Goldman Sachs close to complex deal
Goldman Sachs is close to clinching a deal involving $7 billion of complex asset-backed securities in hopes of making leeway against the credit crunch. Stephen Beard compares the deal to a sausage.
The Goldman Sachs building at 85 Broad Street, Manhattan. (Chris Hondros/Newsmakers)
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Renita Jablonski: Goldman Sachs is expected to make a minor breakthrough in the battle against the credit crunch later today. The investment bank is close to clinching a deal involving $7 billion of complex asset-backed securities. Stephen Beard reports.
Stephen Beard: Goldman Sachs spent 10 months on the deal, and it's easy to see why. The bank's been sorting out an immensely complicated financial package, formerly run by a London-based hedge fund.
It's a structured investment vehicle. Like a sausage containing many different types of meat, this vehicle holds lots of different assets. Some of them are mortgages of high quality, some are distinctly dodgy.
What Goldman Sachs seems to have done is isolate the good and jettison the bad. What's left should be easier to sell. An important step to easing the credit crunch.
But Michael Hampden-Turner of Citigroup warns against over-optimism:
Michael Hampden-Turner: Investors are still highly sceptical of structure finance, and I think that will take, it will take some time before faith is restored.
The Goldman deal could lead to the shake-up of $18 billion worth of structured vehicles. But the total value of such vehicles in is thought to be more than $200 billion.
In London, this is Stephen Beard for Marketplace.
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