--Thursday is Steve Schwarzman's birthday. He claims he doesn't want to do anything big, just a few close friends over to the manse, and if it turns be mostly couples, perhaps they'll put some keys in a bowl, but nothing too crazy. He's also supposedly telling people "no gifts"; this is a trap. You know he's full of it and if you don't READ HIS MIND and tally ho on over to Brookstone and snatch up one of those fancy $200 ass-hair trimmers he's been eyeing for months (sources say Crab Hands was just relating the other day how he needs to 'deforest the Schwarzwald') and hand deliver it to l'office, along with the perfectly worded card, you'll be looking at the business end of a hissy fit.

--The Fox Business commercial. Remember? We found out that it only costs $250-$900 to buy a 30-second spot on FBN, depending on when it airs, and delineated tasks to the group. I repeat: You: Make a video and send it to us. We: Pick the best and our publisher will send it to Fox's ad sales team. They: Either a) air it, and earn you a piece of quasi-immortality along such leading FBN lights as Fat Boy Cavuto; or b) shitcan it, and we'll reprint a transcript and audio clip of how Fox, who would blow a goat for a few extra shekels, all of a sudden got all 'integrity' on us. I love the idea of sending the ValueStockTips guy, and it may very well come to that but seriously, show me what you can do.

-- Goldman Sachs is still firing people. So sayeth:

A friend and associate in equity derivatives got let go from GS this morning. He's on his way to Maiden Lane to get his severance package. The reason? "Re-organization"

The source said the last thing he saw was a few schmattas throwing the guy in a car with Eddie Dane, who told him, "Everyone's so goddamn smart. Well, we'll go to Maiden Lane. And we'll see who's smart."

Bear Stearns has more than $1 billion of short positions on subprime, up $400 million from the end of November, Bloomberg reports. Of course, since Bear Stearns got the subprime trade so wildly wrong last year, people are already wondering if this might be a signal that it is time to go long subrime.

Over at The Big Picture, Barry Ritzholz writes, “While I do not expect us to be done with the subprime slime yet, I do get a ‘Is this a bottom indicator?’ sense from Bear on this.”

JPMorgan Chase, which emerged relatively unscathed from the credit market debacle, is apparently taking the opposite position. Yesterday Jamie Dimon was reported to have said that the bank plans to expand its role in the subprime mortgage business. Goldman is also rumored to have reversed it’s position on subprime, taking a net long position.

Bear Stearns Is `Short' Subprime Mortgages $1 Billion [Bloomberg]

Unusual perks: Goldman Sachs covers sex changes [Fortune]

Goldman Sachs’ latest hedge fund, which was the largest launch in the history of the industry, had a rough first month. The fund is down 6% for January, according to a source familiar with the results.

Goldman Sachs Investment Partners fund recently raised $7 billion, according to a report in the Financial Times. The figure was substantially lower than the rumored $10 billion that had been whispered about in December but higher than the target of between $4 billion and $6 billion. Unlike Goldman’s quant driven offerings, GSIP is a stock-picking hedge fund—the first of its kind at Goldman. It is run by former global proprietary trading chief Raanan Agus and former U.S. prop trading head Kenneth Eberts.

January was reportedly a rough month for many hedge funds of all variety of investment strategies.

We totally forgot to ask Goldman Sachs about this when we were badgering them about the now debunked layoff rumors earlier today.

We’ve gotten to the bottom of the rumors we were following up on this morning about the rumored layoffs at Goldman Sachs. It turns out our skepticism was justified. There have not been across the board cuts at Goldman, and certainly not the type of layoffs we’ve seen at places like Citigroup and Bank of America.

But people are weeping into their keyboards, and a spat of “this is my last day at the firm” emails have been flying through 85 Broad Street today. This is the result of Goldman’s recently completed annual review process in which the people who come out in the bottom 5% are given a stern talking to and often leave the firm. Those in the dead pool have just been given notice—thus the resulting heartbreak, tears, rage and strangely dispassionate emails.

We hear the hideously unthinkable-- layoffs at Goldman-- are happening today. We have no other information*, other than that "the guy sitting next to me was crying." A Jew crying over money-- BFD (follow me into an ATM booth whenever if you'd like to watch this live). Until someone coughs up something interesting, we'll be watching Jiminy Glick clips (February is Jiminy Glick Month). We will begin with the following:

So who is on this list of 14 companies under investigation by the FBI for their involvement in the subprime mortgage crisis? The FBI apparently intends to keep us in suspense because they won’t give details. All we know is that they are looking into “allegations of fraud at various stages of the mortgage process, from companies that bundled the loans into securities to the banks that ended up holding them.”

So let’s recklessly speculate. Two companies that are sure to be on the list are Bear Stearns—which is already under investigation by federal prosecutors and the SEC—and Countrywide, which is both the biggest home loan lender and also facing an SEC inquiry. Goldman Sachs is very likely on the list. It was accused on the pages of the Sunday New York Times of misleading clients by packaging CDOs while shorting the mortgage market. We know that at least one Senator read the article and has been making a stink, and we know that federal investigators often get their leads by reading the paper. What’s more, Goldman Sachs has said that it is cooperating with an unnamed government agency.

Morgan Stanley has also admitted to cooperating with unnamed government authorities. At first, everyone assumed this was the SEC. But why wouldn’t they come out and say that? More likely they declined to name the agency out of fear that saying they were cooperating with the FBI would tar them with serious criminality—rather than the everyday Wall Street shenanigans implied by an SEC investigation.

So that gives us four good leads. Who else is a cylon on the list? No doubt some additional mortgage companies and some home builders. Maybe the ratings agencies are also. Leave your guesses in the comments section below.

FBI Launches Subprime Probe [Wall Street Journal]

According to John Mack’s assistant (I kid, of course, though the tip was anonymous so it’s a fifty-fifty chance it could’ve come from her), Morgan Stanley’s population restructuring project will affect “more than just [the rumored] 1,000 brokers,” with cuts occurring in all departments but most heavily in IBD, and impacting 10-15% of total employees. But layoffs, these things happen all the time, and I don’t want to say I’m not beside myself with this news, but I’m not losing any sleep over it. Know what I am losing sleep over? Know what’s seriously cutting into my mid-morning nap schedule? Weighing on my mind? Distracting me from my Mark Haines fantasies? Infringing on my ability to stare off into space? This news (smut, rather) about Goldman Sachs—GOLDMAN SACHS—being forced into this pedestrian layoffs business. Cutting one person—VP, associate, analyst, trader, CEO, secretary, janitor—from Goldman Sachs is too many; according to Reuters, GS will be cutting a whopping 5 percent of its global workforce. I would like to know where the hell God, Goldman Sach’s co-pilot, is during all of this. What he could possibly be doing that’s more important than protecting his children. The only plausible explanation that I can come up with is that he was busy ghost writing this. If that happens to be the case, cool. It was worth it and “Who knows how many men unwittingly dropped their pants under the government's watchful eye”? That was inspired my friend. Otherwise, we have a problem.

Wall Street, even Goldman, faces '08 slowdown [Reuters]
What Happens in Men's Room, Stays in Men's Room [Bloomberg]

Sorry. It's not a union for overworked first-year analysts who spent the three day-weekend pdfing documents and emailing them to managing directors vacationing on the beach. The workers are security guards at Goldman's London office. Technically, Goldman's security guards are employed by a security firm and not by Goldman directly. Yesterday, however, a court awarded the workers the right to be represented by their union in dealings with Goldman.
Goldman Sachs guards win union recognition 'victory' [The Herald]

It's all Goldman Sachs all the time at the Treasury Department these days. Former Goldman CEO Hank Paulson is bringing Goldman senior director Robert Steel on board the good ship Treasury as undersecretary for domestic finance.

Steel started in the equities division at Goldman, and eventually rose to run the group. He was served on the management committee for years with Paulson. He rose close to the pinnacle of power at the firm as vice chairman. We've heard that he was one of those who pushed for changes at the NYSE to permit buy and sell orders for the most heavily traded stocks to pair up electronically, eliminating the middlemen of specialists and floor brokers. At the time, he was said to have urged Paulson to combat then NYSE chief Dick Grasso's resistance to these changes.

Bush to nominate Goldman's Steel to Treasury post [Reuters]

Henry Ford used to say he wanted to pay his employees enough so that they could afford to buy his company's cars. Goldman goes one step further-paying its people enough that it plans to fund a new $10 billion private equity fund largely from employee investments. It's extra private private equity.
Goldman Sachs to set up 10 bln usd private equity fund - report [Forbes]

Goldman Sachs will decide who will and who will not make partner at the firm this October, an event that only happens every other year. What's more, Goldman will be making these decisions only months after it was forced to replace its top leadership when Hank Paulson left for the Department of Treasury. The Telegraph has a great story on the internal politics at Goldman-high level defections, lots of resumes floating around competing firms and intense interest in how the recent elevation of traders to many of the firm's top slots will effect partnership elections. Unfortunately, no one uses the phrase "fighting like ferrets."

Heard anything about the Goldman partnership pool? Send word to TIPS (at) DealBreaker (dot) com. The identity of all tipsters will be kept strictly confidential. We love our sources.

Goldman's star performers are going for gold [Telegraph]

There were two things we remember hearing about John Weinberg from our early days working in M&A. First, that he was a key figure in the "no hostile deals" rule that Goldman followed for so long (and which has since gone by the wayside). Second, that he opposed taking Goldman public-a move which enriched many Goldman partners but he felt was bound to change the firm's priorities. Oh, and a third thing. Reverential talk about John from old-school Goldman executives used to drive the overworked junior investment bankers we knew crazy. Hey, guys, today you'll have to allow a bit of that stuff, okay?

John Weinberg, Goldman Leader, `Last Gentleman' Banker, Dies [Bloomberg]

We've been spending some time trying to clear away the murk and shine some light into the shadows of Jeffrey Epstein's financial dealings in an effort to provide some, uhm, actual financial reporting related to the sex candal encircling the mysterious money manager. There's not much that is publicly available but we're still digging.

What we have discovered, however, is a brief document amending a credit agreement for RELIANT PHARMACEUTICALS, INC. The amendment replaces the administrative agent for the credit. But what caught our eye was the confluence of three DealBreaker subjects all in the same documents.

The signature pages include lines for Morgan Stanley CEO John Mack, who is scheduled to appear before the SEC in connection with allegations of insider trading at Pequot Capital, as well at Jeffrey Epstein, who signs as trustee of the Wexner Children's Trust II, part of the financial empire of The Limited founding family. And the agent who is being replaced? Goldman Sachs, where alleged insider trading crooks Eugene Plotkin and David Pajcin worked (not to mention the alma mater of that other DealBreaker obsession, Hank Paulson).

Now this is no doubt just a coincidence, and not really a conspiracy to make our heads explode. We should probably just take a deep breath and then post a Venn Diagram illustrating the connections but our diagramist is in meetings off-site.

One additional thought: this is probably the last time you'll see Epstein's name coupled with the words "trust" and "children" any time in the near future.

Reliant Consent, waiver and amendment [SEC]

Marketwatch has more details on the Embassy Suites hotel in Battery Park that Goldman Sachs is reportedly buying, including new speculation on what Goldman might be planning for the site.

Robert Sammons, director of research at real estate brokerage firm Colliers ABR, said the sale would allow Goldman to control the entire block once its new headquarters opens in 2009.

"It's right next door to their new building, and they can use the hotel for their own people if need be and for bringing in people from outside for events," he said. However, he speculates that - more importantly - the acquisition will give Goldman the option to demolish and redevelop the property down the road so that it can add on to its corporate headquarters as the firm grows.

Goldman Sachs in talks to buy hotel complex in downtown New York City [Market Watch]

Goldman Sachs may be buying the Embassy Suites hotel in Battery Park, according to our friends at Curbed (whose powerful investigative journalism team learned about it by reading the Downtown Express). This has sparked all sorts of speculation about what Goldman plans to do with the hotel by people who don't know that Goldman Sachs, and investment funds managed by Goldman, is already in the hotel business. And it may just be that someone at Goldman has figured out that owning a hotel near where the Freedom Tower will be built might not be such a bad investment.

Or, you know, maybe they just want to knock it down so they have a clear view of the Hudson waterfront and their New Jersey tower.
Goldman Entering 'Ugly' Downtown Hotel Biz [Curbed]

Paul Schapira, a long time Goldman Sachs veteran who took over the firm's natural resources group in 2002, is going to Morgan Stanley where his responsibilities will include relations with Italian clients and the European energy sector.

Schapira gained a good bit of notoriety when he worked on the initial public offering of PetroChina, the oil-and-gas behemoth spun off of China National Petroleum Corp. The deal became controversial when a coalition of pro-tibet tree-hugging hippies, Lutherans concerned over the company's investments in Sudan, and unions seeking to keep China out of the World Trade Organization, sought to scuttle the deal. Several U.S. institutional investors declined to participate in the IPO, although Goldman succeeded in selling the shares to overseas investors.

We're trying to find out how recently Schapira left Goldman. The newswire stories are a bit ambiguous about this, and we neither Goldman nor Morgan Stanley have gotten back to us. The reason it matters is that we're trying to determine if this can reasonably be called a defection and whether it is fair to infer that Schapira's move may be related to the "fighting like ferrets" that allegedly went on among the Goldman bigs following the decision of Hank Paulson to take the position of Treasury Secretary. If you know anything send it to Tips(at)DealBreaker(dot)com or drop them below in the comments.

Morgan Stanley hires energy banker from Goldman [Reuters]

We know Goldman is rumored to have one of the loosest strip club policies on Wall Street but we're still confused about what exactly they plan to do with the website Goldmansex.com. Actually, we're not even sure we want to know.

It seems Goldman has submitted a complaint to the National Arbitration Forum arguing that the domain name owned by Robert Muller, a 32 year old who lives in the Netherlands, causes confusion and leads those looking for the investment bank onto a website full of porn. Because lots of people who type "sex" on the end of the name of a company name are probably expecting to be taken directly to the legit company website.

Goldman challenges Goldmansex.com [Reuters]

Distressed debt specialist Lachlan Edwards is defecting to Goldman Sachs from Rothschild, where he had been running its European restructuring arm. Edwards, a 39 year old Australian native, will work out of London in the bank's European leverage finance practice, which is headed by Tim Flynn and Doug Henderson.

Last month Goldman poached bankruptcy attorney James Sprayregen from Kirkland & Ellis. Combined with the Edwards acquisition, this has some folks wondering just how bad Goldman thinks the world economy is going to get. Of course, the expansion of its restructuring practice may just be a result of regulatory reforms which have made it easier for some European companies to declare bankruptcy and changes in US laws which had previously barred underwriters from advising a company in bankruptcy if they had recently underwritten securities for a company.

Or, you know, Goldman may just think we're all heading down the tank.

Goldman Sachs hires distressed company specialist [Reuters]

Hank Paulson's going to have a nice fourth of July. In the first place, he's now officially between jobs. Done at Goldman and not yet Treasury Secretary. So even on this weird half-day, 1 PM market closing Monday he can go bird spotting. Oh, yeah, and Goldman gave him almost $19 million for his mid-year bonus.

Incoming U.S. Treasury Secretary Henry Paulson was awarded an $18.7 million cash bonus for six months of work as Goldman Sachs Group Inc.'s (GS.N: Quote, Profile, Research) chief executive, the investment bank said on Monday.

In its quarterly report, Goldman said the compensation committee of its board of directors on June 29 approved the payment in recognition of Paulson's "leadership" in the six months ended May 31.