Pulling a Goldman

Pulling a Goldman

Nicolaus Mills: Pulling a Goldman

It?s time to add a new phrase to our vocabulary: ?Pulling a Goldman.?

There?s ample precedent for expressions that grow out of historical moments, then take on a life of their own–and given the reported $840.1 million that the Royal Bank of Scotland lost in its recent dealings with Goldman Sachs, we can count on pulling a Goldman to have meaning on both sides of the Atlantic.

When we speak of being forced into a “Hobson?s Choice,” we mean being faced with only bad alternatives, and our reference is to the seventeenth century English liveryman, Thomas Hobson, who required his customers to take the horse nearest the door.

When we say someone is ?in like Flynn,? we have in mind a man with many lovers, and our reference is to the Australian-born movie actor Errol Flynn, a 1930s and 1940s heartthrob starring in such films as Captain Blood and the Adventures of Don Juan.

In the case of a Ponzi Scheme, we are speaking about an investment swindle in which early investors are paid with money from later investors (who lose their money because nobody is left to pay them), and our reference is to the Charles Ponzi, who as a result of the con game he perfected became rich before being caught and serving a prison sentence that lasted from 1920 to 1934.

In this spirit, ?Pulling a Goldman? is useful shorthand–much more meaningful than the popular, but bland, pulling a fast one. In its generic meaning pulling a Goldman would describe any plan designed in advance to fail.

Those of us living today would know the phrase originated when Goldman Sachs created a securities package in large measure put together by Goldman client, John Paulson, who then made a small fortune betting that the securities Goldman sold would fall in value. Over time that specific historical link can be counted on to disappear. But that would not weaken the expression once it became part of our vocabulary. Who, after all, knows very much about Charles Ponzi today?

It will finally be up to the courts to rule on the Securities and Exchange Commission charge that Goldman Sachs committed fraud in marketing the package of securities that Goldman executive Fabrice Tourre gleefully called “a product of pure intellectual masturbation” in an e-mail he sent.

Goldman may even be able to wiggle out of fraud charges if it can make a case that the investors it hurt failed to do their research and should have been more distrustful. But whether Goldman wins or loses won?t change the fact that what the firm created was an ingenious plan that would be of maximum value only if the securities in it lost money.

Built-to-fail may be a mouthful, but pulling a Goldman is easy as pie.