Why Facebook's Falling Share Price Really Doesn't Matter
Mark Zuckerberg and Priscilla Chan: A Romantic Facebook Timeline
The strangest news this morning is that Goldman Sachs (NYSE: GS) has arranged a $3 billion bailout of its Global Equities Opportunity (GEO) Fund, which before this investment had a $3.6 billion net asset value. DealBreaker posts Goldman's official statement.
This news is a little hard to understand. But it looks to me like this fund's value may have been completely wiped out. The investors include Goldman Sachs -- which TheStreet.com reports put in $2 billion, C.V. Starr & Co. Inc. (headed by former American International Group (NYSE: AIG) CEO Hank Greenberg), Perry Capital LLC and real estate development and financial services mogul Eli Broad.
The bailout raises many questions: What happened to GEO's $3.6 billion net asset value? How will the $3 billion in cash be spent? Why couldn't Goldman bail itself out of its own mess? What rights will that $3 billion entitle these investors? Why are these investors making the investment? What has happened to Goldman's other funds, such as Global Alpha, which Reuters reports is down 27% so far this year? Will they also require bailouts?
I don't recall a previous crisis in which Goldman needed other investors to bail it out of trouble. But I am glad that the government has yet to finance any bailouts. My hope is that the banks pay the entire cost of their mistakes.
Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He owns AIG shares and has no financial interest in Goldman Sachs.
- Read about the exit of Goldman Sachs' star Mark McGoldrick
Goldman Earnings Sink After Buffett Dividend
Johnson & Johnson's Income Falls 23%
Burberry Shares Leap on Sales Update
Reader Comments (Page 1 of 1)
8-23-2007 @ 8:38PM
Phil gehring said...
This scamming on morgages was so obvious (no way they would be paid back) it was criminal. There should be a call for criminal charges on the banking regulators and those who primed them. I heard one clown on business news use actually say what do you think "the mortgage companies would knowingly make bad loans". Well of course they would (thats why there are regulators )for personnel motives and hideing and pawning these off as hard securities as they make another nonsensical deal "with mortaged back securities" on the next leveraged Private equaty deal. Only to fire your American butt to pay the additional loan on the business.
Victims are all who paid false inflated prices of there home. Oh! " a greater % of Americans own there own home than ever". No!!! "More Banks own American citizens homes than ever in the history of America" The Bank owns the house you own the mortgage. Sounds like marriage.