This is a game changer even if we don't yet know where the fire is.
Blankfein has led the firm for six years and spent the past two dealing with allegations of conflicts of interest and fraud. A Senate report released in April said Goldman dumped subprime loan exposure onto unsuspecting clients during the mortgage meltdown and then in 2010 gave Congress misleading testimonials about the firm's actions.
So far, Blankfein has not been accused of any crime or crimes. That means, and I cannot stress this strongly enough, that he is innocent in the court of law – even if he is held slightly above pond scum in the court of public opinion for his and Goldman's role in causing the financial crisis.
Under the circumstances, I cannot help but wonder:
- Is the U.S. government's investigation into Goldman Sachs (and other financial houses) gaining momentum and has the government notified Blankfein that he is a person of interest in one or more of those cases?
- Is there a whistleblower inside Goldman, or are there key players who have "rolled over" in an attempt to protect themselves?
- Is Blankfein retaining Weingarten personally on his nickel? If so, at whose direction? (I also can't help but wonder if Goldman's interests and those of its senior executives have separated as a result of the increased legal scrutiny…)
- Could Blankfein have some sense of what's in the wind and simply be making a preemptive grab to obtain the best counsel before others who also will need criminal counsel do the same thing?
- Or is there something as simple as a conflict of interest that has yet to emerge publicly?
At this point there are more questions than answers…but I have a feeling this won't remain the case for long.
Allegations against Goldman of trading against its clients and favoring certain clients over others will not fade quietly into the night this time around, with the global financial crisis having wiped a whopping $28 trillion from global markets in 2008.
The news of Blankfein's hire pushed down Goldman shares 4.7% late Monday to close at $106.51.
News and Related Story Links:
- Money Morning Video:
Keith Fitz-Gerald: The Latest Trick Goldman Could be Playing on You
- McKinsey & Co.:
Global Capital Markets: Entering a New Era
About the Author
Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He's a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs The Geiger Index, a reliable, emotion-free guide to making big money and avoiding losses, and Strike Force, which aims to get in, target gains, and get out clean. In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics – meaning the exact techniques for making money. Sign up is free at totalwealthresearch.com.