It was an important night for the partners: Their leader would deliver the eagerly awaited State of the Firm report. While the great unwashed would perceive him as a rather dull, normal accountant type, the partners knew this was a man who would cut his best friend’s throat for an extra 10,000 shares of preferred stock. In other words, the perfect man to lead their firm.
The room was filled with the partners of Goldman Slacks, a shop so powerful that, the partners joked, the U.S. Treasury Secretary had a picture of their chairman framed in his office, rather than one of the president.
The chairman walked to the podium and cleared his throat. The room went silent.
“Ladies and Gentlemen,” he said, and then paused for effect. “Our nightmare is over.”
The partners rose in thunderous applause, the biggest round of cheers since Cal Ripken set the Iron Man record for most consecutive baseball games played.
The chairman didn’t need to say another word. Their nightmare was a nearly three-year battle with Uncle Sam over their double-dealing in the subprime fiasco. Goldman Slacks sold subprime bonds to some clients and completed short sales to other unsuspecting buyers. During the summer, after much negotiation, the government had delivered its verdict: a $500-million-plus fine, which if you say it slowly sounds like a lot of money.
“Kids,” he said, when he waved them back to their seats, “while we certainly don’t think we did anything wrong, the important thing is to put this matter behind us and get back to our business, which you have already done brilliantly.”
This prompted another standing ovation, since everyone in the room knew the latest quarterly results were pretty damn good. Not 2007 good, but good.
“There’s more good news. First, we can write off most of the fine as a business expense. Additionally, in a brilliant display of Goldman Slacks innovation, Moishe Kelly has figured out how to securitize the balance of the fine into eight different traunches, which should generate at least $32 million in new income.”
The partners went berserk. They rose to their feet, waving their black American Express cards in the air. They dreamed of unlimited NetJets cards.
“We’ve had a good year and a great run this decade. Consequently, in consultation with the executive committee, we are going to make a one-time-only, $100-million award to one man!”
The partners knew this was special, bigger than the time they hired the Rolling Stones to play for a 200-person holiday party. Even the chairman was only a $60 million man.
“We paid a price for jumping into subprime. But it was more like a rap on the knuckles. For that, we have one man to thank: Our General Counsel, Winthrop Wong!
“In late 2004, our mortgage securities team came to me when subprime was just starting to roll. I called Winthrop in and asked him to analyze it.
“Two days later he was ready. He said we had to do it because the business was a rocket ship with only a short lifespan. Even then he knew it would crash and that one day the loan originators would pay a price. But Winthrop said he’d protect us if the shit spread our way.
“Well, Winthrop, you more than came through. We made billions that will re-shape the curriculum of business students at Wharton. The fine is small potatoes.
“Here’s your check.”
Then he paused. His eyes glinted like cold steel. His voice took on a ferocious hint and when he spoke again, the partners weren’t sure whether he was joking or serious. He wanted it that way.
“Just don’t think you’re getting my office, Wong.” He smiled, the smile that had charmed 100 snakes and 1,000 Wall Street asps. “I’m here to stay.”
The roar from the audience came again, and the black Amex cards were raised in the air as one.
Bill Regardie was the founder and publisher of Regardie’s Magazine.