Lloyd Blankfein testified in court late this afternoon that if TARP had gone through more quickly, or was at least imminent on September 23rd, 2008, Goldman Sachs probably wouldn’t have done the deed with Berkshire Hathaway.
After John Dowd, a lawyer for Raj, finished his cross-examination, the government resumed its questioning of the Goldman chief.
Dowd had discussed the passing of TARP with Blankfein to paint the picture that Raj’s trading of Goldman stock was based on public discussion, not insider information gleaned from Rajat Gupta.
But prosecutor Andrew Michaelson was keen to prove that discussion of TARP passing or not, was incomparable to concrete knowledge that Berkshire was going to invest $5 billion in the bank.
Michaelson asked Blankfein to talk about the difference between speculation about impending mergers and acquisitions, as opposed to discussion of the same topic by board members in a Goldman Sachs board meeting.
“Speculation is people trying to guess,” Blankfein said. In a board meeting, however, those board members “know what the company is going to do.”
On September 23rd, 2008, Goldman Sachs released a statement that the firm would be receiving a $5 billion investment from Berkshire Hathaway. This, according to Blankfein, was significant for two reasons. Firstly, in terms of capital. Secondly, it was an endorsement from an “astute, successful” investor that Goldman was a good bet. TARP passed on October 3rd.
At the time, “Did TARP have any impact on your decision to take the Berkshire Hathaway investment?,” Michaelson asked.
“No,” Blankfein said. “TARP was a bigger amount on much more favourable terms. The government didn’t charge nearly as much as Warren Buffett did!” The courtroom broke out in laughter.
Michaelson asked whether, if the passage of TARP was imminent on September 23rd, Goldman would have done the Berkshire deal. “Probably not,” Blankfein said.
“There was less of an incentive to find another investor,” the Goldman chief explained, if there was another entity “to do the same thing at a better price.”
“We weren’t waiting for… We weren’t expecting the government to do that.”
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