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Goldman, what about the FDIC-backed debt

Goldman Sachs is trumpeting the fact it just paid the federal government $1.1 billion to buyback the warrants it gave the Treasury Dept. as part of last fall’s baillout package. But Goldman still is benefiting from the government’s largess by sitting on some $22 billion in FDIC-guaranteed debt it sold this past winter.

Goldman can’t say it’s truly free of government assistance until it retires this $22 billion in long-term debt that it sold to investors. Last week I argued that Goldman, instead of setting aside money for record bonuses, should use some of that cash to retire these FDIC-backed notes early.

Until Goldman does that, it’s still fair to say Goldman is trading with the implicit backing of the federal government.

Goldman’s trading secret

LONDON, July 22 (Reuters) – Goldman Sachs last week reported record net revenues from trading and principal investments ($10.8 billion) during the three months ending June, with the major contribution coming from the fixed income, currencies and commodities segment ($6.8 billion).

Most commentators ascribe the firm’s stunning performance, and strong results reported by some of its peers to luck (a rising market lifts all boats); brilliance (trading strategies that are just smarter than everyone else); being one of the last men standing (benefiting from the lessening of competition in many of the markets in which Goldman operates); or some combination of all three.

What’s the frequency, SEC?

Sergey Aleynikov is not the Wall Street folk hero that some Goldman Sachs conspiracy theorists are making him out to be.

If Aleynikov stole some of the top secret code for Goldman’s automated, super-fast trading platform, as prosecutors contend, then he broke the law, and the 39-year-old former Goldman programmer should be appropriately punished.

Jamie vs. Lloyd

Depending on your point of view, Jamie Dimon is the saint of Wall Street and Lloyd Blankfein is Wall Street’s biggest villain. Or vice-a-versa. Or maybe they’re both villains.

I suppose some might even argue that Dimon, the top honcho at JPMorgan Chase and Blankfein, the top gun at Goldman Sachs, are both saints. But the people in the pro-sainthood camp are keeping their thoughts to themselves these days.

Who will be CIT’s Buffett?

The behind-the-scene negotiations surrounding CIT Group’s threatened bankruptcy filing is bringing to mind the 2001 collapse of Finova, another sizeable mid-market lender.

 On the eve of Finova’s bankruptcy filing in March 2001, Warren Buffett seemingly came to the rescue with a $6 billion loan package to help keep the financial firm running in bankruptcy and payoff creditors. The financial package, which Buffett put together with Leucadia National Corporation, came from a new company called Berkadia.

Tax Goldman debate heats up

The idea of taxing Goldman Sachs and other banks that engage in prop trading is heating up.

I fully endorsed the idea in a column on Thursday. (i amended my thoughts a bit from earlier in the week). FDIC Chairman Sheila Bair seems to be talking about a similar bailout tax concept. And we may hear more from Bair on the subject next Thursday when she is set to testify before the Senate Banking Committee.

The Factor

Don’t worry this is not a column about Bill O’Reilly, the voluble Fox News personality. No, what I’m talking about is the bread-and-butter business of CIT Group, the mid-market lender now limping along on life support.

The Wall Street Journal today wrote one of the first decent articles discussing CIT’s importance in the world of factoring–an ancient form of business financing that CIT long dominated in the US.

Goldman needs to retire its FDIC-backed debt

If Goldman Sachs wants to go back to the future and keep setting aside record sums of money for compensation and year-end bonuses, it should first retire all of its oustanding FDIC-backed debt.

The big investment firm has issued some $22 billion in longer-term debt under the Federal Deposit Insurance Corp.’s Temporary Liquidity Guarantee Program. Goldman sold most of those notes during the height of the financial crisis, when the bank desperately needed to raise capital like most other financial institutions.

Tax Wall Street trades

Reports of the death of the investment bank have been greatly exaggerated, as Mark Twain might have put it. It was just 10 months ago, after Goldman Sachs and Morgan Stanley quickly converted themselves into bank holding companies, that nearly everyone had written off investment banking. All those predictions about Wall Street firms becoming less profitable and boring places to work seem laughable in light of Goldman’s blowout second-quarter profits and JPMorgan Chase’s equally impressive earnings.

Now all the chatter is about how little things have changed on Wall Street, with trading revenues and fees from underwriting stock deals padding the bottom lines of both banks. Back in September, The New York Times ran a lengthy article headlined “Wall Street, R.I.P.: The End of an Era.”

Goldman, liquidity and VAR

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Goldman Sachs’ second-quarter earnings release showed a continued increase in the amount of market risk held on the firm’s trading book. Its risk appetite has continued to expand at a time when extreme turbulence has forced others to scale back.

True, Goldman’s publicly reported figures may overstate its actual positions. But the Wall Street bank also appears to be taking advantage of its access to liquidity from the Federal Reserve to increase risk.

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