Goldman's claim against Lehman "a shame"

Discussion in 'Wall St. News' started by ByLoSellHi, Oct 26, 2009.

  1. Goldman Sachs is just like a parasite that feeds so much that it kills its host and dies as a result.

    Goldman claim a shame
    Wall Street questions firm's Lehman exposure


    Last Updated: 4:41 AM, October 24, 2009

    Posted: 1:04 AM, October 24, 2009

    Goldman Sachs' motivation in filing a claim against fallen Lehman Brothers is coming under scrutiny.

    Despite telling Wall Street that its credit exposure to Lehman was, in the words of Goldman CFO David Viniar, "immaterial," the gold-plated bank late last month filed one of the largest and most senior claims against the bankrupt Wall Street firm.

    That has raised the hackles of some Lehman creditors, who are noting the disconnect between Goldman's public statements and its actions.

    "How can you say this on one hand, while making these claims on the other?" asked one creditor, who described the inconsistencies as "suspicious."

    The issue is particularly important to the junior creditors because a federal judge is sorting through some $500 billion in creditor claims on an estate valued at just $50 billion, and is likely to toss out many of those claims.

    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.

    A second Goldman entity claims it's owed $999 million, bringing the total Goldman claim to around $2.5 billion.

    However, during a Goldman earnings conference call on Sept. 16, 2008, a day after Lehman filed for bankruptcy, Viniar during Goldman's earnings conference call downplayed its exposure to both Lehman and American International Group, the insurance giant that back then was on the verge of collapsing.

    "We believe one of the biggest challenges we have is to avoid large concentrated exposures to Lehman and AIG, as well as we do with any other financial institution," Viniar said in answering an analyst's question.

    "Given that, what 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."

    Goldman has declined to discuss the matter.

    But according to people familiar with Goldman's thinking, the firm believes the claims are legally binding contracts that outline specifically what the bank is owed rather than an exposure, or actual losses.

    And to be sure, other banks are claiming big losses, too.

    Bank of America, along with its Merrill Lynch unit, filed the largest claim against Lehman, at $5.3 billion.

    That's followed by Deutsche Bank, which has a $2.5 billion claim, Goldman's $2.5 billion claim and Barclays' $1.3 billion claim.

    Morgan Stanley also had $1.3 billion in claims, but sold them at 38 cents on the dollar, enabling the firm to net a $300 million gain.

    Last year, Morgan Stanley CFO Colm Kelleher said the bank's exposure to Lehman was "not material in terms of income, and that's as simple as that."

    A Morgan Stanley spokesman declined comment.