply Like
  • Michael Clark
    , contributor
    Comments (11585) | Send Message
    This may be the tip of the iceberg. And the justice department and SEC just keep digging and digging.


    As Dondon writes...and then come the lawsuit from defrauded investors.


    This could lead to some major unraveling, Maurice.
    17 Apr 2010, 10:18 PM Reply Like
  • 123800
    , contributor
    Comments (8) | Send Message
    The SEC complaint is a good read.
    17 Apr 2010, 10:24 PM Reply Like
  • Duude
    , contributor
    Comments (3413) | Send Message
    I agree that the reaction might be overblown. It all depends upon how much bad press is still ahead for Goldman. Its not like its a criminal complaint, which might be warranted. However, Goldman is a big Obama backer. They made the single largest corporate contribution to the Obama campaign. The details about Goldman's action have been known for some time. If it wasn't Goldman, they'd have already been criminally indicted long ago. Goldman will settle with a 1 billion fine but will refuse to admit to any guilt. Democrats look tough with banks to those not watching closely. They'll use this for the November elections. They will kiss and makeup with Goldman after November.
    17 Apr 2010, 11:12 PM Reply Like
  • ebworthen
    , contributor
    Comments (2799) | Send Message
    Barron's Andrew Barry: "Blah blah...blah blah blah blah....blah blah."


    Keep trying Mr. Barry.
    17 Apr 2010, 11:19 PM Reply Like
  • Albertarocks
    , contributor
    Comments (2216) | Send Message
    > Barron's Andrew Bary says Wall Street's reaction to the Goldman Sachs (GS) fraud charges is overblown. <


    I wonder if he's gonna be able to keep his sanity then, when he sees Goldman at $16. On second thought, I've got a hunch maybe he's already lost it.
    18 Apr 2010, 01:01 AM Reply Like
  • Econdoc
    , contributor
    Comments (2938) | Send Message
    He's right. This seems like nothing. Still not clear what the fraud is.


    So they packaged a bunch of crappy securities and sold them (with what looks like the right amount of disclosure) - then scoffed about it (the emails are priceless)...then sold a product that let Paulson play the other side of that trade...and they got fees coming and going...

  seems like a big part of the complaint is that Paulson got to pick the securities and that investors were not told that someone may bet against them...ok. So even if Paulson cherry picked the crap, nobody held a gun to your head and made you invest so I don't get the significance...if you were told all of that would you still go ahead...well maybe you wouldn't but maybe you would presumably you analyzed the securities and liked the risk rewards on the merits (right?)...and even if they did not disclose...I buy stock and the same broker let's someone else short the position...I have to know it could happen...better for me if I am right...this just feels really flimsy...

  can't legislate against stupidity and regulators should not be taking up the cudgels against folks who are just a little ahead of the curve. If they committed fraud then they should burn and burn...but this? Is this really all of it? They will swat this away like the proverbial fly on a lazy day in August. I need to see some more.


    am I not getting it?


    18 Apr 2010, 07:05 AM Reply Like
  • MarketGuy
    , contributor
    Comments (3983) | Send Message
    doc, I believe you place too much emphasis on GS "not" knowing (or being "stupid") about what was going on. They sure in hell did, and profited. Sorry, but I can't picture Goldman exec's and key players walking around in Boy Scout uniforms. Bottom line: they're very smart, very powerful, very connected...and, in turn, very corrupt.
    18 Apr 2010, 12:24 PM Reply Like
  • Archman Investor
    , contributor
    Comments (3319) | Send Message
    I do not think is all overblown, but for different reasons.


    GS worked with Paulson to create this stuff so he could make a mint when it collapsed. GS probably made a mint as well. The people buying the crap were supposed be smart enough to know what they were buying and all the risk associated with it all. Right?
    I do not see a problem with that.


    The real problem is:
    Does anyone who can read and is able to hold a conversation with someone in person without checking their I-Phone, or Facebook status every 2 seconds, believe that this sort of behavior did not carry over to many other things that GS and other investment banks did??


    Where there is one instance there is another instance. And another.


    That is the real direction this should go. The powers that be should now be asking that question and looking for answers that are going to require real detective work to find.


    It may never be proven, ever, but for those of us who are able to read more than the CNBC website, one can guess that Hank Paulsen (former GS CEO) helped to create much of the sub prime crap that he knew would eventually collapse, along with his subordinates like the current GS CEO. They are all in on it. They as well as all the former CEO's of the banks that got bailed out by the US taxpayer.
    I do not believe, for one second, that the former CEO's of WaMu and Countrywide did not know what was going on. I also believe that the former CEO's of Fannie and Freddie were also in on the con.
    I still hold out hope that before the end of this year, we get a shocking surprise that the Justice Dept or even the FBI hands down indictments on members in our own government showing that they too were deeply involved in the deception that has cost millions of taxpayers their homes, jobs and savings.


    One can only hope.
    18 Apr 2010, 08:12 AM Reply Like
  • Tom Spingardi
    , contributor
    Comments (2) | Send Message
    I am Tomaso Spingardi and I spent 20 years in investment banking competing with GS. GS is a very fine institution, I would be very surprised if they were found guilty of serious wrong doing. as for the stock market valuation, it's anybody's guess. sure is that such pool of talent, capital, distribution and technology will always be likely to outperfom.


    Tomaso Spingardi
    18 Apr 2010, 09:18 AM Reply Like
  • realitybiter
    , contributor
    Comments (227) | Send Message
    Who knows? Maybe The Squid is orchestrating its return to privatization and wants to pay its outside shareholders nothing for it. What do they care if their share prices get pummeled? It is a small price to pay (and only a paper price at that) for the longterm benefit.
    18 Apr 2010, 10:17 AM Reply Like
  • EMS
    , contributor
    Comments (586) | Send Message
    That is the bet.
    18 Apr 2010, 10:21 AM Reply Like
  • clearthinker
    , contributor
    Comments (5) | Send Message
    Oh and one more thing. all of players who got fees, made money on CDS, ratings agencies, shoud be forced to give back the money
    18 Apr 2010, 10:40 AM Reply Like
  • 1980XLS
    , contributor
    Comments (3360) | Send Message
    Timing of the announcement smells badly.


    4 hours before options expiration.


    Those who were holding out of the money puts just before the news broke, should be examined.
    18 Apr 2010, 11:09 AM Reply Like
  • protransparency
    , contributor
    Comment (1) | Send Message
    Let's just let goldman sachs run the country . . . it is impossible to have a large house underwriting huge transactions as institutions are cratering and then buying the same institution and making huge profits once there is a total failure. shame on these guys and the government for its non-enforcement of the regulations that already exist. shame, shame, shame
    18 Apr 2010, 11:10 AM Reply Like
  • Jeff Nielson
    , contributor
    Comments (2449) | Send Message
    "Goldman Sachs: Wall Street's #1 Fraud-Factory"


    18 Apr 2010, 11:34 AM Reply Like
  • realitybiter
    , contributor
    Comments (227) | Send Message
    The largest financial damage was done to the legitimate, credit worthy home buyer, who assumed that the rules applied to them were applied to the market, and then overpaid for their home. I understand that "caveat emptor" applies, but if the CDS allowed the bankers to create a fictitious mortgage market safety net, and that allowed credit unworthy borrowers to become home buyers, then didn't the bankers cause financial damage to buyers who overpaid? Without these credit unworthy buyers brought into the market, the ultimate price of homes would have been substantially less.
    You could argue that buyers should have known this, but how could they know that bankers were manipulating the CDS market using fraud? The damage to the unwitting CDS player is merely the beginning of the damage. If fraud can be proved in the CDS market, the rest is simple extrapolation. Just sayin'
    18 Apr 2010, 12:08 PM Reply Like
  • TonyV
    , contributor
    Comments (16) | Send Message
    The reaction is not overblown if it opens floodgates for other lawsuits.
    Angela Merkel said that they will be looking at the facts and considering a lawsuit of their own. If US government wins the case, then GS and others could be facing the same situation that tobaco companies were facing a decade ago.
    18 Apr 2010, 12:11 PM Reply Like
  • realitybiter
    , contributor
    Comments (227) | Send Message
    It seems logical that if there is just a glimmer of fraud that the varied parties that realized financial damage will fire up the loyuz. Treble damage is not a billion or 10 or 100 billion. With a hundreds of trillions in derivatives it is theoretically measured in quadrillions. Banking is fun! The difference between tobacco and finance is that tobacco actually provided a product that people wanted/ needed due to addiction. Society doesn't need Goldman's trading desk. Also, the damage to society due to this debacle is likely many times greater than that of tobacco. When mortgages start stating in bold letters at the top of every real estate contract: "The Attorney General states that this transaction may be hazardous to your financial health. The real estate mortgage market is known for systemic fraud", you will know there is reform. Right.
    I still chuckle that realtors, one of the easiest professions to qualify for, are most folks' most important financial counselor. They shepherd folks into their single most important financial decision. Not saying all realtors are unqualified, but very few could explain a CDS, and its relationship to the mortgage market, and ultimately the value of the property you are buying.....Senseless...
    18 Apr 2010, 12:48 PM Reply Like
  • jasonwee
    , contributor
    Comments (17) | Send Message
    The information coming out does suggest that the SEC has a lot more than just the single email that has been widely quoted. See some news articles (e.g. which gives more detail behind how Paulson played a key role in selecting the assets that went into the Abacus CDO. If the SEC proves this, and since the Abacus document suggests that the selection was made by an independent committee, then it is a clear case of fraud.
    With GS choosing to defend, the case will just escalate.
    For now, debating the true fundamental valuation for GS seems pointless.
    The newsflow is likely to remain nasty, especially with UK and Germany getting into this and the politicians in US and London needing to show they are doing something substantive.
    We will know if fundamentals can buoy the stock after we see the price action post the upcoming results. I doubt it.
    I can't think of many analysts who would have a BUY rating on GS after results. Why should they when they can use one of a hundred excuses to demurr?


    ... so if news momentum is likely to be negative and momentum players likely to go short on the stock, where is the countervailing BUYing pressure potentially going to come from? Value investors? Hmmm... and when would Warren Buffet add more? [I can't imagine this happening ahead of resolution for the case] Most value investors I know won't consider a stock with pending fraud litigation with unclear repercussions on its core business.
    I must state for the record that I decided to short GS after the announcement while adding to others which were sold off in the downdraft. But unlikely some commentators here, I really don't see GS going anywhere near zero. There are certainly many bright people running strong franchises in this group, and these should be worth something... I guess.
    18 Apr 2010, 02:37 PM Reply Like
  • mowjo
    , contributor
    Comments (96) | Send Message
    Why did the SEC announce this during Market hours? The FDIC doesn't even announce nickle/dime bank failures until after the market closes. At the very least, I would say the timing of the announcement was not very well thought out.
    18 Apr 2010, 04:48 PM Reply Like
  • MarketGuy
    , contributor
    Comments (3983) | Send Message
    How about the multitudes of "breaking good news" since the March low that were announced at 3 pm? It's all a game.
    18 Apr 2010, 08:35 PM Reply Like
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