Tuesday, June 2, 2009

Goldman Sachs Hires New Adviser Arthur Levitt

The Goldman Sachs family grew with the hiring of Arthur Levitt, former SEC Commissioner and Senior Adviser to The Carlyle Group. Arthur will advise Goldman on public policy issues. Levitt heads a domestic working group on financial regulatory reform. Levitt also serves as adviser to Promontory Financial Group and Global Electronic Trading Co.

I wondered how Mr. Levitt might navigate potential conflicts of interest as Carlyle and Goldman pursue similar strategies, private equity (new funds and trading PE investments in a secondary market), investments in public infrastructure, targeting distressed assets, keeping innovative financial instruments like derivatives/hedging, and buying bankrupt banks.

Goldman surely wants to keep their huge energy futures business, which turns oil into an investment vehicle such that supply and demand have no affect on prices. Goldman Sachs wants to keep its franchise in derivatives, of which credit default swaps are but a portion. Arthur Levitt has the connections. Will Arthur disclose his conflicts of interest before he testifies before Congressional committees? I doubt it.

Note: Arthur Levitt served on the board of M&T Bankcorp and just stepped down from the board of RiskMetrics Group. Arthur has 20,000 shares of RiskMetrics and options to purchase 160,417 shares. He set up a trust for his M&T shares, which includes options that vest in between 2010-2014 and expire in 2019. In 2003 Levitt sat on the board of Neuberger Berman, when it was acquired by Lehman Brothers.