This probably wasn’t what Lloyd Blankfein had in mind when he reportedly asked Goldman Sachs employees to cut back on conspicuous displays of consumption.

The New York Post, which screamed the news about Blankfein’s order to exercise restraint from its front page on Tuesday, reported on its Page Six gossip column Wednesday that his wife sent a rather different message at a charity event in the Hamptons last Saturday.

According to Page Six, Laura Blankfein and Susan Friedman, wife of Richard Friedman, a Goldman managing director,  “caused a huge scene” as they waited with lesser donors for the doors to open for a charity event for ovarian cancer research.

“Their behavior was obnoxious. They were screaming,” one witness told the Post, who added that Blankfein said she wouldn’t wait with “people who spend less money than me.”

Of course it’s not the first time that Wall Street wives’ high-falutin’ ways have gotten tongues wagging. Former Pan Am stewardess Susan Gutfreund, the free-spending wife of 80’s era Salomon Brothers CEO John, was gossip column fodder, as was Henry Kravis’ ex-wife, fashion designer Carolyne Roehm.

More recently, an anonymous Wall Street spouse penned a column for Portfolio.com entitled “Confessions of a Bailout CEO Wife” that bemoaned the inability to throw birthday parties at “Michelin hotspots” and other sad side effects of her vow of “financial abstinence.”

(reporting by Steve Eder; photo by Reuters)

Turns out Goldman Sachs is a staunch advocate of going organic — when it comes to the money management business.

As Barclays auctioned off its Barclays Global Investors unit this year, Goldman was widely seen as a likely acquirer. That is until Blackrock In under Larry Fink emerged as the buyer with a $13.5 billion deal.

Lots of other money managers are expected to be sold, as the industry consolidates and cash-strapped banks look for valuables to pawn. But Viniar told analysts Goldman’s preference is to grow the business without deals, and appeared to question the very idea of money manager deals.

“If there were an acquisition that made sense financially for us to do, we would certainly consider it,” he said, something he says every three months to calm down excitable analysts. “When we look at the prices of most of the acquisitions, we think that they haven’t made sense in that you’ve had to assume really heroic growth rates that we don’t think are realistic.” 

Jefferies Putnam Lovell recently said it counted 35 management deals in the second quarter, compared with 52 deals a year earlier. Besides the BGI takeover, Aquiline Capital Partners acquired Conning & Co,  JPMorgan Chase bought the remainder of its Highbridge Capital Management hedge fund unit and Woori Finance purchased Credit Suisse’s 30 percent interest in a joint venture.

Yet Viniar notes money management firm deals are tricky, since buyers have to pay a premium for the company and then put up more money to retain star managers. And even as billions of profits come sloshing into Goldman’s coffers, Viniar apparently doesn’t like to part ways with the firm’s cash.

“It has taken a while, but we’ve grown (the asset management business) quite successfully, almost exclusively organically.” he said. “And the high likelihood is that is the way we are going to continue to grow it in the future.”

(Photo: A customer walks past organic products in an organic food chain store in Taipei/Pichi Chuang)

After more than a week of silence, Goldman Sachs finally commented publicly on the alleged theft of computer codes by former programmer Sergey Aleynikov calling losses sustained as a result would be “very, very immaterial.”

Those words were spoken by David Viniar, Goldman’s Chief Financial Officer, in response to a Reuters question during a conference call with reporters to discuss the company’s robust second quarter earnings.

Aleynikov, a former Goldman computer programmer, was arrested on July 3.

“We still have all of the code,” Viniar said. “It is not like the code had been lost to Goldman Sachs. And even if it had been, it is a small piece of our business.”

A federal prosecutor last week during a bail hearing for Aleynikov made it sound as though the code was of vital importance.

“It is something which they had spent millions upon millions of dollars in developing over the past number of years and it’s something which provides them with many millions of dollars of revenue throughout this time,” Joseph Faccipointe said, according to a court transcript.

Viniar said on Tuesday he was limited in what he could say about the story that just last week threatened to overshadow Goldman’s landmark earnings announcement.

“First of all, there’s an ongoing case so I can’t say much,” Viniar said.

(Photo courtesy of Goldmansachs.com)

Final, first-half M&A data from Thomson Reuters, released earlier on Thursday, filled out the picture painted by preliminary data last week — deal-making has shrunk dramatically, even as investment bankers find solace in a record flurry of bonds and rights issues.

One interesting wrinkle, compared to the earlier numbers, is the inclusion of Xstrata’s unwanted approach for rival miner Anglo American, valued by the number-crunchers at $42.5 billion. That helped propel Goldman Sachs to the global top spot for M&A advice, and boosted several other banks engaged on the deal.

Some other nuggets:

* Compared to the first half of 2008, announced M&A is down 40.2% to $941 billion, the slowest H1 since 2004.

* Geographically, M&A by dollar value is down 49.2% in the U.S., 42.5% in Europe, 28.4% in Asia-Pacific, and 51.2% in emerging markets. Cross-border M&A totalled $287 billion, down 54.5%.

* Buyouts plunged 78.8% to $32.9 billion , the lowest H1 since 1997. They made up just 3.5% of announced transactions, the lowest percentage since H1 2000.

Among the law firms, who are also having a pretty tough time, Linklaters came top for deal advice, outflanking U.S. rival Skadden, Arps.

Deutsche Bank, the underdog in the race to run the IPO of a large AIG unit, has come out on top.

The German bank has been chosen as one of two global coordinators to run the IPO of American International Assurance (AIA), beating out Goldman Sachs and Citigroup, which ran the aborted auction of the Asian life insurer earlier this year.

Morgan Stanley, the other global coordinator, is no surprise. The bank has been advising the Fed since the September implosion of AIG, and on top of its own expertise, regulators wanted it in.

At a time when few deals are gettting done, the AIA flotation will be a big one. In fact, it will be the biggest Hong Kong IPO since April 2007 and a fee bonanza for the banks. Coordinators and bookrunners typically earn around 3 percent in fees — so a $5 billion IPO could produce at least $150 million in fees split between the banks. More than 30 banks applied for the job.

Deutsche, of course, is no babe in Asian IPO woods. As our colleague Michael Flaherty in Hong Kong points out, Deutsche was the joint global coordinator of China Life’s $3.48 billion IPO in December 2003, and was among the banks that handled the $19.1 billion IPO of Industrial and Commercial Bank of China in October 2006. 

The banks that did not make the cut still have hope, though. There are spots left to be filled for bookrunners and co-managers of the IPO, which is not expected to actually happen until the first half of 2010.

Goldman Sachs, putting together the pieces of its TARP repayment, is taking a page from Bank of America’s book and selling off at least some of its China exposure. The stake of Industrial and Commercial Bank of China is being sold at a discount and should raise $1.9 billion – or about a fifth of what it owes in TARP.

Goldman, along with Morgan Stanley and others applied last week to repay the government. This may have more to do with Chinese bank assets being big and, presumably, more liquid than others Goldman has in its vast pool of assets. A more alarming analysis could be that asset quality at Chinese banks is as bad as it ever was.

Interesting that news of the sale should come from a bank that launched so many careers at the U.S. Treasury just as Treasury Secretary Tim Geithner touches down in China.

News that top investment banks want to pay back their TARP funds is welcome news for the M&A market. Though the tens of billions of dollars in capital that will slosh out of the banks and into government coffers may sap the banks of the funds to make big buys, the fact that most post-stress-test capital-raisings have gone smoothly must be encouraging for dealmakers.

Plus, banks that are unable to pull themselves from the government teat will have a whole lot less pricing power. It was interesting to see HSBC commenting on Tuesday that it expects industry consolidation in the second half of this year and in 2010. Though they may be looking more closely at non-U.S. assets, given the burns on their fingers from their foray into the U.S. mortgage market, that big global may sit out the next round of mergers. Will they be missing the boat, particularly given the conviction of many analysts that the U.S. economy will be the earliest to recover?

A key question that could rain on any M&A party is asset quality, and the radiation emitting from the toxic assets still poisoning the financial system. While most of it has been moved to the bomb shelter balance sheet of the U.S. taxpayer, there is little conviction that valuations will have the golden glow of yesteryear, and plenty of lingering fear that the glow is the toxicity of the lost decade.

As the U.S. government prepares to reveal the results of stress tests to asses the ability of the nation’s largest 19 banks to cope with worse-than-expected financial conditions, worries continue about the sustainability of recent better-than-expected results from banks.

Bank of America reported a big increase in troubled loans, and shares of Citigroup tumbled after analysts at Goldman Sachs said credit losses at the bank continued to grow at a rapid rate.

Regulators closed banks on Friday in Missouri and Nevada, bringing the total of U.S. bank failures this year to 25 and matching the number that failed throughout all of 2008, as the struggling economy and falling home prices take their toll on financial institutions.

The following is a list of U.S. bank failures so far this year, according to the Federal Deposit Insurance Corp.

Details about each bank closure are posted at the FDIC website.

U.S. BANK FAILURES IN 2009*
(assets, deposits in millions of dollars)

* Table does not include two corporate credit unions that were placed into conservatorship on March 20. The U.S. Central Federal Credit Union in Kansas and the Western Corporate Federal Credit Union in California, which provide products to the overall credit union system, are insured by the National Credit Union Administration.

** FDIC estimated the cost to its insurance fund at between $120 million and $145 million

Investors have welcomed the prospective £3bn (US$4.4 billion) sale of iShares by Barclays, which gives strong hope that the bank can avoid accepting a UK Government bailout and its implicit restrictions.

Since the deal announcement, Barclays’ shares have risen by 26 percent to 198.8p, their highest point since October, when a rescue £7.3bn financing was arranged with royal potentates from Qatar and Abu Dhabi. These Gulf investors agreed to subscribe for an effective 31percent stake through separate issues at 153.3p and 197.8p. Now, both slugs are “in the money”. However, that cash has not come cheaply.

The £4.3 billion of mandatorily convertible notes, which must be converted into shares at 153.3p by the end of June, receive a 9.75 percent coupon. And the £3 billion of reserve capital instruments pay 14 percent annually, or £420 million, for 10 years. They have warrants convertible at 197.8p.

The iShares proceeds could neatly pay off the holders of the reserve capital instruments. Removing that shackle is the aim of chief executive John Varley, and Barclays Capital boss Bob Diamond in particular. Then dividends could flow freely again. Diamond’s other goal is to make Barclays Capital an investment bank to challenge the few remaining serious players with global scope, such as JP Morgan, Goldman Sachs, Morgan Stanley, Deutsche and the Swiss banks.

The purchase of Lehman’s US advisory business, together with heavy recruitment across the Middle East and Asia, are helping Barclays catch up. But Goldman is extending its lead, after Monday’s strong first-quarter results and $5 billion share sale plans. The money Goldman raises will help pay back US Government funds. Barclays wants to pay off its Gulf rescuers too. However, the iShares sale will only add £1.5 billion net to Barclays balance sheet, bearing in mind iShares’ £1.5 billion book value.

So to pay off the reserve capital instruments and keep Tier 1 capital above the expected 7.2 percent, a higher bid needs to be found. The novel “go-shop” deal structure gives Varley and Diamond until June 18 to solicit such offers. However, a higher bid is unlikely. CVC has offered a generous 10 times historic EBITDA and Barclays is already putting up debt worth 70 percent of the sale price.

Selling all of Barclays Global Investors is an alternative. That could raise £6.73 billion on the same valuation as CVC’s offer for iShares, the smaller but higher margin part of the business.

Reporting by Chris Spink, from Acquisitions Monthly

(PHOTO: A video grab image shows Chief Executive Officer (CEO) of Barclays, John Varley, speaking to the House of Lords Economic Affairs Committee in London March 17, 2009.  REUTERS/Parbul TV via Reuters TV)

Not much rides on Goldman Sachs‘ success at shedding TARP – just the future of Wall Street, the recovery of the U.S. and global economies, and saving whatever shreds remain of the American Dream. Though it may take some financial finagling to extricate itself from the government’s grip, Goldman’s storied stable of financial savants is as capable as any of casting off the yoke of socialism.

For Wall Street, Goldman fights for the right to pay people whatever the market will bear, enshrining the guiding principal of the marketplace that it is not how much money one earns, but how much more than the other guy. For the economy, everyone knows we need a healthy banking sector to run our particularly high-octane form of capitalism. As for the American Dream, what this country needs most in this time of financial peril is a hero, someone who can stand up to the regulatory Frankenstein shambling from the wreckage of such spectacularly failed government efforts as AIG and Lehman Brothers.

The only question really for Goldman shareholders is how big a bonus Lloyd Blankfein should get if he manages to achieve these lofty goals.

Christopher Kaufman; DealZone Editor

Deals of the day:

* Hong Kong Hotel and property owner Harbour Centre Development said it would sell its equity stake in a Hangzhou property firm to Chinese real-estate developer Greentown China Holdings for 1.3 billion yuan ($190.2 million).

* Cement equipment provider China National Materials Co will pay 1.01 billion yuan ($147.8 million) to its parent company for cement producer NBM, the firm said.

* Avocet Mining said it plans to buy Oslo-listed Wega Mining ASA for about $78.4 million in shares in a move that would create a gold company with annual output of almost 300,000 ounces.

* Telecom operator Tele2 said it would form a joint venture with Nordic rival Telenor to build a fourth generation mobile network in Sweden.

* A proposed buyout of eBay Inc’s Skype led by private equity, including Warburg Pincus and Kohlberg Kravis Roberts, and the Web telephone company’s co-founders is unlikely to be completed, the Wall Street Journal cited sources as saying on its blog on Monday.

* Total SA boosted its hostile takeover offer for UTS Energy Corp by more than a third to C$1.75 a share on Monday, though its sweetened offer was quickly branded as inadequate by some of the Canadian oil sands developer’s biggest shareholders.

* BT Group, the British telecommunications carrier that holds 31 percent of India’s Tech Mahindra, said it backed its affiliate’s plan to acquire a stake in scandal-hit Satyam Computer Services.

(PHOTO: Lloyd Blankfein (R), CEO of Goldman Sachs, walks by the New York Stock Exchange in New York October 10, 2008. REUTERS/Shannon Stapleton )