It is remarkable that Goldman was prepared to offer preferred stock to the Libyans and that chief executive Lloyd Blankfein himself was involved in discussions.

This article titled “Colonel we shrank your cash pile, have some stock” was written by Nils Pratley, for on Tuesday 31st May 2011 19.34 UTC

Lost a fortune on the roulette wheel? Don't worry, if you are a big and important player, the casino will offer you the chance to recoup your losses by investing in the casino itself.

That seems to be a rough summary of the extraordinary story, as revealed by the Wall Street Journal, of how Goldman Sachs found itself in 2009 offering preferred stock to the Libyan Investment Authority, a fund controlled by Colonel Gaddafi. The Libyans lost almost .3bn (£790m) in derivative trades in 2008 conducted through Goldman; the bank, anxious to maintain a relationship with a bn-plus fund, dreamed up a series of attractive investment offers for the LIA. Preferred shares are not ordinary shares – they are more like debt. But the funniest part of the saga was this: the Libyans were so shaken by their losses they didn't bite; instead, they questioned the solidity of Goldman itself.

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