We raised the possibility here yesterday that Goldman’s legal woes would drag on for years, ultimately threatening the uber-bank’s very survival. It’s not hard to imagine that all who have invested in Goldman deals that went sour will smell blood and join in the attack. It’s just the excuse many city and county treasurers will be looking for as their own financial problems multiply.  For its part, Goldman has offered a pretty feeble defense. For instance, the firm’s CEO, Lloyd Blankfein, is claiming that Goldman can hardly be guilty of fraud if the firm itself lost $90 million investing in the toxic mortgage portfolio assembled by John Paulson. Blankfein would like us to believe that the portfolio was a two-way bet, even though Paulson had designed it specifically to fail so that he could make leveraged bets against it. However, there were reports that Goldman did not take a $90 million stake because it liked the investment, but because the firm was unable to unload the last piece of it on outside investors. Will anyone be shocked when it’s discovered that the $90 million was hedged five-to-one by an offsetting “don’t pass” bet similar to Paulson’s?

We’re no fans of Goldman Sachs & Co., but the excuses it has trotted out to help with damage control have been so pathetic that it makes us cringe. To the beleaguered Mr. Blankfein, we offer some fresh excuses, courtesy of a post in the Rick’s Picks forum by “TKO,” who wrote as follows: “I can envision the hordes of recently excessed corporate lawyers, out of work immigration counselors, class action jurists—ambulance chasers of every stripe and persuasion lining up for the carrion. However, Goldman has plenty of defenses. There’s the Salesman’s Defense: caveat emptor — they were offering this crap to ‘investment professionals’ who should have known better. There’s the Mercantile Defense: they were just marketing a product to entities willing to take opposite sides of the trade. And the Patriotic Defense: they were enabling the national housing policy of placing every citizen in a McMansion regardless of race, creed, color, or financial and mental capacity. There’s the Capitalist Defense: Hey, it was profitable; the Adolescent Defense: Everyone was doing it. And finally, the Religious Defense: This, too, is part of God’s work!”

Beating the Rap

TKO further notes that because Goldman most likely faces “trivial” consequences for its attempt to defraud the public, the company has effectively beaten the rap. Will yours truly eventually have to dance the hula in Times Square in the dead of winter because Goldman shares have failed to drop below $30 as predicted here a while back? “Barring a 10-for-1 stock split,” writes TKO, “you have a date with destiny in Times Square ten months hence!”

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