It is not hard to blame Goldman Sachs (GS) for failing to cut its own earnings estimates for the next quarter and the full year. That kind of action by analysts is verboten. Rating yourself is not allowed.

Goldman did take a pollaxe to its peers, chopping Citigroup (C), Morgan Stanley (MS), JP Morgan Chase (JPM), and Merrill Lynch (MER).

The culprits causing the bad news were the same ones as in recently past quarters. Mortgage-backed securities will be written down further. Corporate banking activity will slow. The underwriting market in capital markets will be nil.

Goldman’s note was effective. It drove Citi back down to $17. Lehman fell to $12.50, near its 52-week low.

The odd part about the analysis is that Goldman Sachs shares are off over 12% in the last month. That is more than JP Morgan, Merrill, or Citi. The market has turned against the premier investment bank as it now appears to lump its chances in with the balance of the industry. The immunity that Goldman has had for so long has gone away.

Analysts are supposed to be more independent than they used to be. They are not tethered to investment banking departments. They are supposed to issue more "sells" than they used to, although that does not seem to have worked out. Even in a rough market getting a good rating is not terribly hard.

If other large financial institutions are in for a hard time, then Goldman is as well. The brokerage knows that. It has convenient excuse for keeping itself out of its own analysis.

There should have at least been a footnote to the report saying the the trouble in the rear-view mirror is closer than it appears.

Douglas A. McIntyre

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