Every fall, previously in the basement of 85 Broad and more recently at 200 West, Goldman Sachs names a class of new partners. Blindfolded and naked, they pledge their devotion to the firm. To commemorate the event, and for the practical purpose of tagging them so their status at the firm can be quickly verified with one quick drop of trou, these newly-made partners have their nether regions dipped in a vat of gold, which harden while Lloyd Blankfein gives a speech about how to carry oneself differently once they reach the upper echelons of GS (literally, as those things will drag if you’re not careful). At the stroke of midnight, as a baby seal barks in the corner, they are inducted into the Brotherhood of the Sach. And while one is more than welcome to benefit, monetarily, from this new position, being a member of the Brotherhood is less about sharing in its huge ass profits than it is making sure the partnership stays long and strong. Some people, apparently, did not read that portion of the fine print.

Goldman Sachs partners have sold $108 million in shares in recent months, driving their total ownership stake in the Wall Street firm down to about 10 percent from 11.2 percent. The sales are a small yet significant dilution of the influence the partners have over the firm. Part of the power of the Goldman partnership is the stake they own collectively, and the agreement they have made to act in unison on shareholder votes. The next annual shareholder meeting has not been set, but it is typically held in May.

And while no one is keeping a list of names….a list is in fact being kept.

The top two sellers in the most recent period were Gregg Felton, a senior executive in the firm’s asset management division, who sold shares amounting to almost $8 million, and Philippe Altuzarra, a banker, who sold shares amounting to about $6 million.

No one should be worried that this going to reflect poorly on them. You are free to sell your shares as you please. And hey, everyone’s allowed (one) transgression! Keep it up though and don’t be surprised when you’re pulled from your desk one unseasonably chilly day next September and placed on a bus headed upstate, to a warehouse in Buffalo. Don’t be afraid of the the head of HR will come out of the shadows, wearing an executioner’s mask and swinging massive clippers. It’ll all be over soon enough.

Goldman Sachs Partners Sell Shares, Diluting Stake [Dealbook]

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Last week, Charlie Gasparino reported that he’d spoken to a bunch of Lloyd Blankfein’s ‘friends,’ who’d told him that Blankfein a) hates his job running Goldman Sachs and b) has been saying he’s going to leave the firm by the end of the year. Goldman denied the report, promising Lloyd will be with us for years to come. False!, Chaz claimed and today provides names of two executives who will potentially take over for Lloyd at some point in the future.

They are vice-chairmen Michael Evans or Michael Sherwood, the latter of which will succeed the firm’s Gary Cohn as chairman of the partnership committee, it was announced in a memo yesterday. All of this, CG says, is proof his story is more spot on than Goldman would have you believe, and proof that he is all-knowing. Speaking of which, CG asked his Fox Business colleagues, “What, is Lucas van Praag clairvoyant? How does he know I haven’t spoken to Lloyd’s friends, who’ve told me he’s leaving?” (CEO’s up and down Wall Street also backed him up, Chaz says.)

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Ray Dalio’s Bridgewater Associates clocked in as the hedge fund of choice among public pension plans, in a recent popularity contest, with 21 out of 150 PPP’s investing with the firm. If they can’t get a piece of Ray, the funds people will settle for are:

K2 Advisors, Grosvenor Capital Management, Pacific Alternative Asset Management, GAM and Blackrock Proprietary Alpha Strategies, the next five most popular hedge fund firms among public pension investors

[Institutional Investor]

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When Bear Stearns went down for the dirt nap three years ago to the day (more on the anniversary later), many people assumed having the firm listed as a one-time employer on the résumé would be the equivalent of pulling a Merrill, i.e. it would make you categorically unemployable. Apparently these people had never heard of a guy named John Meriweather who, despite being forced to sign up investors for his latest fund down at the dog track, is proof positive that you can blow it or work for a place that (spectacularly) blows it and it will in no way affect your future prospects. According to Bloomberg and former BSC chairman Ace Greenberg, most Bear execs have “landed on their feet.”

Three years after the collapse of Bear Stearns Cos., which helped fuel the worst financial crisis since the Great Depression, former bond executives of the firm are running businesses at one-time rivals, including Bank of America and Goldman Sachs…Among the most highly placed members of the Bear Stearns diaspora are Michael B. Nierenberg, 48, who’s now in charge of Bank of America’s global mortgage and securitized-products business; Jeffrey L. Verschleiser, 41, who runs mortgage operations at Goldman Sachs; and Scott Eichel, 36, now Royal Bank of Scotland Plc’s global head of securitized products and U.S. credit trading…Nierenberg, who oversaw adjustable-rate debt at Bear Stearns, and Verschleiser, whose purview included subprime loans, were co-heads of the New York-based firm’s U.S. mortgage business until they were promoted in late 2007, when Eichel and another trader took the posts.

Other Bear Stearns bond executives landing at rival banks include its last co-heads of global fixed income, Jeffrey Mayer and Craig Overlander, both 51. Mayer now runs the North America region for the securities unit of Frankfurt-based Deutsche Bank AG (DBK), whose sales and trading revenue rose 30 percent last quarter while five big rivals posted an average 8 percent decline. Overlander is deputy chief executive officer of Societe Generale (GLE)’s investment-bank division for the Americas. Thomas Marano, 49, global head of mortgages, rates and foreign exchange at Bear Stearns, is now CEO of the mortgage unit of Ally Financial Inc., the auto and home lender rescued by the U.S. government. Randy Reiff, 40, Bear Stearns’s head of commercial-mortgage finance and commercial-mortgage securities, now holds a similar role at Australia’s Macquarie Group. Japan’s Mitsubishi UFJ Securities USA is relying on Bear Stearns alumni in corporate bonds, including James Gorman, its managing director of high-yield capital markets.

And for those of you thinking of citing the jobless Jimmy Cayne in a misguided attempt to debunk this theory, bite thy tongues. Cayne could get a job at any firm on Wall Street, he just prefers unemployment and has been working on a project that requires his undivided attention. Details TK.

Bear Stearns Thrives In Diaspora [Bloomberg]

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A few hundred will be told their services are no longer necessary.

Morgan Stanley will lay off 200 to 300 trainees and lower-producing financial advisers in its brokerage joint venture, according to a person familiar with the situation…Trainees likely to be laid off include brokers who have worked at the firm for six to 36 months who had $25,000 or less in annual production. Lower producers who could be let go include five-year industry veterans who have been with Morgan Stanley for more than a year and have an annual production under $75,000.

There is, however, some hope.

“If someone is showing growth potential, there is discretion involved,” the person said.

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As you’ve likely heard, today marks the first day of the historic Raj Rajaratnam trial, the government’s biggest insider trading case to date. Jury selection kicked off this morning, and while we wait for a few hundred people to answer questions designed to reveal whether or not they have prejudices toward everyone from hedge fund managers, to Wall Street in general, to Sri Lankans to the big-boned, we thought it best to come with a list of character witnesses we’d like to see take the stand. Rajaratnam has already said he’ll speak on his own behalf and Goldman Sachs CEO Lloyd Blankfein is slated to make an appearance as well. But there are some lesser-known names who could probably tell an even richer tale about Raj and we’re just going to put their names out there and hope the universe does the right thing. Some of them would work in his favor and some not but all would add a certain je ne said quoi to the proceedings. They include:

* The Galleon Group analyst who was called an ‘idiot’ by Raj for questioning the hedge fund manager’s inside information about Goldman Sachs, given to him by a board member

* Former vanquished competitors of Raj’s fantasy football league, such as Jim Pallota and Paul Tudor Jones, who in hindsight think he probably cheated at that

* Keryn Limmer, the Galleon analyst who Raj paid $5,000 to be tased when execs from stun-gun maker Taser International came to make a pitch in 2005 (“Employees gathered around as two people propped up trader Keryn Limmer at the elbows and another person fired the weapon. Ms. Limmer’s legs buckled beneath her from the shock”)

* The dwarf who was hired by Raj as an April Fool’s Day joke, and introduced to employees as a new analyst brought on to cover “small-cap” stocks

* The Galleon junior female analyst Raj told to buy a spandex outfit from Lululemon, wear it to the firm’s morning meeting and “walk back and forth on top of the conference table” while Raj commented that “few consumers would pay so much money for the expensive outfit in a recession” (this one in particular could help the guy out, as it demonstrates the firm did real, in-depth research of its own)

Anyone else come to mind?

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Apparently the vice-chairman is not retiring but “pursuing opportunities outside the firm,” though it’s unclear where. [BW]

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Goldman Sachs Says It Lost Money On 25 Days Of Trading In 2010 (Bloomberg)
After incurring losses on trades during 12 days in the first 9 months, the full-year figures indicate that Goldman Sachs lost money on 13 days in the fourth quarter. The firm’s traders also made $100 million or more on 68 days in 2010, down from the record 131 days in 2009, according to the New York- based company’s annual 10-K filing with the Securities and Exchange Commission. Traders exceeded the firm-wide “value-at-risk” limit, or VaR, on one occasion during 2010 “to facilitate a client transaction,” according to the filing.

Goldman Puts Figure On Possible Litigation Costs (WSJ)
Goldman could lose as much as $3.4 billion in damages and other litigation-related matters involving securities it underwrote in the last few years for which the purchasers are now suing to recover losses or to force the firm to buy them back. In a securities filing Tuesday, Goldman estimated that the figure, in the upper range of estimates, was “reasonably possible.”

Fannie, Freddie Caught In Vicious Circle On Dividends (WSJ)
The requirement that both companies pay a 10% dividend on preferred shares—which the U.S. government receives for its infusions after taking over Fannie and Freddie in 2008—costs them about $15 billion a year at the current rate. In the last two quarters, the firms have paid $7.5 billion in total dividend payments, while receiving injections of $5.7 billion to help keep them in business. The dividends could force Fannie Mae and Freddie Mac to keep asking the Treasury Department for more money even after the companies get back into the black, helped by lower losses on mortgages and profits from newer loans. U.S. officials have said those payments are an appropriate way to repay taxpayers.

Jack Welch: Obama Move To The Center Is All Talk So Far (CNBC)
“The tack to the center is verbal, it’s not actionable,” Welch said. “Let’s hope he’s moving to the center,” he added. “But from what I see—unionizing 43,000 TSA workers on a Friday and giving a speech (to the US Chamber of Commerce) Monday morning—show me the money.”

Sheen’s Publicist Quits As Actor Says On TV He’s Drug Free (Bloomberg)
Stan Rosenfield, the publicist for Charlie Sheen, said he resigned from the role because he is no longer able to work effectively for his client. In an interview with NBC’s Jeff Rosen, Sheen said he would return for a ninth season of “Two and a Half Men,” the most- watched comedy on TV, only if the producers give him a raise to $3 million an episode. In response to a question, Sheen acknowledged receiving roughly $2 million in salary and royalties from reruns. “I’m underpaid right now,” Sheen said on the “Today” show, describing himself as a “rock star from Mars.”

Treasury To Sell $2.7 Billion Of Ally Trust Securities (AP)
The Treasury hopes to take back more taxpayer money through an initial public offering of the former General Motors finance arm, which received $17.2 billion during the financial crisis. The government owns 74 percent of the company through holdings of common stock.

JPMorgan Twitter Deal Is Said To Value Start-up At $4.5 Billion (Bloomberg)
The bank has invested in a fund that has bought about $400 million in Twitter Inc. shares, valuing the blogging service at as much as $4.5 billion, three people with knowledge of the matter said. The fund, which has more than $1 billion, is being run by Twitter investor Chris Sacca.

Muni Industry Optimistic About State Revenues Recovery (FT)
Many of those surveyed in a poll by RBC Capital Markets have become more confident about the effect of a US economic recovery on local tax revenues. Some 27 percent of the 100 municipal bond issuers, bankers and lawyers questioned at a recent conference sponsored by The Bond Buyer expect it will take two years for state and local government revenues to return to pre-crisis levels. This compares with just 3 percent in a similar survey last October.

Article courtesy of Dealbreaker

Sean George, a Deutsche Bank managing director in corporate bond and credit derivatives trading from Deutsche Bank recently accepted an offer to work at Jefferies, as the firm’s “first addition in credit derivatives trading.” A person familiar with the matter commented that Jefferies “must have thrown the kitchen sink at [George]” to get him to come over and that it was an “interesting move.” It feels as though this PFWTM wanted to say or meant to imply more, but couldn’t risk having it come back to him. What do you figure he was driving at?

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People familiar with the firm say SAC Capital’s legal team actively discourages traders and analysts from using email, instant messages and other forms of communication that can leave a paper trail. The lack of email documentation at SAC Capital is something that has frustrated litigants over the years, according to people who have been involved in lawsuits and arbitrations with the fund. [Reuters, earlier]

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