The next Goldman acquisition

By Felix Salmon
July 16, 2009

Every so often, Andy Borowitz nails it:

In what some on Wall Street are calling the biggest blockbuster deal in the history of the financial sector, Goldman Sachs confirmed today that it was in talks to acquire the U.S. Department of the Treasury.

According to Goldman spokesperson Jonathan Hestron, the merger between Goldman and the Treasury Department is “a good fit” because “they’re in the business of printing money and so are we.”…

Mr. Hestron said the only challenge facing Goldman in completing the merger “is trying to figure out which parts of the Treasury Dept. we don’t already own.”

Meanwhile, Mark Gimein attempts a peculiar defense of the squid:

The rhetoric of the outrage has come full circle: Where, before, the villains were the banks that were stupid and greedy enough to fail, now the villains of the moment are those—a very small club, basically just Goldman and JPMorgan Chase—that have been smart and greedy enough to succeed.

Is it fair to say that Bear and Lehman were stupid, where Goldman and JPM are smart? Not really. In a universe of greedy bankers, some will fail and some will succeed. There’s no particular reason to believe that success is directly correlated with intelligence — in fact, as Gimein himself points out, there’s a long history, from Drexel to Enron, of smart people making spectacular profits before blowing up even more spectacularly. Higher profits generally mean higher risk — and if the US taxpayer is going to have to pay the bill if and when Goldman implodes, we should be able to ratchet down that risk. Or, at the very least, take for ourselves some of the upside when things go well.


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I find it interesting that in the past you’ve argued that there is no important relationship between risk and return for stocks, but you’re perfectly willing to apply the theory to banks. what’s the difference? (note that your argument implies that at least for bank stocks, there must be a positive risk-return relationship).

Posted by Ian D-B | Report as abusive

I disagree that the guys at Enron were smart. They were cheating. At the peak of the bubble there were risks. Lehman bet that the bubble wasn’t ready to burst, while Goldman said we need to get off this train. If I remember, in 07, when the Bear hedge fund imploded there was talk about how Goldman was shorting these MBS’s. The anger was that they were still selling some, but Bear, Lehman Merrill were doubling down bad investments while Goldman was getting out. There is no equivalence.

The analogy is to the bubble market neighbors. One sold in 2006, and moved or rented, raking it in, while the other heloc’d and used the proceeds to buy another specuvestment. One has 400k in cash, while the other has two foreclosures. Did they really take the same risks?

Posted by winstongator | Report as abusive


I love your blog and have been reading it daily for the last couple years. However, whenever I see a post concerning Goldman I am almost always loathed to read it.

Your posts about them often strike me as needlessly one-sided and disingenuous. While you generally apply level-headedness in your analysis; something about Goldman makes you go all wonky (as witnessed by the beatdown you took at the hands of Heidi Moore).

In some ways your Goldman posts remind me of the work of Ben Stein. I see a lot of typical Stein tactics when you do things like argue against obvious straw men (Mark Gimein’s weak post) and feigning ignorance by not acknowledging the ludicrous nature of some anti-Goldman arguments (you don’t really believe that Goldman “the great bubble machine” caused the great depression or the tech bubble do you?)

Posted by thalp | Report as abusive

The cultural differences would be too big to make this work. Also, Treasury is too heavily leveraged.

“Not really. In a universe of greedy bankers, some will fail and some will succeed.”

The difference between Goldman and the rest is its influence in Washington. Every time things go badly at GS it can go crying to the federal government and get bailed out. 3 blow-ups in twenty years is not a record to be proud of, nor is it a sign of intelligence. GS doesn’t benefit from greater intelligence, just greater corruption.

Posted by a | Report as abusive

I appreciate Andy’s humor, I really do. But Goldman Sachs has been the point man for financial pillaging of the US consumer. I am sure that Borowitz gets it and I certainly get it with my recently published website: s-Is-Committing-Treason