Lloyd Blankfein's Nightmare On Wall Street

by Derek Loosvelt | April 30, 2010

The chief executive officer of Goldman Sachs may never sleep again.

Two weeks ago, Lloyd Blankfein walked into a nightmare in which the SEC filed a civil fraud case against his firm for allegedly failing to provide material information on a certain investment named after this machine. On Tuesday, he had another terrible dream in which he and a handful of other current and former holy workers were held over an open flame for more than 10 hours by Senator Carl Levin (D-Mich) and a few of the senator's close Congressional pals. And yesterday, the nasty old SEC was back in Lloyd's reveries, rumored to be brewing up a criminal case to go along with its civil one. Indeed, Lloyd must be thinking, April is the cruelest.

And May may not be much better.

If serious derivative reform passes the Senate, billions of dollars in annual Goldman Sachs earnings will be history (as the New York Times notes today in a study). Of course, Lloyd and Goldman are not the only ones who stand to lose big; the rest of Wall Street's huge derivative business will be brought along in the nightmare as well.

Which is why all eyes and ears will be on Warren Buffet this weekend down in Omaha, Nebraska, at Berkshire Hathaway's annual shareholders meeting, commonly referred to as Woodstock for Capitalists (instead of grass and free love, think grass-fed beef and free lunch). This year's meeting is expecting to attract about 35,000 folks, who will be on the receiving end of one of the more highly-anticipated speeches in years.

Buffett's annual state of the company talk (which has become more of a state of the U.S. economy speech and prediction of where the country is fiscally headed than simply an assessment of Bershire Hathaway's health) is a highly-publicized affair, and this year will be even more so given that Warren's buddy is in a tough spot and thus Warren's $5 billion investment in Goldman Sachs is in a tough spot (as you may recall, Buffett threw a handful of billions behind Goldman in September 2008, giving the firm a monstrous boost of capital and confidence when it was seriously hurting and rumored to be susceptible to fail). Buffett has said that he will speak frankly about Blankfein (whom Warren very much respects) as well as Goldman Sachs, knowing that he will be on the receiving end of many questions about Lloyd and the SEC case against Goldman.

Along with Lloyd, expect the very senators who grilled him this past week to listen closely to what Warren has to say. There's no other investor or pundit in America whose opinion is more highly sought concerning economic matters than Warren's, and as the Wall Street Journal points out, he has experience coming to the rescue of investment banks on the brink, having saved Salomon Brothers from its nearly deadly nightmares back in the early 1990s.

With financial regulation pending, and Wall Street perhaps about to be forced to alter the way it does business forever, when the Oracle of Omaha speaks this weekend about how Washington and the Street should move forward from here, everyone will be listening.

Filed Under: Finance


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