Sources revealed that from General Motors Co.'s initial public offering, a combined $120 million will be earned by Wall Street banks led by JPMorgan Chase & Co. and Morgan Stanley. But these companies could have made four times more if not for Goldman Sachs Group Inc.
Sources said that in Goldman Sachs' proposal to the US Treasury in May, it had said that it will accept a 0.75% fee.
This is far lower than the 3% that other banks typically charge on the largest IPOs. It is also lower than the 2% rate offered by Bank of America Corp. and other banks that presented to Treasury.
Goldman Sachs, which had recently been named in a fraud lawsuit by federal regulators and has ties to Ford Motor Co., wasn't given a top role in the IPO.
The sources said that banks became upset when the government imposed the fee pitched by Goldman Sachs President Gary Cohn and his five-person team on all underwriters.
Samuel Hayes, a professor emeritus of investment banking at Harvard Business School in Boston, said that he is not at all surprised that the other banks are "furious at Goldman."
He said that they believe that it provided the government with a "real lever" to force down fees on the underwriters. However, he believes that the deal "still has a lot of marquee value." [via autonews]