Posted on 07/22/2009 7:23:39 AM PDT by SeekAndFind
Given the public outcry over news of Goldman Sachs's recent record earnings, you'd think many people would prefer Goldman had lost money. Does that really make sense?
I can understand why some people are upset, since I've heard from many of them. Their argument is that Goldman Sachs, like other recipients of funds from the government's Troubled Asset Relief Program, might well have failed without taxpayer assistance. Now, without the slightest sign of being in any way chastened, Goldman bankers have gone out and earned so much that they stand to receive huge bonuses that rival those at the height of the credit bubble for which they deserve at least some of the blame.
But let's think about this for a moment from Goldman's point of view.
I don't think anyone there would dispute that Goldman benefited, perhaps disproportionately, from steps the Treasury and Federal Reserve took to stabilize the financial system. The rescue of insurance giant AIG may not have had any direct benefit (Goldman insists that it was so well insured against an AIG demise that it wouldn't have lost money had AIG failed) but to the extent AIG's rescue helped prop up the financial system, Goldman and all other banks benefited. Like others, Goldman was able to issue government-backed debt to help maintain its liquidity. Goldman not only survived, but seems to have taken market share from competitors.
But Goldman did not seek the capital injections it received under TARP. Like the other large recipients, its chief executive was summoned and told the TARP funds would be coming, and the terms on which Goldman would have to accept them were dictated by the Treasury. Those included the interest rate Goldman would pay and the grant of warrants. Treasury had to make strong banks as well as weak ones take the money so as not to trigger runs on the weak banks. In that sense, by taking the TARP money, Goldman and other strong banks like, JP Morgan Chase, rendered the U.S. a service.
It's also worth bearing in mind that Goldman bankers will be in line for large bonuses because the firm made a lot of money. This is not a case, as AIG was perceived to be, of paying bonuses to people who lost money, costing shareholders and taxpayers billions. Goldman seems to have made most of the profits on its trading and underwriting businesses. In other words, it earned it. And if you think that's so easy, look at all the rivals that didn't fare nearly so well.
Goldman was also in the vanguard of banks that repaid their TARP money, with interest. So far the firm hasn't cost the taxpayers a dime. The government is still negotiating how to value the warrants. But as long as it holds them, the government is like a shareholder. Those warrants just got a lot more valuable thanks to Goldman's blow-out quarter. If only all the government's investments worked out so well.
Goldman is hardly alone on Wall Street in making lots of money this past quarter. Just about anyone with the courage to invest in mid-March (as I strongly recommended at the time) has enjoyed a great run. There are plenty of hedge fund managers who will continue to haul down massive bonuses, but without the outrage Goldman has generated.
I'm not saying compensation in the financial industry makes sense. There may well be ways to align pay and bonuses with the long-term interests of firms and the financial system as a whole, which would be all to the good. But until the problem is addressed systemically, it hardly seems fair to pick on one firm just because it's so successful.
I've said before that rather than complain about the success of investment bankers, you might as well invest in them, as I have. For about $160, you can own a share of Goldman Sachs. That's not to say I'd be buying it now, after such a great quarter. In fact, I've been reducing my position (as I've reported), and, given the recent results, clearly sold too soon. But I'm not complaining. As both a shareholder and a taxpayer, I hope Goldman — and the other big banks — do well. That's the only way to restore the financial system to health.
Maybe because they made money the real old fashioned way???
What they did is immoral and outrageous. Greed is a vice and it is one of the seven deadly sins. There is a reason greed is wrong.
Wrong. GS got $13 billion in federal bailout money through AIG. And guess who engineered the AIG bailout? Former GS chairman Hank Paulsen. THAT is what has people ragging on GS now - they used AIG credit default swaps to increase their leverage and their profits, apparantly without making sure AIG could cover what had been issued. And when they found out AIG was not good, they ran to their sugar daddy at Treasury and he made sure GS got their money. Privatizing profits, publicizing risk and losses - that is the issue here.
For starters, Goldman Sachs, after recieving taxpayer bailout money, turned right around and made hundreds of millions off of jacking the very same American taxpayers via oil and gas speculations, which invariably raised the price of both oil and gas. Schweeeeeeeet, huh?
But yeah, lets continue to defend Goldman Sachs making huge profits.....
Why Bash Goldman Sachs for Making Money?
Because the swindling thieves rigged the system to their own advantage?
That they did - by having the government bail them out of their poor risk management hole.
My feeling is a that Goldman is a trough for the Dems to funnel money.
I don’t trust a bank that produces Robert Rubin or Gov. Corzine.
We protest because the profits were privatized while the risks are nationalized. There is no disincentive to take the risks. They get salaries and bonuses either way. That is fascism.
I don’t fault any company for making a profit. What concerns me is the fact they were on the verge of going under due to questionable decisions. Those same people are now in key positions that have an effect on the economy. So I question if they’re the best people.
Why bash Bernie Madoff for making money??
Exactly. Apparently, that will be the next hit piece from Mr. James Stewart.
This cr@p has already been refuted.
http://seekingalpha.com/article/149921-the-fine-line-between-profits-and-theft?source=yahoo
For exceptionally small values of "earned".
Government money poisons everything it touches. Just as programs like affirmative action cast suspicion on everyone it is supposed to help (is your doctor a good doctor, or a D- student who was pushed through on an affirmative action program? The fact that question has to be asked harms the good doctors), TARP and all the other government bailouts cast doubt on every successful bank. Is the bank in a strong position because they avoided the mortgage meltdown by only granting sane mortgages, or are they in a strong position because someone in treasury (who maybe worked at that bank last year, still has friends there and expects to go back after a stint in the government) decided that company would be a winner at the expense of other companies not so connected. Is that dog a strong wolf, or is it government's pampered pet?
(Goldman insists that it was so well insured against an AIG demise that it wouldn't have lost money had AIG failed)
If AIG had gone belly up, it would likely have dragged all those insurance plans down with it.
Straw man. Nobody’s bashing them for making money. Having their cronies and operatives in government rig the game to cover their bets is to be condemned.
Because Goldman Sachs made money a) illegally and b) with preferential treatment at the expense of the taxpayer.
A little research has really opened my eyes. Start here:
http://www.zerohedge.com/taxonomy_vtn/term/197
and
http://market-ticker.denninger.net/
But of course it is not so nearly immoral or outrageous, if the proceeds are being used to promote the agenda of The Won, and the various lower eschelons that support the agenda.
These holy words were transcribed from scholars of Marx-Lenin, in that ill-gotten gains used to further the socialist cause, were never ill-gotten to begin with, but were simply reparations due and owing to the proletariat.
The list is endless on how GS games the markets to loot and steal. Back during the dot bomb implosion when Corzine was running them - GS and other investment banks were trading the IPOs of dot bomb stocks on IPO daya back and forth to drive worthless companies from $15 to 150 on IPO day due to small floats. Why to get the suckers on Main Street to buy this junk.
GS also cleared trades and lent money to hedge funds that wiped out much of their competition - Lehman, Bear, Merrill, etc.
The hedgies then went after Goldman and Morgan Stanley and they ran crying to Hank Paulson at Treasury and the SEC to make the hedge funds stop. They got what they wanted.
That is correct DS! Goldman Sacks funneled American taxpayer money through AIG - total of 13 Billion dollars.
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