Goldman Sachs

Amazing what you can do if your audience is foolish enough. Goldman Sachs has become the darling of the cable TV talking heads and others largely due to the cachet still attached to it from its days as a highly successful privately owned investment bank. Right now it is trying to turn itself into a dull old bank holding company while still retaining that aura. Like most financial institutions Goldman relies heavily on its reputation, not just to attract customers, but to pump up the egos of its employees.

It also is highly upset at all the meddling that goes along with accepting TARP money from the government so it trying to raise fresh private capital in order to pay the government back.

With that in mind it just announced its first quarter earnings: a very healthy $1.81 billion. Nice job.

But.

Take a look at those niggling details. Like the actual income statements. Here’s the Goldman press release:

Notice anything?

Let me give you a clue: the ‘first quarter’ this year includes March. No surprise you say? Well no, except for that in previous years Goldman’s fiscal year ended in November. Which means that its first quarter would have included the months of December, January and February.

The plot thickens.

So enquiring minds search around the earnings release to see proper comparisons. But alas there are none.

Fiscal year 2008 is reported as ending in November 2008. That’s OK and conforms with history. All present and correct.

And the new first quarter reports the months of January, February and March 2009. Just as it should given the shift in fiscal years that Goldman is adopting as part of its transition towards being a bank holding company.

With me so far?

Good.

So where are the figures for December 2008?

Nowhere.

Don’t you find that odd?

A whole month seems to have vanished from the reporting.

Now I don’t want to sound cynical … but … this is the financial industry and there have been lots of nasty losses lately at some of the other banks [and some very shaky accounting I should add] … so how convenient is it to have a ‘missing’ month into which a clever chap could lose a ton of losses. No one would ever know. They aren’t going to be formally reported. You’d have to figure it all out the hard way by examining the accounts in detail.

And the detail just isn’t all there.

Floyd Norris at the New York Times did an investigation and discovered December included losses of $1.3 billion.

What a coincidence. The horror!

And what a cheap, tawdry thing to do.

Goldman is doing its best to maintain Wall Street’s fine image … for self-interested and unrepentant lying … sorry ‘mis-speaking’ … to investors, and those of us whose lives they helped ruin with their gambling schemes … sorry I mean their derivatives portfolio.

What else are they ashamed to admit?

Addendum:

Back in the day I did some business with Goldman and they were undoubtedly the best of the bunch on Wall Street. Judging from this stunt I am wondering what they hid from me. And whether their reputation is simply built on tricks rather than brains.

Reputation is everything in banking. Sneakily missing a month of huge losses is hardly a way to burnish one.

Addendum #2:

James Kwak at the Baseline Scenario has this to say about Goldman’s earnings: Are Goldman’s Earnings That Good? . His view is generally benign, which is a bit odd given his propensity to lash out at the big banks, but he shows his true colors when he says that Goldman’s ability to generate very strong income from some of its lines of business in the first quarter probably reflects the benefits of being part of an even smaller oligopoly. In other words: we should worry about the big banks being even more influential after the crisis than before. Many have fallen, so the pie gets shared by fewer survivors. That does not bode well for the economy, and it supports the case for tighter regulation. If we worried about ‘too big to fail’ before the crisis, it seems we may have entered the era of ‘much too big to fail’ afterwards.

Not good. Not good at all.