The news of the morning (and after the bell yesterday, of course) is Goldman’s earn-and-burn two-step. Blow away estimates (thanks prop desks!) and burn bridges with the Safecracker and the icy grip of Obarney. But Goldman is looking at a complicated mess to untangle.
First, a sale of $5 billion in common (with Goldman underwriting itself) will surely cause shrill screams to issue forth from the cobweb tangled lair of black-widow Maxine Waters, where the silk entombed, still living carcasses of Ken Lewis, and Count Vikula hang suspended from her ceiling, paralyzed by her neurotoxins. We can hear it now: “You paid yourself fees to take money from the public?”
Second, while Goldman is anxious to dip below the threshold that ties the all powerful bonus dollar up, the Government is decidedly less anxious to let Goldman escape its clutches. Wait for “now is not the time,” to issue forth from the White House. How we would love to see Goldman keep sending the check to The Safecracker until its accepted if/when this happens.
Third, paying back TARP is not enough. The Government also has a large chunk of warrants attached to the deal which Goldman would have to buy back.
Fourth, Goldman is paying over a million a day for the pleasure of Warren Buffett’s company in the form of dividends on the “Buffett Preferred,” which they cannot pay back until the government “lets them.”
We, of course, are cheering Goldman on (insofar as this means cat calling Maxine Waters and Barney Frank) but it is a long road ahead.
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Who is your CEO EP? If that is your real name.
When is Goldman going to start laying off more investment bankers? Investment banking down another 20% from the 4th quarter. I am sure some people at Goldman don’t want to share the bonus pool with all of those idle i-bankers.
The reason this fries my tail is that, even if Goldman succeeds in paying back TARP – isn’t it implicitly known now that the government would/will bail them out if they screwed up?
So Goldman gets to play by its own rules, pay itself bonuses – but still get rescued on the taxpayer’s dime?
Gotta hand it to Blankfein – getting the best of both worlds.
“Black widow”? So you’re comparing Maxine Waters, a congresswoman of color, to a poisonous arachnid? So racist EP. SO racist.
I’m calling The Right and Good and Honorable Reverend Jesse Jackson on you.
I can only comment, channeling Hitchens, that the title “Reverend” isn’t an honorific.
Goldman is switching calendars, and therefore not counting December, which coincidentally contained a lot of writedowns.
http://krugman.blogs.nytimes.com/2009/04/14/bush-budgeting-lives-at-goldman-sachs/
@6, even if they included the writeoffs, they would have come out firmly in the black and over the predicted profit line. learn to count.
@7, yes, based on FDIC-backed debt issuance and AIG payments. What’s that say about business going forward?
Who at Treasury permitted GS to continue trading prop? Trading prop having accepted taxpayer funds equates the funds with a free call option. What result should GS have suffered losses trading prop? Wouldn’t GS have again accepted taxpayer funds in order to speculate? Should taxpayers be cognizant of GS’ thievery, they would insist on fraud indictments.
@8
1) PPIP transactions haven’t happened yet
2)AIG hasn’t unwound their book yet, so going forward, you’ll continue to see more ‘conspiracy theory’ portfolio trades.
-adding months (check)
-shorting AIG equity and getting paid on the other side of their CDS trades via taxpayer rape (check)
-trading as principal v agent at a 5 to 1 ratio (check)
-having your ex-CEO hand you a blank taxpayer check (check)
GS always kills it
Goldman selling stock? Top of the market?
@9
Would you rather their prop desk get shut down? Care to ponder the effects of your own suggestion? Methinks not.
So what if GS prop desk shut down ?
there will no effects. businesses come into being and go out of existence or reorganize all the time. its called capitalism or at least it used to be called that.
So what if GS prop desk shut down ?
there will no effects. businesses come into being and go out of existence or reorganize all the time. its called capitalism or at least it used to be called that.
This is so obvious who EP works for. GS of course! Its easy to pay back taxpayers 10b after accepting 12.9b from them. Not to mention how many Bs in FDIC/taxpayer backed bonds it has issued.
Bought out of money october puts on these crooks. Will wait and see this go the way of AIG.
-Selling stock at 6 month high
-Overhaul in accounting, new year ends
-DIY underwriting
-low risk business underperformed
-Prop is king
-CFO didn’t sound convinced about short term performance
Smells like shit to me, you don’t switch mortgages unless you know your current lender will accept the repayment.
bawney fwank likes it when bankers are in bed with the government.
@17
You want them to issue shares when they perceive their stock is “cheap,” oh lord of high finance?
Maxine Waters is the Ellsworth Monkton Toohey of our time.
from d to v’s lips on the call: “the making of markets is the key to our business”. I may be reading too much into this, but I believe he’s implying that if gs has to steam roll a few “clients” along the way, well…they can suck it.
btw, did anyone else notice that they wrote down leveraged loans to $0.50 on the dollar? while I applaud their ability to dump $50 billion in loans since the third quarter, what does the mark say about the rest of the banks yet to report? finally, what’s with whit-whit being so nice these days (clearly an effort to get some consulting business)?
The point, @ 19 is what this says about business going forward
@8 and everyone else who still fails to understand the AIG-GS connection. GS profits have NOTHING to do with the payment it received from AIG. AIG owed them money and had to pay it back to not be considered insolvent. If AIG was insolvent, GS, much like all the other smart banks that hedge their funds, would have gone to other places where they’d bought insurance against AIG defaulting and received the money back. There is nothing illegal about this. Bankruptcy means inability to make good on due payments. Same way as if you ratchet up credit card debt. If you then take a federal loan that is there to help you against going bankrupt, you pay the credit card debt. Get it? In the meantime, your credit card company always has insurance against your defaulting. I don’t think you really understand the difference between cash reserves, payments, and profits, do you? And, if not, perhaps you shouldn’t sling mud? Just thinking out loud.
–Yours, @7
GS is trying to do the honorable thing and return the taxpayer money that government regulators shoved down its throat in September. They do not need the money and do not want to continue using taxpayer money. Why is this bad? I mean everyone feels outraged that banks use the fund, and then outraged again when bank says thank you, we are ok now, here is your money back with a VERY HEFTY divident of upwards of 5%. Everybody wins. What are you bitching about?
And you do realize, right, that GS doesn’t need to raise extra money to repay it–it is just one of the government’s stupid regulations. Look at their publicly available info–GS has a cash reserve of 135 billion dollars. But the TARP condition is that the bank has to raise the money to be able to repay it.
EP is so full of it.
How about Goldman’s lost month?
How about it?
@24 Please dont be so naive. GS are not trying to do the honorable thing, they are trying to do what they believe will make the most money.
And no everybody does not win. There is a difference between redistibuting wealth and creating wealth. hmm OK maybe Russia and China win ultimatly as the US is destroying itself. lol Funny really, so consumed by the quest for as much money as possible yet not realising that they are destroying the very things that make it worth anything.
It is amazing. I point out all the ways Goldman isn’t out of the woods yet, compare them to William Shatner’s bloated waistline and still I’m some kind of Goldman shill. I suppose there must be a substantial contingent of Dealbreaker readers wearing Spock ears who suffered mortal wounds to their delicate sensibilities when I put Kirk and Lloyd on the same level. Shame on me.
@23
If it is correct that Goldman bot protection on AIG from other sources, and other ‘smart’ money did the same, why was it necessary to take AIG into conservatorship? Why was it necessary to fully honor contracts written by an insolvent company on the banks of taxpayers?
You make the argument that the system would have been able to hold up under GS’ and other banks’ insurance claims in the event of an AIG default. The web of bank/reinsurance/insurance companies would not have been able to entertain so many cash obligations at once and Goldman was only able to collect on anything because we bailed out AIG. Maintaining the notion that Goldman could have collected on its default insurance stacked against AIG in a system collapse is absurd. The system would have failed and we the taxpayer halted that. The mere existence of GS as an entity at all is due to our action with regard to AIG.
The accounting identity is far from complex; Goldman should have to repay what it took from AIG derivatives proceeds as well.
Nothing will change the fact that GS, JP and fellows have effectively fucked those dumb tax payers. Make a risky bet and INSURE IT, THATS ALL YOU GOTTA DO!!!. The sums are so large and “systemic” that the domino effect comes into play. Its why We own 80 percent of AIG. I hope your deaths are heinous and painful.
@29, the other way to look at it as this. If we didn’t bail out AIG (and of course, AIG was bailed out NOT so that GS could benefit–just to preempt the next conspiracy about their world domination), GS would have been collecting their money from someone else, just like SocGen would have. This would have put a strain for a few tens of billions dollars on another financial institution, possibly leading it to require assistance from the government. However, these are profit-making institutions, not charity organizations, to be writing off other companies’ debts and not demanding what is rightfully theirs. Why should they care where the money they collect has come from? I mean I understand this is somewhat annoying, but there is a difference between annoying and wrong. What about GS’s or SocGen’s or any other bank’s obligation to its shareholders?
An empire of worthless rubble is all they deserve. We’re expected to believe that they are victims of Circumstance? Misfortune? Its just how it is!!! they say; Nevermind the always profitable GS scum. Goldman Sachs defies all odds? Nope. They’re only more devious and conniving.
@32, that’s like saying that google is more devious and conniving, or the medical company that develops a new medicine that others failed to develop is more devious and conniving. it is called intelligence. in gates’s words, “iq.” do you realize that envy is the only real reason behind why so many people hate gs and want it to fail? even when they were a private company, because of their policy of keeping to themselves they used to get mudded and denigrated for everything. they make money because they can and because they know how. it used to be a good thing; now, for some reason, in this new socialist usa of ours, we hate the idea. get over it!
@33, google provide a service that is of immense use to alot of people. They contibute a great deal to open source software. A medical company that develops a new medicine has produced somthing of real value for people who need it. There is a world of difference between companies like these and companies like GS. The term investment bank is so missleading. These people trade. They will as soon destroy as create real value – real companies – if that makes them more money. That is the difference. Personally I dont think envy is why most people hate GS, maybe more amongst those of a similar mindset but people who have been blessed with skills which allow them to create real and amazing things are generally just angry to see so much consumed and destroyed by these people who know how to or care only for the ammount of money they can accumulate for themselves without regard for what they actually create for others in return.
@31, you’ve alluded to my point. I am not of the conspiracy theory tinfoil hat school (I stayed away from west coast institutions of higher liberalism). That point is that in the event we did not bail out AIG, other institutions would have been on the hook for Goldman protection bot on AIG. In that event, as you point out, we would have had to bailout those other entities as well. Once again we arrive at the same conclusion: Goldman realistically owes the taxpayer significantly more than through direct TARP contribution. Is it incorrect to demand that money, which it would not have gotten absent any bailout to AIG or the other entities, back from GS? I am well aware of how they hedge(d) their exposure to AIG. It neither involves pixie dusk nor ruby slippers
However, their risk was not specific to AIG, it was systematic. No matter what someone may tell you, they were exposed to the system. And that is why Goldman owes the taxpayer substantially more than what they got through direct TARP funds.
@31
And one more thing. I do not hate Goldman for playing the game as it should be played. Any rational profit oriented firm would do that same. I have always admired them for that. And I do not want them to fail. My problem is that they have been given substantially better treatment than that of its peers. By virtue, they are manipulating the game in their favor more than playing it. The turnover between the Administration/Fed/Treasury and GS represents a serious conflict of interest. Anyone who says otherwise is:
A. A liar
B. An idiot
C. An ignoramus
D. A Legislator (A*B*C)^2
Wake up, this is garbage