The Banking and Strategy Initiative

Chillin' out till it needs to be funded

Goldman Sachs batting nine innings for Kinder Morgan? | Deal insight

The question may veer to other commentary on Goldman Sachs but I believe the organization and its brand does not represent that loose brand of ethics that maes this a defect of the organizaton. However Facebook and Kinder Morgan in some ways represent a quandary one would consider resolved with the repeal of the Glass Steagall act ( which some GOP want back) the interpretation of the Glass Steagall Act in the wild 80s was that you could just represent the same companies in Trading and sell side research notes as long as there were no links between the trader and the analyst that made no sense at the very front of it all.

The current conflict of interest suit against Goldman Sachs in the Kinder Morgan case is that the bank represents both El Paso and Kinder Morgan and thus due diligence is compromised and both parties are not getting a fair deal. As the Dealbook tells us, the Goldman Directors on the El Paso board seemingly recused themselves and to make discussions short and crisp even after recusing themselves and recommending another bank be appointed ( Morgan Stanley) did take their $20 mln for advising a sale. Kinder Morgan which has been a Goldman Sachs investment/client since its going private transaction in 2006, first approached el Paso who was in the process of merging with a larger company and had been advised to sell  off its Exploration and Production assets 9 bought by the management, shareholders say too cheaply and finding a nice scape goat in Goldman Sachs)

The other bank brought on i.e. Morgan stanley was awarded a charter limited to completing a sale and not evaluate options like spin offs etc, which gave them their $35 mln only if the sale completed. Now that such exigencies are bound to arise in business situation, it just seems a case of internal conflicts committee in the case of Goldman Sachs going by the law and the logic of the relationship there in where hindsight makes it clear that whatever happened unless Goldman did forego their fee on the account they would look like conflicted and they may not fear legalaffairs for their processes bu tthey could have stayed out of a situation like these. Next argument on this issue would be if bonuses to senior bankers were the reason fees were also not rescinded. The part about Morgan Stanley having a limited charter is clearly a case of the client not wanting to move out of his new found comfort zone because of ill considered hassles of his advisors and trying to lock everything in, which probably was the focus of the bankers involved.

 

Enhanced by Zemanta

Information

This entry was posted on February 10, 2012 by in Financial Markets and tagged , , , , , , , , .

Archives

%d bloggers like this: