It appears the federal government is on the verge of walking away from CIT Group and the same can be said for Goldman Sachs–even though the investment firm is one of the mid-market lender’s biggest bankers.
Goldman Sachs’ second-quarter earnings, as jawdropping as the numbers were, did come with a few warning signs of trouble ahead. Most notably, the $1.2 billion in losses and write-downs the investment bank absorbed on commercial real estate loans, securities and related investments may be a harbinger of bad news to come from other financial firms.
The market is soaring today largely because chip-maker Intel reported better than expected earnings and Goldman Sachs bested even the most optimistic earnings predictions. But is it any shock that these two defacto monopolies would produce outsized earnings.
Goldman Sachs is entitled to make as much money as it wants from proprietary trading–that is trading stocks, bonds, currencies and bonds for its own account. But as long as Goldman benefits from bonds it sold with a government guarantee, it should pay an extra tax on those prop trading gains.
Though Goldman likes to downplay its own vulnerability during the financial meltdown last fall, its CDS levels provided by CMA DataVision paint a different picture. They also show just how far the company has come since the government pledged to support the big Wall Street banks through TARP and the FDIC bank debt guarantee program.