This news is a little hard to understand. But it looks to me like this fund's value may have been completely wiped out. The investors include Goldman Sachs -- which TheStreet.com reports put in $2 billion, C.V. Starr & Co. Inc. (headed by former American International Group (NYSE: AIG) CEO Hank Greenberg), Perry Capital LLC and real estate development and financial services mogul Eli Broad.
The bailout raises many questions: What happened to GEO's $3.6 billion net asset value? How will the $3 billion in cash be spent? Why couldn't Goldman bail itself out of its own mess? What rights will that $3 billion entitle these investors? Why are these investors making the investment? What has happened to Goldman's other funds, such as Global Alpha, which Reuters reports is down 27% so far this year? Will they also require bailouts?
I don't recall a previous crisis in which Goldman needed other investors to bail it out of trouble. But I am glad that the government has yet to finance any bailouts. My hope is that the banks pay the entire cost of their mistakes.
Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He owns AIG shares and has no financial interest in Goldman Sachs.
