Mail & Guardian 28 April 2010
Blankfein conceded in the final hours of a nearly 11-hour hearing that the criticism of his firm would lead to soul searching. He said "everything that's been the subject of criticism will be tightened up", an indication that the pressure on Wall Street may be starting to change behaviour.
Blankfein, who was quoted late last year as saying he was "doing God's work", was asked time and time again whether it was morally correct for the bank to sell clients securities while at the same time the firm was betting against them.
"You shouldn't be selling junk. You shouldn't be selling crap. You shouldn't be betting against your own customer at the same time you're selling to them," said Senator Carl Levin.
"You're going short against the very security [you're selling] ... many of which are described as crap by your own sales force internally." said Levin, chairperson of the Senate Permanent Subcommittee on Investigations.
"How do you expect to deserve the trust of your clients, and is there not an inherent conflict here?" asked the Michigan Democrat.
Blankfein was the last in a parade of Goldman Sachs Group current and former executives who tried to fend off accusations they helped inflate the housing bubble and then made billions off the market's collapse.
The hearing starkly illustrated the conflict between Washington and Wall Street over blame for the financial crisis, and resistance to some of the key financial reforms the Obama administration is trying to push through Congress.
Blankfein was frequently interrupted, told to answer the question and stick to the point. He often squinted as if puzzled by the questions and sometimes gave hesitant answers.
He said, as a market maker, it was not Goldman's responsibility to tell customers how to trade or invest.
Clients "are not coming to us to represent what our views are, they probably wouldn't care what our views are. They shouldn't care."
The hearing came less than two weeks after the US Securities and Exchange Commission (SEC) filed a civil fraud suit against Goldman, charging that it hid vital information from investors about a mortgage-related security.
Edward Rogers, CEO of Tokyo-based hedge fund adviser Rogers Investment Advisers said Goldman's difficulties could hurt its ability to retain talent.
"The government hates you. Your friends throw tomatoes at you. You are evil now. You are not the smart guy in the room -- you are the evil, twisted greedy crook guy," said Rogers.
Protesters attended the hearing, some wearing striped prison outfits and holding pink signs reading "Shame" and "Goldman Banksters."
The hearings recalled the Pecora Commission hearings that investigated the causes of the 1929 stock market crash. The head of the commission, Ferdinand Pecora, is often credited with popularising the word "bankster", which combines "banker" and "gangster."
Goldman bond trader Fabrice Tourre, the only individual named in the SEC suit, said he did not hide material information from clients.
Senator Tom Coburn, the top Republican on the subcommittee, accused Goldman of making Tourre "a whipping boy" and questioned the firm's motivation for releasing personal emails from 2007 between Tourre and his girlfriend.
Blankfein stammered through his response, saying: "There were elements here that spoke badly to the firm, and we just wanted to come abreast of all the issues about which were bad to the firm."
The current and former employees said Goldman was managing risk on individual positions rather than making a broad bet against the future of the housing market.
The Goldman executives spoke deliberately, but at times looked uncomfortable as they were asked to leaf through massive evidence binders, crammed with emails and other internal Goldman communications.
The executives insisted they took responsibility for their actions, but mostly blamed the housing crisis on broader industry issues, rather than their own conduct.
Former mortgage chief Dan Sparks came close to an apology, saying the bank "made some poor decisions in hindsight". He added: "I don't have any regrets about doing things that I think were improper, but we were participants in an industry that got loose."
Levin told Sparks and other executives, "You should have plenty of regrets."
The SEC's April 16 fraud suit centres on a subprime mortgage-linked product known as "Abacus 2007-AC1." The agency says Goldman failed to disclose that hedge fund Paulson & Co had input into its construction and was betting it would fail.
An $8-billion Dutch transport pension fund said on Tuesday it had dropped Goldman as its fiduciary manager, but said the decision had no connection to the SEC charges.
Levin closed the hearing by taking a final jab at Goldman for complaining that the committee cherry-picked from the company's internal emails and other documents.
"That book in front of you is a whole bowl of cherries," Levin said pointing at Blankfein and the evidence book. "These are not cherry-picked. Those documents reflect the history of what happened here." -- Reuters
Tito Mboweni joins Goldman Sachs
Mail & Guardian
Tito Mboweni, former South African Reserve Bank (SARB) governor, will join Goldman Sachs as an international adviser from June, his third high-profile appointment since leaving the central bank in November.
Mboweni (51), who was head of the SARB for a decade, has been appointed chairperson of mining group AngloGold Ashanti and packaging firm Nampak.
The United States-based investment bank said his experience and knowledge of the political and financial environment would compliment its business capabilities in the region.
"In this capacity, he will provide strategic advice to the firm on business development opportunities, with a particular focus on South Africa and sub-Saharan Africa," Goldman Sachs MD for South Africa Colin Coleman said.
Mboweni, a former Cabinet minister, left the central bank in November last year after a decade as governor but could not work elsewhere during a six-month "cooling-off" period, which ends in May. -- Reuters
Eskom blacks out chunk of labour force
Fin24.com 21 April 2010
ESKOM is planning a major restructuring, which could involve a partial
privatisation and a major shake-up of its labour force.
In the latest edition of Finweek, Sikonathi Mantshantsha reports that
Eskom has asked international mergers and acquisitions teams of
financial giants JPMorgan and Goldman Sachs to advise it on a proposed
Finweek has been informed that the company may be split up and certain
of its assets privatised, in a similar fashion to that of arms utility
The first business unit apparently on the line is distribution.
Up to half of its labour force may be sold off to new owners as part of
the partial privatisation and jobs may be on the line.
The restructuring idea is the brainchild of Eskom’s newest executives,
human resources director Bhabhalazi Bulunga and finance director Paul
O’Flaherty. They respectively joined the company from South African
Airways and a construction company based in Dubai. O’Flaherty confirmed
to Finweek that Eskom was considering restructuring.
“Organisations such as Eskom need internal efficiency and productivity.
We need to show we can also produce something ourselves – some savings –
and not only rely on external funders,” he told the magazine.
The plan is to produce some internal savings while the public utility
scours the markets to produce the R45 billion funding gap in its capital
investment programme. Over the next six months Eskom will produce a plan
that seeks to reduce overheads to make it a “lean and mean” operation,
Bulunga was head of SAA’s human resources team – which reduced the
national carrier’s staff complement by about 20% in 2008 – credited by
the current management as having laid the foundation for its R398
million profit last year.
Eskom approached Bulunga to fill one of three key senior positions that
had been vacant for more than a year in its executive committee.
While the World Bank recently approved a R28 billion loan for Eskom, the
utility is under pressure after a R9 billion loss last year.
NUM will oppose Eskom privatisation – Komane
Chanel Pringle (Engineering News) 21 April 2010
The National Union of Mineworkers (NUM) would not allow for the
privatisation of State-owned power utility Eskom, deputy general
secretary Oupa Komane said on Monday.
He was speaking at the NUM's energy mix workshop in Johannesburg.
However, deputy Public Enterprises Minister Enoch Godongwana, speaking
on behalf of the ruling African National Congress (ANC), said that
government's plans did not involve the privatisation of the power company.
He emphasised that government was not considering selling entire power
stations or privatising Eskom, but highlighted that Eskom and government
alone could not continue to fund the new power expansions needed in the
coming 20 years.
Eskom has recently appointed Credit Suisse as transaction adviser for
the sale of a stake in the R142-billion Kusile power station to a
strategic equity partner.
The utility may sell between 30% and 49% of the Kusile power station.
South Africa would require a further 50 GW of new power generation in
the coming 20 years and government had to start buying power from the
To that end, the creation of an independent buyer of electricity should
not be considered as the privatisation of Eskom, said Godongwana, adding
that this entity would remain State-owned.
Further, he highlighted that the country had to increase its power
generation capacity, as a number of older power stations would start to
be decommissioned from 2023.
South Africa would not continue to be able to maintain its power exports
to its Southern African Power Pool neighbours in the medium-term, which
would impact on the development of its neighbours. This was something
the country had to take into consideration, said Godongwana.
He added that South Africa could not ignore nuclear as a base-load power
Meanwhile, Komane said that the NUM should revisit its position on nuclear.
He noted that the union was anti-nuclear, but pointed out that this
position was adopted in the Apartheid-era and that many things have
since changed. The NUM should investigate nuclear energy as a potential
alternative energy, he said.