More Goldman Outrage

Includes: AIG, BAC, DB, GS, LEHMQ, SKF
by: John Lounsbury

David Viniar is CFO of Goldman Sachs (NYSE:GS). On September 16, 2008, the day after the Lehman collapse, Goldman conducted a conference call. At that time, Viniar said, "I would tell you is, given the outcome at Lehman and whatever the outcome at AIG, I would expect the direct impact of our credit exposure to both of them to be immaterial to our results."

Saturday's New York Post article by Josh Kosman and Mark DeCambre (here) reveals that GS has filed a suit that claims a $2.5 billion contractual obligation to them by Lehman. Of course, they are not likely to have this claim honored. There are about $50 billion in bankruptcy claims against about $5 billion of Lehman assets. If they are apportioned a settlement, it will be about $250 million.

What is Goldman thinking? They are exposing one of two things: (1) duplicity or (2) incompetence. They are doing this for a potential $250 million? Maybe they are so arrogant that they just don't care or maybe they didn't think anybody would notice.

According to Kosman and DeCambre, previously Goldman thought the claim would be larger:

"Goldman, in last month's claim, said it was initially owed $4.2 billion, but reduced that figure to $1.5 billion after it replaced some Lehman positions."

Replaced some Lehman positions? Did they trade off (cross cancel) some CDSs with other counter parties? This needs clarification.

In the new claim, the $1.5 billion was increased because GS "discovered" some new related material. This comes to light more than a year later? Are these guys for real?

Of course, the amounts we are talking about here are almost trivial in relation to the CDS payments made by AIG, using government money, to GS previously. This was $13 billion (see LA Times article here). Immaterial to results (see September 13 statement above)? What a load of male bovine excrement!

Other large banks also have claims pending, totaling more than $10 billion (not including GS). The list is available in the Post article (here) and includes Bank of America (NYSE:BAC) and Deutsche Bank (NYSE:DB).

Disclosure: Currently own SKF (Ultrashort Financial ProShares).