Meredith Whitney asks the tough questions

October 15, 2009

—-Not to beat a dead-horse here, but I thought I’d blog one last interesting thing on Goldman. This from today’s conference call. (Transcript via Thomson Street Events, no link)—-

Guarantees for certain liabilities aren’t the only way Goldman has benefited from government largesse. They’ve also made money handling trading volume that is driven by the Fed…

Meredith Whitney, Analyst: I have a few questions. The government purchase program was supposed to end this quarter. They’ve extended it to next quarter. How much of that us a driver of velocity of flows? And how are you positioned when they exit, if they exit, for any type of principal risk? And what do you think that impact is going to be in the larger market? That is my first question. Start off with an easy one.

Is MW on to something here? Perhaps: Note the non-answer answer.

David Viniar – Goldman Sachs Group, Inc. – EVP, CFO: Not a problem. Look, I think, as you know and I think the Fed knows this, exiting their support of various markets is a very tricky thing. I think that they are going to do it carefully. They are going to do it slowly and over time. I think they are signaling the market. I think they are doing a very good job of letting people know they are going to continue for a while, but they aren’t not going to continue forever. As far as our positioning, I don’t think it really matters at all. As you know, as I said, most of what has happened has been the velocity, not the positioning. And I think that they are going to slowly extricate themselves for that as the markets get healthier and can pick up slack.

MW: Okay, but in terms of the flow volume, right — so you have been the greatest beneficiary of increased flow volumes. How are the flow volumes going to be influenced as they exit?

DV: I think that they will try to time their exits for the market being healthy enough to pick up that flow. And so I think the flow will continue.

Another non-answer. But MW persists…

MW: And then who would you imagine would be the substitute buyers?

DV: The various market participants. I think it will be the various financial institutions, funds. I think the whole variety of buyers. And there is a lot of cash out there to buy.

MW: Okay. And then just a last one. I was teasing when I said it’s the easiest one. But it was easy for you. The last one, of the principal revenues, almost $1 billion, how much of that was cash sales, and how much were markups?

DV: Oh, I would say that it was much more markups than sales…I don’t have the exact number, but it would be much more markups than sales.

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Who’s on first?

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