A Battle Over Goldmans Hunger Bonds Is Being Waged in Florida
Politicians in Florida are sparring over Venezuela, and it’s giving Goldman Sachs Group Inc. the jitters in New York.
About a week after Governor Rick Scott declared on July 10 that he wanted his government to sever ties with companies doing business with the regime of Nicolas Maduro, Goldman dispatched envoys to the state. Then Scott issued what critics complained was a watered-down proposal, which they said left wiggle room for Goldman to continue managing money for Florida.
Democrats accused the Republican governor of backtracking, and state Senator Jose Javier Rodriguez unveiled a bill to bar the state from investing in any financial institution that has “advanced funds in any manner, or purchases or trades any goods or services with the government of Venezuela.” Rodriguez singled out Goldman, calling on Florida to “initiate disinvestment.”
For Goldman, the ruckus may be reviving memories of the fury when word got out earlier this year that it had purchased $2.8 billion of bonds issued by Venezuela’s state-owned oil company. Those flames were fanned on Thursday when Credit Suisse Group AG barred its traders from buying and selling the so-called “hunger bonds,” as well as one note issued by the government.
“We want to ensure that Credit Suisse does not provide the means for anyone to violate the human rights of the Venezuelan people,” the Zurich bank said in a memo to employees. It also banned business with Venezuelan entities.
Goldman was blasted for snapping up the deeply discounted securities, which got their nickname from the food shortages racking the crisis-torn country. The bank has said it acquired the bonds for asset-management clients via a broker and didn’t funnel money directly to the Maduro government. On Thursday Goldman said in a statement that it doesn’t support the regime “and will not do business with it.”
Castro And Chavez
The bank realizes that it has “created a P.R. firestorm — and the way to handle that is to make nice with Florida politicians,” said Sean Foreman, a professor of political science at Barry University in Miami. And he said the stance many Florida politicians are taking is smart. “People are rightly outraged at American capitalists making money off the misery of one of our neighboring countries.”
All of it has a particular resonance in Florida, where tens of thousands of Venezuelan immigrants have settled. The state is also home to a large community of Cuban exiles who see themselves as kindred souls, having lived through their native country’s descent into authoritarian rule and watched as the Castro brothers forged close alliances with Maduro and his mentor and predecessor, Hugo Chavez.
Florida politicians of all stripes have positioned themselves as fervently anti-Maduro. These include Republican Senator Marco Rubio, the former presidential candidate who pressed for the sanctions the U.S. has imposed on current and former Venezuelan officials. (He got into a Twitter war last Sunday with Diosdado Cabello, one of the highest-ranking members of Maduro’s United Socialist Party. Rubio blasted him as a “narco leader,” in a nod to U.S. accusations that Venezuelan officials are involved in the drug trade. Cabello shot back, blaming the senator for stirring up unrest in the country and calling him “Narco Rubio.”)
For his part, Scott, governor since 2011, has been appearing at anti-Maduro rallies and demanding the resignations of the Venezuelan leader “and the Cuban thugs helping him.”
While he never mentioned specific companies, Scott did promise a crowd at a Venezuelan restaurant in the Miami suburb of Doral that he wanted state agencies to boycott “any organization that does business with the Maduro regime.” Goldman manages $478 million in Florida’s Long Duration Portfolio, plus $16 million in a distressed-debt portfolio. As of June 2017, Florida’s retirement system had $147 million in Goldman stock and $171 million in Goldman bonds.
That’s not much money in Goldman’s world: It had net income last year of $7.3 billion, and its asset management division oversees or advises on more than $1 trillion. But there are serious pockets of private wealth in south Florida, and Wall Street banks — Goldman and Credit Suisse among them — have sizable businesses managing them.
Scott has denied changing his tune after the visit in July from two members of Goldman’s management committee, John Rogers, chief of staff, and Timothy O’Neill, global co-head of the investment management division.
Goldman seems to be taking no chances. Michael Paese, a partner based in Washington, recently registered to lobby in Florida. And the bank hired Miami-based law firm Greenberg Traurig.
“It’s not about the specific dollars they’d lose from Florida,” said Foreman, the political scientist. “It’s about the hit that their brand and credibility could take.”
— With assistance by Dakin Campbell
via Bloomberg News https://bloom.bg/2lsrIoJ
August 11, 2017 at 03:26AM