Inside of Goldman Sachs there is one unexpected reaction to the news Tuesday morning about the firm’s dealings with Libya: relief.
Goldman invested $1.5 billion for the Libyan sovereign wealth fund in 2008, according to a report in The Wall Street Journal. It lost 98 percent of the money.
In an effort to placate outraged Libyan officials, Goldman executives attempted to sell preferred shares of the firm to Libya.
And this is where the feeling of relief comes in.
“The last thing we need right now would be headlines reading ‘Vampire Squid Profits Funding Libyan Dictator,’” one senior Goldman investment banker told NetNet. (We agreed not to identify him, because bankers are not really supposed to talk to reporters, except under very limited and controlled circumstances.)
The United States has been bombing Libya for months—and Gadaffi is back on the list of official villains.
But back when Goldman offered Libya a preferred equity stake in the firm, Libya had spent years on the list of foreign governments with which it was acceptable for US companies to do business. After years as a pariah nation, Libya was being brought back into the fold of the respectable international community.
Goldman has been stung again and again with bad publicity, much of it stemming from how the firm maneuvered itself through the mortgage meltdown and financial crisis. Goldman has been accused by the SEC of defrauding customers—a lawsuit it settled for $500 million. It is reportedly expecting federal subpoenas in connection with its mortgage-related business.
“Finally, we dodged a bullet,” another person at Goldman said in reaction to the Libya news.
You kind of have to admire the sheer self-confidence of Goldman, offering to sell a stake in itself to Libya after losing so much of the country’s money. It’s like a used car dealer offering to let you loan money to the dealership after selling you a lemon.
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