Rolfe Winkler
Option ARMageddon
Goldman’s Q2 profit blowout
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From NYT: For Goldman, a swift return to lofty profits
Up and down Wall Street, analysts and traders are buzzing that Goldman, which only recently paid back its government bailout money, will report blowout profits from trading on Tuesday….
“They exist, and others don’t, and taxpayers made it possible,” said one industry consultant, who, like many people interviewed for this article, declined to be named for fear of jeopardizing business relationships.
Startling, too, is how much of its revenue Goldman is expected to share with its employees. Analysts estimate that the bank will set aside enough money to pay a total of $18 billion in compensation and benefits this year to its 28,000 employees, or more than $600,000 an employee. Top producers stand to earn millions….
For all its success, Goldman is not impregnable. In addition to the federal money it took last fall, it benefited from the government’s bailout of the American International Group, being paid 100 cents on the dollar for its $13 billion counterparty exposure to the insurer, and it has $28 billion in outstanding debt issued cheaply with the backing of the Federal Deposit Insurance Corporation.
Kudos to NYT for noting the taxpayer-funded collateral payments that passed through AIG to Goldman when the former imploded. Every dollar of that should come back to taxpayers. Goldman took counterparty risk dealing with AIG and, when that risk blew up in its face, wasn’t forced to eat a single penny of losses. Not a penny.
And the FDIC’s TLGP program enabled Goldman to borrow cheaply by putting a taxpayer guarantee behind that $28 billion worth of debt.
No doubt the guys at Goldman think they “deserve” all that bonus money being set aside. They’ve totally forgotten that, without taxpayers, many would have lost their jobs when their bank blew up with the rest of the financial system…
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Aarrrghh!!
Goldman Sachs is the brain trust for the the U.S. Treasury. “Manus manum lavat.”
I saw this coming at the beginning of the debacle but believed our Government would sufficiently behave in a manner to benefit the tax payer but it appears Administration protects its’ own interest.
Question: What’s the difference between Madoff and Government Sachs? (Answer: Who’s subsidizing it!)
The Administration bailed out AIG so that it can bail out its’ customers in full. That’s bad business when they would of accepted 25 to 50 cents on the dollar and save the taxpayer the additional expense.
Question: If AIG which is 80% owned by the Government goes under will Goldman Sachs be required to payback funds? What keeps Goldman Sachs from continuing to insure their debt through AIG and we’ll just do this all over again in two years?
One small problem with Goldman paying back the AIG receipts – it wasn’t theirs. GS and JPM etc are only the broker for the insurance and these payments went quietly to their clients who bet large knowing full well it would be rescued. Follow the money and you will find the winners of that engineered trade.