Warren Buffett Fights in Goldman’s Corner

Chairman and CEO of Goldman Sachs Lloyd Blankfein with Warren Buffett

There is no doubt that a suitable scapegoat for the economic meltdown is still being searched for. With Goldman Sachs being raked over the coals, someone who has a bit of influence in the business community thought it necessary to step up for the investment giants, and that someone is none other than Warren Buffett. Despite the bad press that Lloyd Blankfein and cohort, Fabrice Tourre, have weathered, shares seem to be quite happy to rise for Goldman, and now it’s just a question of a PR turnaround to mitigate the damage.

You couldn’t ask for better lip service than that of the old Midwest titan fighting in your corner. Bloomberg reports that Mr. Buffett believes that the bank shouldn’t be blamed for clients losses and that “it wasn’t so obvious” in 2007 (the period in question) that the housing market would collapse. He also echoed the sentiment that it isn’t a bank’s job to proffer advice to clients, that the bank does “not owe us (the client) a divulgence of their position.” To be fair, he does have a point. If every investment bank told the person sitting opposite their fears and reservations of particular shares, they wouldn’t have a business. It’s also true that there is a level of duplicity involved, but Buffett is essentially saying what we already know: this is a betting game, a game of risk and there will be winners and losers from it.

What the congressional committee has done, and this is what I think the point was all along, is to shine a light for the public on what goes on behind the closed doors of institutions like Goldman Sachs – and to throw a little mud on their faces (they make too much money!). I don’t believe they thought they would find a smoking gun of nefarious intent from several hundred employee emails. All they found, after all, was an arrogant Frenchman (Tourre) and the reference to some Goldman shares as “shitty.” Not really worthy of criminal negligence though. They did manage to embarrass a financial giant and perhaps this will bode well for more transparent dealings with the public in the future. That’s the biggest win, it seems, the government will get.