An interesting disconnect exists between Goldman’s public posture on the SEC’s suit against it over its Abacus 2007 AC1 deal and its private remarks. The firm has maintained that the charges are baseless and politically motivated, and hinted that if there is any dirt here, it must be the fault of Fabrice Tourre, the staffer named as a defendant along with the firm itself.

Yet according to the Financial Times, Goldman’s chief Lloyd Blankfein made a series of calls to clients yesterday to defend the firm. The substance of his remarks sound so over the top as to suggest that the firm’s leadership feels badly threatened by the pending action. A truly confident actor would make reassuring noises along the lines of “Look, this may all look dramatic in the headlines, really there isn’t anything here, but the press and the government will take decisions and actions out of context and try to make them into something they aren’t. These distortions are unpleasant, but we are confident the truth will come out in the end. If you see or hear anything that troubles you as we fight this case, don’t hesitate to call me or XXX.”

Instead, Blankfein’s comments sound like those of a narcissist completely unhinged at the idea that he is being criticized. If this neurosis pervades the Goldman executive ranks (which we think is entirely possible, see our earlier discussion), that provides an indirect confirmation of the widespread perception that the firm is concerned only with what it can get away with, and is lacking in any moral compass.

From the Financial Times:

Lloyd Blankfein on Wednesday attacked the Securities & Exchange Commission’s fraud charges in telephone calls to clients as Goldman escalated its campaign to stem the damage to the bank’s reputation. One person who received a call from the Goldman chief said he was told the regulator’s case against the bank was politically motivated and would ultimately “hurt America”…. “He was very aggressive,” said one person called by Mr Blankfein on Wednesday. “He feels that the government is out to kill them, that they are under attack and the whole thing is totally political.”

Yves here. The idea that an SEC’s enforcement action on a lone transaction is tantamount to a campaign to “kill” the firm is bizarre, and sounds an awful lot like Dick Fuld at his less than stellar moments. It suggests either hypersensitivity to bad press, or recognition of the possibility that the discovery in the SEC case will expose widespread predatory conduct (as we noted in an earlier post, the private suits against derivatives kingpin Bankers Trust similarly looked weak, but they did huge damage to the bank by exposing cynical, rapacious behavior towards clients).

While it is too early to tell, the SEC may have found Goldman’s underbelly.