Harvey Pitt Says That Goldman Will Regret The Image They Have Created (GS)

Former SEC Chairman Harvey Pitt spoke with Bloomberg Television's Erik Schatzker about the news today that the FCIC has subpoenaed Goldman Sachs and offered his views on how the firm needs to avoid costly litigation and repair its image to clients. Excerpts of the interview can be found below. Click here for the full video.

On Goldman fighting a subpoena from the FCIC:

“For Goldman the priorities have to be restoring its image and assuring its clients that it cares about them first and foremost. This is a frolic and a detour but it hurts the general image of Goldman.”

“The real issue is, how do your persuade all of the people who might otherwise hire you that you’re still trustworthy and that they ought to hire you? This is a great firm. They’ve lost $20 billion in market capitalization, they’re subject to criminal inquires now, foreign governments are investigating them, all because, I think, they didn’t step up and handle this the right way and that doesn’t mean admitting that they did anything wrong.”

Pitt on how he would advise Goldman Sachs:

"I think the first thing was to come out with a statement the minute the lawsuit was filed saying while we’re going to defend ourselves, the fact of the matter is we don’t like being anywhere near government fraud charge, so we’re now taking constructive steps to review our policies and procedures so that our clients and customers know that they come first. No admission, no concession, just an indication that they care about their clients.”

“They've created an image that I think they are going to come to regret dramatically.”

“The most important constituency for Goldman is public opinion and potential customer opinion. That’s far more important than the SEC is concerned, and that’s the group they need to reach."

On Lloyd Blankfein:

“I’m critical only of the lack of sensitivity to what the image is. I’m not critical of the firm and I’m not particularly critical of Mr. Blankfein either. So I don’t think that this is, per se, a question of a CEO doing the wrong thing. But there is a very simple rule I urge my clients, if you’re in a middle of a crisis stay away from litigators. They want to win the case and you want to save your company.”
On whether Goldman Sachs should settle their case:

"They're going to have to avoid the litigation. If there is no dismissal of the case, no summary judgment in their behalf, the risks to them are so great that they cannot afford to litigate. Therefore their goal has to be, to get out of this and save as much face as possible."