Shortly after the world decided that Goldman Sachs and Lloyd Blankfein would be the target of a collective primal scream therapy in the wake of the global financial crisis, the bank decided it should set up what amounted to a Bad Look Minimization Department. The idea was to avoid deals whose potential reputational costs might exceed whatever money they brought in the door. “At the end of the day, we only have one reputation. We rise and fall together,” Blankfein said back in 2012 as he introduced the morality squad to what we can only imagine was a chorus of silent grumbles.
Now, thanks to Goldman Sachs Asset Management's less-than-popular decision last week to buy $2.8 billion in Venezuelan bonds marketed to help prop up the foundering Maduro government, it looks like there may be another few training sessions in store:
Buying the bonds for pennies on the dollar was a no-brainer trade for fund managers in the unit of Goldman Sachs Group Inc. GS -0.58%
And, internally, the purchase didn’t appear to receive heightened scrutiny. The two co-heads of the unit, GSAM, were informed only after the trade had been completed, people familiar with the matter said. The trade didn’t reach Goldman’s firmwide standards committee, which often vets deals that carry potential blowback, they added.
If you're going to set up an internal group specifically devoted to ensuring that major transactions don't step afoul of public norms, one would expect that group to know about a multibillion-dollar transaction tied to one of the world's most hated governments – indeed, a regime that has been the target of a financial boycott attempt for more than a month now. The members of that committee could be forgiven for feeling a bit neglected right now.
As the Journal reports, it's not just Goldman's fun police who remained ignorant of the bond deal . Senior executives were also caught at unawares, owing in part to the fact that it was the relatively insulated asset management wing that bought the debt.
Luckily for Goldman, however, the outrage cycle moves fast.