Goldman Secret Meeting: A Game of High-Stakes Poker

[Post Summary]

Catch us the foxes, the little foxes that spoil the vines.
—Song of Solomon

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Today, CNBC's Charlie Gasparino reported on an emergency meeting Goldman Sachs held with some of its high-profile clients immediately following Treasury Secretary Geithner's announcement on Tuesday of a modified framework for addressing the nation's ongoing financial crisis. This news rather indicates a high-stakes poker game is playing out before our eyes.

Surely, present at this meeting was private capital Treasury seeks to coax back into frozen secondary markets, hoping to restore pricing for various structured products. It doesn't require a vivid imagination to suppose the motivation for the Goldman pow-wow was driven by some "business as usual" desire. Indeed, the haste with which the meeting was called suggests matters near and dear to the Roundtable are in fact being threatened.

Trouble is a new dynamic having nothing to do with the Treasury Secretary, the President, or any other living person is, in fact, changing the game. You see, now days any lack of sensitivity toward political exigencies precipitated by this crisis is easily sniffed out. Thus, Goldman's exposed position is shown to be incredibly weak. The status quo would sooner go on, business as usual, than be part of a proper reordering of things? Well, this position finds scant little popular support. Thus, the naked Emperor is seen to be the Goldman Sachs Roundtable. Indeed, pitted against Treasury they are a paper tiger.

So, when Gasparino reports, "What the group concluded was that the longer the plan takes to produce, the more difficult the situation becomes," one can interpret the message as a threat, or better a bluff in a game of high-stakes poker (lest one forgets bluffs, too, always are backed by capital.)

According to the Goldman Roundtable, "reviving the securitization market is key toward reviving the economy." Unfortunately, there's a dwindling consensus sharing this view. Likewise, cooler minds question Gasparino's characterization of a "vicious cycle" premised on the idea that, "the longer it takes to revive securitization, the worse the economy becomes and the securitized products held by the banks lose more value." That's Hank Paulson, "my way or the highway" talk, and this plainly holds diminishing power of persuasion.

Reportedly, a subsidized mortgage plan is being hammered out by the Obama administration, bringing one to wonder if Treasury is calling Goldman's bluff. If so, wisdom suggests the stronger hand will raise the ante. Are serious investigations into Wall Street malfeasance at hand? Was yesterday's House Financial Services hearings putting the Titans of Wall Street in the public spotlight a shot across the bow?

—Tom Chechatka