Senior executives of Goldman Sachs Group Inc. are likely to be ousted because of their "ineptitude" in responding to government allegations that the investment bank misled investors, a Rochdale Research analyst says.
Analyst Richard Bove, however, maintained a buy rating and a $200 price target on Goldman's stock, saying he still is refusing to sell the recently battered stock.
He wrote in a research note that Goldman "is likely to be supported even more strongly by its clients" following the bad publicity the company has suffered over the April 16 Securities and Exchange Commission complaint and subsequent congressional hearings.
But Bove said the company has hurt itself by saying "as close to nothing as possible" in response to the allegations.
"Goldman is going to have to pay a high price for its ineptitude in handling this issue," Bove said. "Its shareholders already have."
The stock closed Monday up $4.30, or 3 percent, at $149.50. But shares are down 20 percent from their high on the day the SEC complaint was announced April 16.
"Goldman has simply been outclassed at every step, and there is no sign that the company knows how to deal with the current situation," Bove wrote.
Without citing names of individuals such as CEO Lloyd Blankfein, Bove said it's likely that high-level executives "are going to have to be removed from their positions both in the management suite and from the board of directors."
He also said Goldman's legal team "will have to be replaced with one having greater skills and Washington know-how."
Bove predicts a fine "of at least $1 billion will be required," and "a new mission statement will be developed and produced."
Bove said Goldman "must start to redefine the financial crisis discussion; it must get proactive in its defense."
"It appears," Bove said, "that President Obama needs a symbol of financial evil that must be expunged from the system. That symbol is Goldman Sachs."
Bove also said senators who assailed Goldman during hearings "had no desire to hear anything Goldman had to say," while Goldman "had no desire to say anything, either."
The government's civil fraud case alleges that Goldman misled investors by failing to tell them that subprime mortgage securities had been chosen with help from a Goldman hedge fund client, Paulson & Co., that was betting the investments would fail. Goldman and one of its traders, Fabrice Tourre, have denied wrongdoing and said they will contest the allegations in court.
Goldman's stock took a hit after the complaint was announced, then took another dive on Friday, after word that the Justice Department had opened a criminal investigation of the Wall Street powerhouse over its role in the mortgage securities deals it arranged.
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