Goldman Sachs

[KRonn]

Goldman Sachs.

What's up here with them anyway? Any of you financial gurus have any good feedback? GS just reported huge profits, on taxpayer money or what ever. Also see the youtube video on the second link.
Two of their large competitors were allowed to go bankrupt - Lehman Brothers and Bear Stearns, while AIG was bailed out, and AIG promptly paid Goldman Sachs money owed, billions worth. Just so happens that Hank Paulsen, under the Bush admin, was a former top guy with Goldman Sachs, as were others along the way in similar govt jobs, as the articles point out. Rather messy. Plus other rumblings I've seen or heard on the news elsewhere.

Our illustrious Congress should be doing a lot of investigating, er, if many of them weren't so entrenched in the issues, power plays, connections and campaign cash that they'd be investigating on, perhaps? Yeah, I know I'm being overly conspiratorial, but really, the events lately have really given me a lot of questions.

In the first link, skip the Sarah Palin part and go to the bottom of the link about GS.

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http://www.huffingtonpost.com/david-paul/the-greening-of-goldman-s_b_235181.html

The US economic turnaround may not be complete. The AIG turnaround may not be complete. The GM turnaround may not be complete. But Goldman Sachs is back.

"A Swift Return to Lofty Profits" proclaimed in the New York Times, as Goldman Sachs reported that it earned $3.44 billion in the second quarter, and is preparing its largest bonus payout in history. And without doubt, those lofty bonuses are well earned.

Consider how effectively Goldman has navigated the roiling waters of the global financial crisis. First, Goldman received a $10 billion injection of TARP funds to help it weather the market turmoil. Next, it swiftly converted itself into a commercial bank and member of the Federal Reserve system, gaining access to low or zero cost capital at the Fed Discount window and access to federally guaranteed borrowing through the FDIC Temporary Liquidity Guaranty Program. Finally, it garnered a $13 billion payout at one hundred cents on the dollar for its outstanding credit default swap contracts with AIG.

Now, we are told, Goldman's profitability stems from its trading prowess in global markets. Really? A $3.44 billion profit in the second quarter could be accounted for simply by a 25% run-up in the value of the CDS portfolio from its value when AIG stood as a bankrupt counterparty.

No, Goldman may have trading prowess, but that pales against its political prowess.

Thirty years ago, most of the major Wall Street investment banks were partnerships, and those with the greatest prestige and market power--Salomon Brothers, Goldman Sachs, Lehman Brothers and Morgan Stanley--eschewed retail brokerage in favor of institutional relationships and proprietary trading. Only Merrill Lynch prided itself on retail brokerage and being a member of the New York Stock Exchange.

Then, the world changed, as investment banking firms looked far and wide for new ways to strengthen their balance sheets and access new pools of capital. One by one, the old-line partnerships fell by the wayside, casting aside their culture and independence for the lure of other people's money. Salomon merged first with Phibro, and then was subsumed into the emerging Citibank colossus. Lehman was acquired by American Express. Morgan Stanley suffered the ignominy of merging into the Sears Roebuck/Dean Witter/Discover financial services company.

Only Goldman Sachs retained its culture and identity, even though it too tossed aside its partnership heritage in exchange for the lucre and capital offered through a public stock offering.

As one watches the evolution of Goldman, it is hard not to become a conspiracy theorist. After all, Goldman's rise from merely the top of the heap into the stratosphere has come after years of growing influence in Washington as one Goldman partner after another were appointed to senior positions in the Cabinet or White House--John Whitehead, Robert Rubin, Josh Bolten, Hank Paulson, to name a few--and tens of millions of dollars of political contributions found their way from Goldman Sachs into the campaign war chests of members of Congress, of Senators and Presidents, Democrats and Republicans alike.

Perhaps the public interest and the private interest just happened to coincide with the passage of the Financial Services Modernization Act in 1999 and the Commodity Futures Modernization Act of 2000. Perhaps the conversion of Goldman Sachs--a non-depositary institution--into a commercial bank, with access to Fed Funds and the Discount window, and eligible for FDIC guarantees on its debt offerings was in the public interest. And perhaps the public interest was somehow served when Goldman and others jumped to the front of the line of AIG creditors and were made whole on their credit default swap contracts with a bankrupt counterparty.

Perhaps. But we must conclude--because we believe in truth, justice and the American way--that Robert Rubin, Josh Bolten and Hank Paulson influenced and guided public policy in ways that was truly in the public interest, and that there was no nefarious connection between all of those campaign dollars and the direction of our national policy in any manner that unduly benefited Goldman Sachs over the years.

Perhaps. But this year, appearances matter. And this is the year that has seen $10 billion of TARP money and $13 billion of AIG money and who knows what amount of additional Federal Reserve funds or federal guarantee benefits flow into the coffers of Goldman Sachs.

So perhaps, this year, Goldman Sachs employees should be content with the tripling in value of their stock--surely a direct result of all of the financial largesse that has flowed Goldman's way--and perhaps this is a year when $3.44 billion of Goldman Sachs profits should not turn into bonuses, without due consideration for how all of that was possible, and where that money came from.
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http://www.huffingtonpost.com/peter-daou/palin-mania-how-goldman-s_b_233241.html

    I'm starting to wonder about the mental health of our nation when I read stuff like, "Analysts estimate that [Goldman Sachs] will set aside enough money to pay a total of $18 billion in compensation and benefits this year to its 28,000 employees, or more than $600,000 an employee. Top producers stand to earn millions." (Update from Reuters: "That puts the average Goldman employee on pace to earn more than $900,000 this year. Chief Executive Lloyd Blankfein, senior officers and star traders will likely receive tens of millions of dollars.") Are we out of our minds? How can we sit by and let this happen?


    In sum, after paying off TARP, Goldman Sachs is still in hock to us for $52.6 billion. No wonder they can pay $18 billion in compensation. Correct that: We're actually paying the $18 billion. Which brings us back to the problem of holding on to reality. When we bail out an entire sector to the tune of trillions of dollars, eliminate many of the competitors, make money available at near-zero percent interest rates, change accounting rules to make toxic assets appear less toxic for profit and loss purposes, and guarantee everyone's remaining assets -- after we've done all that, what does it mean to book a profit? What did Goldman Sachs actually do that was useful for society, after having helped to drive our economy off a cliff? And why aren't our elected leaders doing something about it?

And this, from Robert Reich:

    Goldman's resurgence should send shivers down the backs of every hardworking American who has lost a large chunk of retirement savings in this economic debacle, as well as the millions who have lost their jobs. Why? Because Goldman's high-risk business model hasn't changed one bit from what it was before the implosion of Wall Street. Goldman is still wagering its capital and fueling giant bets with lots of borrowed money. While its rivals have pared back risks, Goldman has increased them. And its renewed success at this old game will only encourage other big banks to go back into it.

Goldman's greed is being rewarded at our expense while the media, punditocracy, and online commentariat rail against a soon to be ex-Governor of Alaska. Next time Palin writes an op-ed or makes an announcement, hopefully we put her in perspective, keep the reaction appropriately muted and stay focused on more significant things.

[DGuller]

I agree that it takes a lot of effort to not be a conspiracy theorist when it comes to Goldman Sachs.  It also saddens me that it seems like we're on track for never learning anything from the previous debacle.  It seems like the culture of obscene profiteering is back.

[Richard Hakluyt]

It seems to me that these guys have got the perfect gambling system. If they lose then the taxpayer bails them out, if they win then they profit 

[alfred russel]

I didn't read the article (not interested in a hufffington post financial article), but the firm has had the reputation of being the best, hiring the best, and paying the best for a while.

GS had 4 major investment banking competitors in this country: Bear Stearns, Lehman Brothers, Merrill Lynch, and Morgan Stanley. Three of the four failed, and the government rescued two of them, which preserved some competition for GS. As for the bailout, apparently GS never wanted to take the $10 billion but was told it had to along with other companies—and GS paid it back at the first opportunity.  As for the AIG counterparty payments, GS claims it was fully hedged on those claims and would not have lost money had AIG defaulted.

GS had the strongest capital position of the investment banks going into the crisis, and was able to privately raise capital when most of its competitors could not. As they either went out of business (Lehman Brothers), had to downsize during a firesale (Bear Stearns and Merrill Lynch), or had to deal with major losses and a crappy capital reserve (Morgan Stanley), GS is in a very strong competitive position right now.

[KRonn]

Yeah Alfred, that at least puts things in some perspective. But I still wonder if there are too many connected people, those that helped get us into this mess (Bernanke, Geithner, Paulsen, and more), now running things to try and get us out. But maybe there aren't many others with the knowledge to do it, though the business-government relationships seem too incestuous.

I rarely care for the Huffington Post site either, but I was looking for info on GS and these posts came up. While I'd figure that a lefty site might be too anti-"evil corps", I also figured that might be balanced some by the fact that some of this goes on during Obama's watch, having started in previous admins as well.

[Admiral Yi]

It seems to me that these guys have got the perfect gambling system. If they lose then the taxpayer bails them out, if they win then they profit 

C'mon Tricky, not you too.

Who is "these guys?"  Goldman, who bet right on CDS and made money?  Lehman, which is gone?  Bear Stearns, Merril, Washington Mutual, or IndyMac, whose shareholders got wiped out? 

[The Minsky Moment]

Goldman has smart guys and they had the resources to buy some assets on the cheap when everyone else was panicking.

Goldman was basically forced to take the TARP money, and they were the first to pay off.  They did benefit from the AIG bailout, but the government didn't bail out AIG to help Goldman, they bailed out AIG to avoid a major diplomatic incident.

[Valmy]

They paid back the TARP money eh?

Good on them.  Hurrah for profits!

[Richard Hakluyt]

It seems to me that these guys have got the perfect gambling system. If they lose then the taxpayer bails them out, if they win then they profit 

C'mon Tricky, not you too.

Who is "these guys?"  Goldman, who bet right on CDS and made money?  Lehman, which is gone?  Bear Stearns, Merril, Washington Mutual, or IndyMac, whose shareholders got wiped out?

I was confusing Lehman with GS, I'll shut up now 

[Neil]

It could be good, or it could be more accounting tricks.

[Zanza]

they bailed out AIG to avoid a major diplomatic incident.

What does that refer to? All the European financial institutions that would have gone done without the AIG money?

[Zanza]

I wonder why the shareholders of Goldman Sachs don't demand higher dividends and a bit lower bonuses. It's not like everybody would immediately jump ship if they only got an average $200,000 and not $300,000 bonus. Sounds like the other banks are currently incapable of paying such high bonuses.

[citizen k]

  It seems like the culture of obscene profiteering is back.

Obscene profiteering is in the eye of the beholder. Objectively it's just called profit.

[Ed Anger]

I agree that it takes a lot of effort to not be a conspiracy theorist when it comes to Goldman Sachs.  It also saddens me that it seems like we're on track for never learning anything from the previous debacle.  It seems like the culture of obscene profiteering is back.

[Legbiter]

Well, most of the competition is gone. That could explain it, in part at least.