April 21, 2010

Claim That Goldman Probes are Politically Motivated
Singapore. A top Asian fund manager said on Wednesday the civil fraud allegations against massive Wall Street bank Goldman Sachs was a smokescreen to divert attention from the financial crisis in the United States.

Goldman is being investigated for fraud by the Securities and Exchange Commission and Britain’s market watchdog.

It has also been learned that banks here in Asia are using the US bank’s woes to get an edge on multimillion-dollar fee-paying deals in the region.

Marc Faber, who runs Hong Kong-based fund manager Marc Faber, described the lawsuit against Goldman Sachs as a hunt for scapegoats amid economic problems faced by the US.

“The target now is Goldman Sachs. You distract the masses with a villain,” he said at the Asian Public Real Estate Association Forum in Singapore. Goldman’s leading role on Wall Street, coupled with massive paychecks to staff and bumper profits, make it an obvious target, Faber said.

Rival institutions in Asia were seizing on Goldman’s problems to try and elbow in front of the bank on major upcoming deals, sources familiar with the matter said.

Investment bankers have been lobbying executives at state-owned Agricultural Bank of China and pushing officials in Beijing to drop Goldman as an underwriter for the bank’s more than $20 billion IPO.

Rivals are also asking officials at state-controlled Bank of Communications to ditch Goldman from its joint global coordinator role in the Chinese bank’s $6.1 billion rights issue, the sources said, though there was no evidence either bank was considering pushing Goldman aside.

Meanwhile, Paulson & Company, the hedge fund linked to civil fraud charges against Goldman Sachs, has moved to head off investor concerns about its role in a deal that has scarred the reputation of the famous Wall Street bank and overshadowed blow-out quarterly earnings.

Goldman is accused of defrauding investors by failing to say that prominent hedge fund manager John Paulson bet against a Goldman subprime debt product that he helped design.

Paulson, sources have revealed, has made telephone calls and sent letters to his big investors this week telling them that neither he nor anyone else at the fund had received notice indicating that charges might be filed against it or Goldman Sachs.

Paulson & Company, which earned $15 billion by correctly betting in 2007 that the US housing market would collapse, declined to comment.

Experts said the case and the response showed Goldman’s traditional strategy of keeping news media and critics at bay behind a wall of silence was no longer valid. “They can’t play that game anymore,” said Michael Robinson, a consultant at Levick Strategic Communications. “The world has changed too much.”

Goldman on Tuesday reported its first-quarter net income nearly doubled to $3.29 billion, bolstered by strength in fixed income trading and principal investments. The bank reported its lowest-ever first-quarter compensation ratio, but still set aside $5.5 billion for compensation and benefits in the period.

The reduction in money set aside served to bolster earnings that could bring more public scrutiny to the 141-year old bank.



Reuters, Bloomberg