Business

Why no scandal tarnishes Teflon-coated Government Sachs

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Goldman Sachs may be conducting an Easter egg hunt in search of the smoking Muppet e-mail, but you know in the end CEO Lloyd Blankfein will come up with the golden egg. Its profits will rise, its stock will soar.

Why is Goldman Teflon-coated? Countless pixels have been generated noting the revolving door between Goldman and Washington, its supposedly undue influence in high places, its eagerness to hire those with a few extra IQ points on the competition, the special sauce it adds to its souped-up derivatives — you’ve seen the list.

But what if it isn’t nearly as complicated as that? For a simple explanation of what makes Goldman tick and keeps it immutable even in the face of great challenges, I turn to Disney, keeper of the Muppets — the real ones.

Think of Goldman as the Premier Theme Park of Finance, where the “theme” is making money: making money for its clients and making lots of money for its partners. Better yet, since Goldman’s business is all about money and moving it around (the $63 billion dollar firm doesn’t make anything), it is fortunate to find itself in the biggest growth business on the globe.

Veteran Goldman-gazers have seen this phemomenon before, as it has played out over the past 25 years. From the Ivan Boesky insider-trading scandal (which ended with the conviction of a senior Goldman partner) to the firm’s brush with death in late 2008, Goldman always skates through in better form than its competition.

In the case of Muppet-gate, Goldman Sachs stock sold off briefly in the wake of Greg Smith’s New York Times op-ed, but since has bounced back to levels not seen since last August. At a price that is 28 times earnings, Goldman shares still command a significant premium over the competition, and first-quarter results for 2012 are expected to be strong. Goldman is also going ahead with a new multibillion-dollar European headquarters in London and has begun talks with famed architect Lord Norman Foster. Meantime, no major Goldman clients have left the tent since Muppetgate began.

That’s because of the growth business of money, and, remarkably, it’s about the only business that has been growing faster since the financial bust than it was growing before.

Governments are printing it by the trillions and selling sovereign bonds to facilitate the borrowing, and Goldman is the key player in making it all happen.

Every time Congress and the president are forced to raise the debt-ceiling, Goldman can add a few more zeros to its bottom line.

Without the Goldman Financial Theme Park, Fed Chairman Ben Bernanke and his counterpart, European central banking chief Mario Monte, who is a Goldman alum, wouldn’t be having a magical day.

Goldman’s role as the key primary dealer to the Fed and most of the world’s central banks offers it not only profits but protection. Witness what happened in September 2008. With the firms that buy and sell Uncle Sam’s paper on the brink, Bernanke launched an unprecedented line of credit for Wall Street’s primary dealers, including Goldman. During the final two weeks of that month, the Fed lent $100 billion a day to keep its bankers afloat.

Yes, Goldman may think of its clients as Muppets, even its biggest clients of all: Ben Bernanke and Treasury Secretary Tim Geithner, the Bert and Ernie of Washington, DC. But Goldman also knows a trillion-plus dollars a year in deficit spending and the need to roll over $15 trillion in national debt will keep it in the sweet spot for years to come.

Blankfein & Co. can look all they want for those Muppet e-mails. But let’s face it guys — you already have the Rainbow Connection.