Goldman Sachs under fire over role in Lloyds cash call
US investment banking giant Goldman Sachs is facing more fire today after reports that the terms of the Lloyds capital raising last year were altered after a last minute request from Goldman's investment team.
A manager that invests the bank's own money demanded last minute changes to the terms of the £23.5 billion bond part of the cash call.
The change was implemented and benefited the bank's position as a bond investor, the Financial Times reported.
Goldman Sachs said the bank ensures different departments are unaware of what each is doing and cannot influence each other. But today's claims highlight the conflicts of interest at the heart of the investment banking model.
Given the government owns a 41% stake in Lloyds, the news adds further weight to calls earlier this week that the government should sack Goldman Sachs as an adviser after the US regulator announced it is bringing fraud charges against the bank.
The SEC alleges that Goldman allowed hedge fund Paulson & Co to select certain securities to be a part of a mortgage backed product it was selling to other investors knowing the hedge fund was betting against the securities the fund had recommended.
Goldman Sachs has issued a rigorous defence against the SEC saying the charges against it have no foundation in law and said today's revelations are an attempt by rivals to muddy its name.
Critics say taken together these stories suggest Goldman Sachs put its own interests ahead of its clients, which include the UK taxpayer.
source: citywire.co.uk
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