Piling Onto Goldman Sachs

I had a funny conversation with my Bloomberg editor today about whether the media is "piling on" to Goldman Sachs. Apparently Goldman feels that way. We are in the midst of the greatest outcry against any company that I can recall in my career -- besides Enron -- and yet I really don't think it's overkill. Here's why...

Goldman Sachs has shown a remarkable tone-deafness to its critics. When this episode is said and done, the words tone-deaf and Goldman Sachs will be synonymous. Just as business students study the Johnson & Johnson Tylenol recall as the "best practices" of media relations, they will be studying Goldman as the "worst practices" example. The way you quiet an uproar is by listening to it, acknowledging it, and correcting the problem. Goldman Sachs has turned a deaf ear to the uproar, then misinterpreted it, and finally, responded to it in ways that are inappropriate and border on satire.

How could the firm have sent a partner into a church in London to claim that Jesus (who drove the money-changers from the temple) advocated self-interest? How could Lloyd Blankfein have used the term "God's work" to describe anything that Goldman does? Supposedly he was joking, but you just don't joke that way at times like this.  How could Goldman have thought that it would help to partner with  Buffett to make a $500 million donation to small businesses? (I question Warren's judgment in letting himself be used this way. It hasn't helped his reputation, and his reputation matters more to Berkshire's shareholders than whatever happens to its investment in Goldman Sachs.)

A donation of $100 million a year over five years is laughably small. But the real problem is that this investment is a form of marketing that will ultimately earn more money for Goldman.  In effect they have put seed money into private equity startups. The recipients are potential future Goldman Sachs clients. Even if only a few become successful, the firm could earn back more than it invested. And if not, that's the breaks with risk capital. It's not a real donation.

If Goldman had invested a billion or two to help homeowners who had lost their homes to foreclosure, it might have gotten a different response. From me anyway. As it is, the story didn't distract the media from pursuing Goldman for abandoning kittens and swinishly hogging the H1N1 vaccine for its employees.

To stop the media from piling on, Goldman has to listen, acknowledge and respond appropriately. So far, they've yet to do any of these things. By the way, I know some very fine people who work at Goldman. It's too bad they have no control over what their leaders are doing and saying.

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It's also worth mentioning that I used to work at Morgan Stanley. I turned down a financial package and declined to sign a release form from Morgan Stanley rather than give up my right to comment on and criticize the firm. There's plenty to criticize and at some point I'll doubtless have some things to say about Morgan Stanley. They just haven't made enough money this year to have gotten themselves into the same kind of trouble as Goldman Sachs.