MELISSA BLOCK, Host:
From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.
ROBERT SIEGEL, Host:
NPR's Chris Arnold has the story.
CHRIS ARNOLD: The bigger of the two problems is probably the Facebook snafu.
BLOCK: Oh, it's a fiasco. It's unbelievable. I was stunned.
ARNOLD: Chris Whalen rates bank stocks for Institutional Risk Analytics. He explains what happened here. Goldman came up with the idea of holding a private stock offering, where they could basically give clients a chance to buy stock in Facebook in advance of a big public stock offering down the road.
BLOCK: Yeah, your classical private equity offering is for an early stage company that's not well-known, that doesn't put out press releases all the time or have movies being made about them, where you can quietly sell shares to institutional investors, qualified investors.
ARNOLD: But Whalen says this type of stock sale is not meant for big-name companies like Facebook. And Goldman, at the last minute, seemed to realize that there was too much public buzz about the deal and that it might run afoul of U.S. securities laws. Those regulations don't allow such stock sales to be publicly promoted or advertised.
BLOCK: They should have known that this was not going to work.
ARNOLD: People on Wall Street say many investors got angry about this. NPR has learned of at least one client who pulled millions of dollars out of Goldman Sachs over it.
BLOCK: You've raised questions in the client's mind as to whether or not you know what the hell you're talking about as a banker.
ARNOLD: Whalen is more understanding about Goldman's disappointing earnings report. Goldman's chief financial officer, David Viniar, held a conference call today. He blamed the drop in earnings on investor worries over the global economic outlook.
BLOCK: These concerns led to greater risk aversion, a deterioration in conviction among institutional investors, and thus a steady decline in client activity.
ARNOLD: Chris Arnold, NPR News.