McClatchy takes on Goldman Sachs on the eve of the New Jersey governor’s election. That can’t be helpful to former Goldman CEO, Jon Corzine. There’s no question that Goldman did the best job of hedging against a housing market collapse, nor that they received preferential treatment from Treasury Secretary Hank Paulson, who was himself a former CEO of the firm. They’ve returned to profitability in large part because they now have less competition. If they were too-big-to-fail before, they are even more so, now.
However, I think it is primarily their good decisions that are giving them extra scrutiny at the moment. The firms that failed committed all the same sins and deserve the same condemnation. It’s true that Paulson’s moves to rescue AIG and not to rescue Lehman Brothers helped Goldman. So did a big infusion of cash.
With the help of more than $23 billion in direct and indirect federal aid, Goldman appears to have emerged intact from the economic implosion, limiting its subprime losses to $1.5 billion. By repaying $10 billion in direct federal bailout money — a 23 percent taxpayer return that exceeded federal officials’ demand — the firm has escaped tough federal limits on 2009 bonuses to executives of firms that received bailout money.
Goldman announced record earnings in July, and the firm is on course to surpass $50 billion in revenue in 2009 and to pay its employees more than $20 billion in year-end bonuses.
But it was actually the fact that Goldman, along with JP Morgan, were the healthiest firms going into the crisis that made them the vehicles for solving it. The Treasury went looking for help from those two firms because they were the only ones with enough of a pulse to buy up failing firms and avoid a complete collapse of global confidence in the financial markets.
The reason Goldman was comparatively healthy may have been because they were more clear-eyed than others about the crap they were selling in the bundled mortgage market, and they hedged against it earlier and more thoroughly than others. That doesn’t make them more guilty, in my view. It only makes them look worse. All of these firms knew that they were selling AAA-rated products as safe investments that they knew to be virtually worthless. The difference is that Goldman tooks steps to protect themselves.
The whole scheme was a form of legalized thievery and fraud. Some of it was illegal. All of it should be illegal after Congress completes its work on regulating the financial markets. But it’s become kind of a fad to conjure up conspiracy theories about Goldman Sachs and their influence on the inside of government. It’s definitely a big concern, but Goldman mainly benefitted from their status as a firm that was not collapsing, while others were. That put them in the driver’s seat more than the fact that Paulson used to work there. Spending too much time focusing on Goldman risks letting everyone else off the hook. They’re all scoundrels.
Nice to see a sensible analysis of the bailout. The conspiracy theories going around were difficult to swallow because they don’t make sense. Why would Obama make his top priority upon entering office the saving of the economy by papering over the sins of Goldman? Why would he risk destroying his own credibility?
No, the bailout in the form that it took was simply seen, rightly or wrongly, as the shortest distance between two points. Hopefully, sensible reforms will come soon. If the Republicans lead the efforts to filibuster, and the corporate Democratic whores line up with them, it should have the effect of sorting out the rats and the reformers.
hi…….
I m sure many of you are like me and one of the first things you do in the morning is head here and check out the new post. Along with seeing the new posts, I’m also always checking out the blog roll rss feed and watching them grow, or shrink sometimes. In one of my past …but all in all excellent site. Keep it up!
thanks.
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ashish
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foreclosed home auctions–foreclosed home auctions
Let’s bring back the progressive income tax and tax all these scoundrels. Hit them where it hurts the most — in their pocket books. And, the proceeds from such a levy we can use to accomplish all sorts of good things: public health, repairing the infrastructure, combatting global warming, revising our diplomatic and foreign policy initiatives, getting private money out of the electoral process. Why we could have the dawning of a gentler and more compassionate culture.
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Half year number works out to about $386,429, on average, for each of the roughly 29,400 employees, consultants and temps on Goldman’s payroll as of June 26.
It’s only a half-year figure, so it’s too early to know how Goldman’s workers will fare for all of 2009. But it’s clear that Goldman’s bonus machine is running well ahead of where it was in the summer of 2008.
A year ago, when the mortgage crisis was gathering steam, the comparable compensation figure at Goldman was $8.52 billion, or $243,514 per worker. (In those happier days, the firm had about 35,000 employees.)
In fact, Goldman’s per-employee compensation is close to where it stood in the middle of 2007, when Wall Street was booming. Halfway through that year, Goldman had set aside $392,756 per worker.
Goldman posted the richest quarterly profit in its 140-year history. (Bloomberg)Goldman is setting aside about 49 percent of that revenue for its compensation pool, a figure that’s actually fairly standard for a big investment bank.
… Goldman’s compensation expense isn’t just salary and bonuses — it also includes items such as severance pay.
… Those poor bastards. So I ask that, in celebrating our raping of the stock market, we show restraint in the following ways:
"But I will not let myself be reduced to silence."Of course it didn’t hurt Goldman that Paulsen was holding $600 Million in stock of theirs that he could not sell. It would have really hurt him if they were to not get all of their credit default swaps from AIG paid at 100 cents on the dollar, as they were.
When Paulsen literally got on his knees and begged Nancy Pelosi to support the TARP program, he was thinking of his own personal fortune in Goldman stock becoming virtually worthless if she didn’t get on board.
So let’s say 12 LA Republicans put aflatoxin in LA’s water supply because they think it will make Jesus come back, and that will neutralize the poison so no harm done and, well, heeere’s Jesus. 10 of them drink the water as usual and die. 2 of them are found to have stockpiled 1000s of gallons of pre-poison water and used it for their own, and their friends’ and family’s use. They may not be more legally guilty, but I’d say they’re vastly more morally reprehensible. Wouldn’t you? Or you would just call them more prudent?
I don’t know why some of the blogosphere is so anti-Goldman either. They are certain Obama, Geithner, and Summers are all loyal slaves to Goldman’s. They often blame Geithner for things that Paulson did. He has never worked for a Wall St. firm–just Treas. mainly and the Fed. Summers worked for a hedge fund somewhere for about 3 yrs and the Clinton Admin when banks were deregulated, but Clinton signed the bill and Gramm wrote them. Summers also taught at MIT and Harvard and ended up pres. there. I don’t think everything is his fault and he answers to Goldman.