Goldman Sachs loaned Banco Espirito Santo €584 million just before the bank went bust and was bailed out.
The loss of this money means that Goldman’s profits and some employee bonuses will be cut, according to Lloyd Blankfein, Chairman of the American finance house known as the 'great vampire squid.'
Goldman lent the money to Banco Espirito Santo just before the Portuguese government bailout served to wipe out all BES creditors. Goldman and some of its clients had lent Banco Espirito Santo around €584 in July 2014 through Oak Finance in Luxembourg.
The Bank of Portugal had to bail out BES in August and split it into two parts, Novo Banco and the old BES that holds all the bad debt, including Goldman’s money.
Goldman originally said that the Oak Finance loan was protected, it even had written confirmation from the Bank of Portugal that the money was indeed held in the healthy Novo Banco but this turned out to be a whopping lie for which no explanation has been forthcoming from Lisbon.
Novo Banco commented that the Bank of Portugal decided not to transfer the Goldman-backed loan to Novo Banco’s account.
Goldman Sachs is appalled at this duplicity and embarrassed in front of its clients whom it involved in the Oak Finance investment and has had to write down the loan, thus affecting around 50 staff payments for the year, not than anyone will be too sympathetic for bankers suffering a drop in bonus income.
How Goldman Sachs made the loan to a Portuguese bank on the point of collapse is perhaps a more interesting question.
Goldman threatened court action to recover its investment but news is quiet on that front, just today’s hand wringing about staff bonuses.
Goldman certainly will have tried to hedge its exposure to the loan which may have dampened its losses but its name is foremost and the finance industry can rightly ask how Goldman got into this mess.
Goldman recruited multiple investors to Oak Finance in supplying the loan, including pension funds.
After the Bank of Portugal’s decision to keep the €584 million, Goldman said it would pursue “all appropriate remedies” to recoup its losses on behalf of itself and its investors unless the bank of Portugal changed its mind and returned the loan to Novo Banco from the bust BES where currently it sits.
This should be an interesting court case as if the bank of Portugal did indeed write to Goldman saying all was well, and later snatched the money, compensation of a materially large sum will have to be handed back by Novo Banco.
See
http://www.algarvedailynews.com/news/4345-vampire-squid-duped-by-bank-of-portugal
Comments
Goldman - the Great Squid (GS) does not have a leg to stand on.
Have they not heard that Portugal has 'just' discovered Freedom of Expression ? Like Brit-bashing ... Yet another Freedom !!
The country that triggered Amnesty International ... is awed at this - although as always puts on its own skew!
So no Portuguese court will find the Bank of Portugal guilty.
But presumably Goldman Sachs were filling in the UK or US versions of the application forms ? And these foreign courts will agree that they were seriously misled.
That there is a world of difference between telling porkies because you are experimenting with a new freedom. And trust in international banking.
And award GS their money back, all expenses and any interest lost. Maybe some more for unnecessary stress and taking the michael.