What's Good for Goldman Is Good for the Government
By Scott Reeves Aug 06, 2009 11:15 am
Doesn't Washington remember that more Wall Street wealth brings in more tax revenue?
They’re not. Earlier this week, Goldman disclosed two new investigations by the government into its compensation practices and credit derivatives trading.
“We’ve got millions of people with no jobs,” Rep. Elijah E. Cummings, D-Maryland, told the Los Angeles Times after Goldman’s earnings announcement last month. “It just doesn’t make you feel too good and it doesn’t make my constituents feel too good.”
Today’s study question for politicians: where does tax revenue come from?
Maybe some members of Congress think tax money drops from the sky, and lately they’ve been spending it as if it’s free. But as any sane person knows, someone has to create the wealth before it can be taxed and then spent by wise members of Congress on programs that often fail to goose the economy as promised.
Goldman Sachs took $10 billion from Uncle Sam in the Troubled Asset Relief Program, but repaid the money earlier this summer. So on what theory do members of Congress think they have any say in the brokerage firm’s earnings, how it pays executives or rewards top performers with bonuses?
Goldman Sachs says it accepted federal bucks only at the behest of former US Treasury Secretary Henry M. Paulson. Nevertheless, Goldman reorganized as a bank holding company and many now question its ability to have survived the credit crisis without federal intervention.
But let’s get this straight: Goldman takes on risk, makes money for its clients and shareholders in a dicey market – and gets hammered by some in Congress for being bold and savvy? At times, it seems that some members of Congress believe Wall Street should be run like the National Endowment for the Arts. Follow-up study question: would Rep. Cummings’ constituents, or anyone, be better off if Goldman Sachs were in the dumper, maybe something along the lines of Bank of America’s (BAC) Merrill Lynch or American International Group (AIG)? Maybe the late, unlamented Lehman Brothers is Washington’s model of a socially responsible brokerage house.
Goldman Sachs last month reported net revenue of $13.76 billion and net earnings of $3.44 billion for the second quarter ended June 26 – the heftiest quarterly profit in the company’s 140-year history. It earned $4.93 a share, compared with $4.58 for the second quarter in 2008 and $3.39 for the first quarter of 2009.
The bank earmarked $11.4 billion for employee compensation, or about $324,600 per employee. Deep down, or maybe not so deep down, this probably rankles members of Congress who are paid $174,000 a year. If the routine nonsense out of Washington about Wall Street pay is just a case of class envy, the solution is simple: suffering souls should resign from Congress and get a job on Wall Street.
Last week, New York Attorney General Andrew Cuomo fretted that Goldman Sachs handed out 953 bonuses of $1 million or more, including 212 stars who pocketed $3 million or more.
Horrors! That’s a bit more than most have in their checking account at the moment, but why is this any of the government’s business? Where is the Constitutional authority for the government to regulate the pay of Wall Street’s top performers – or anyone else? If the tax code is steeply progressive, wouldn’t it be smart for the top 5% to make big bucks so they can be taxed cross-eyed?
Flapdoodle about Wall Street pay may just be part of the continuing spat between New York and Washington. If the purpose of Wall Street is to raise and allocate capital for US industry, it’s a good bet Washington wants a piece of the action. And why not? After all, the $787 billion stimulus bill was such a hit and naming public buildings or bridges after yourself must get old.
Goldman Sachs recently bounced back to report impressive profits. Join Hoofy and Boo as they take a look at how Goldman's risks paid off big:
No positions in stocks mentioned.
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Reply
2009-08-06 07:25:18
Propaganda on Minyanville?
I am suprised to see outright deception here. For starters, you have left out the 13 Billion loss Goldman would have taken if not bailed out by Paulson on AIG failure. No one forced Goldman to become a bank holding company. They did so because without several hundred billion more more in Govt. back-stops, Goldman was dead. Goldman has been given exemptions from the "risk rules" which govern banks, and has criminally INCREASED their VAR (risk level). (Citi's 350 Billion in guarantees are forgotten too by your ilk).
The world is beginning to see that bankers added little to the planet and that banks are best when they are regulated like utilities. If the Bankers are really as smart as we keep hearing they are, the real shame is the diversion of that brain power away from science and into highly rewarded paper shuffling.
The world is beginning to see that bankers added little to the planet and that banks are best when they are regulated like utilities. If the Bankers are really as smart as we keep hearing they are, the real shame is the diversion of that brain power away from science and into highly rewarded paper shuffling.
2009-08-06 07:54:53
"Give me Liberty or Give me Money!"
His backround is at Dow Jones News and Forbes. He knows better, he is doing the job of his masters. Sorry for the acrimony, but covering up crimes is dirty work, and some will call you on it, Mr. Reeves.
By the time the details of the multi-Trillion dollar theft that has occurred come out, you will be the first to say it is all ancient history and we must move forward, not look backward. As a wise man said, in response to that logic (only applied to the Elites, of course) "ALL crimes, by definition, took place in the past".
By the time the details of the multi-Trillion dollar theft that has occurred come out, you will be the first to say it is all ancient history and we must move forward, not look backward. As a wise man said, in response to that logic (only applied to the Elites, of course) "ALL crimes, by definition, took place in the past".
2009-08-06 11:31:41
Finally
Finally someone at least hints at the governments ridiculous policies. By all means, you are the government; if you have billions in the company then you have your say, and a large one at that. But if a company, like Goldman, has done nothing but make money and exceed expectations, let them go! They are getting paid well for doing well, pretty much the way life goes. Those who are successful, are rewarded. Back off, you have no say in the company when they have done nothing wrong! Goldman even made the taxpayers money, stay out of their business!
GovernMENTAL idiots.
GovernMENTAL idiots.
2009-08-06 11:41:30
Did this Jump the Shark?
Interesting perspective on the relationship between heroin addicts and their dealers.
Yes, both parties wish to be left alone in the alley. The taxpayer will clean up the needles and borrow the money for countless rehabs.
Nothing wrong?
Yes, both parties wish to be left alone in the alley. The taxpayer will clean up the needles and borrow the money for countless rehabs.
Nothing wrong?
2009-08-06 11:42:58
BS
lets not forget the backdoor bailout through AIG. To say that GS does not have any blame, is insane......I did not see you complaining, when the gov helps GS. Maybe Greed is not the best business model. When you play with fire you get burned. The whole Wall Street culture is to blame. Nobody is saying you cant make money, you just cannot take risk that will bring down everyone else but you.
Wall Street was built on the back of the American consumer. The current mind set on wall street of always chasing a profit which led to shipping good jobs out of this country is in effect Wall Street cutting its own throat, by destroying the American Consumer
Wall Street was built on the back of the American consumer. The current mind set on wall street of always chasing a profit which led to shipping good jobs out of this country is in effect Wall Street cutting its own throat, by destroying the American Consumer
2009-08-06 11:47:17
Wrong
Let's say the government makes theft legal as long as you declare your winnings as income and pay taxes. Would that be OK?
I'm not suggesting what GS does is theft, but I am suggesting that your argument is bankrupt. Let's say the AIG bailout cost $85 billion, $45 billion of which went to GS. Assumming a very rough tax calculation of 30% on that gain, GS gives the government $13.5 billion. Should the government be thrilled about this "winner?" No, they spent $71.5 billion to cover AIG's loss. Is that something the government should celebrate?
Internally, I'm wrestling with whether you actually know better or if you're really naive enough to buy the GS propaganda.
I'm not suggesting what GS does is theft, but I am suggesting that your argument is bankrupt. Let's say the AIG bailout cost $85 billion, $45 billion of which went to GS. Assumming a very rough tax calculation of 30% on that gain, GS gives the government $13.5 billion. Should the government be thrilled about this "winner?" No, they spent $71.5 billion to cover AIG's loss. Is that something the government should celebrate?
Internally, I'm wrestling with whether you actually know better or if you're really naive enough to buy the GS propaganda.
2009-08-06 11:58:56
There may be some critiques about this particular article, but to be very blunt, GS, like the banks that they now have joined, are capitalistic on the way up and socialistic on the way down. Looks like the folksy Warren Buffett (who invested in GS and GE and did a lot of PR jaw-boning) is now firmly in the same camp. As a main-streeter, I think they can all go to hell. To paraphrase Frank Zappa - capitalism isn't dead, it just smells funny.
2009-08-06 12:06:35
You all are still missing the boat. There is no profit unless true value of assets is greater than outstanding debt...very few corporations in the world are debt free and very few report their assets at a true firesale value.
Second...the value of money in all currencies issued is exponentially increasing while the actual production of clean water and food and electricity is decreasing.....so the world's debt has to diaapeear or a billion or more people have to die....this is 7th grade mathematics.....there is not enough actual real world life support production to equal the amount of currency issued by the world's countries.
Goldman simply holds claim to all the food that people will eat ten years from now....if we make it past Q3. but their ballance sheet is negative just like the balance sheet of the world.
Second...the value of money in all currencies issued is exponentially increasing while the actual production of clean water and food and electricity is decreasing.....so the world's debt has to diaapeear or a billion or more people have to die....this is 7th grade mathematics.....there is not enough actual real world life support production to equal the amount of currency issued by the world's countries.
Goldman simply holds claim to all the food that people will eat ten years from now....if we make it past Q3. but their ballance sheet is negative just like the balance sheet of the world.
2009-08-06 12:13:38
The government has nobody but them self to blame for GS earning money hands over fist. They showed the financial establishment that they're willing to let the tax payers absorb the risk while GS and their ilk keep the profit. Yeah they paid back TARP, so what? If I knew the government would guarantee my family's well being while I spent every dollar on lottery tickets, then I would aim for the big one too. Too big to fail, the most disgusting words ever heard in a capitalistic country.
2009-08-06 15:52:56
14 million dollars... that's what GS paid in taxes in 2008
14 million dollars... that's what GS paid in taxes in 2008
2009-08-06 16:03:14
hypocritical
Hey Mark, i can't help but get furious about your comments. First, let me say that I also agree that govts. shouldn't tell companies how they should be run, but you and the writer of this article just don't seem to get it. The govt. is the biggest contributor to GS's success over the past year!! If it wasn't for the govt. GS might have failed just like Lehman and others, but as soon as they were under threat the govt. you so much criticize came to their rescue with a bailout. Yes GS was in a way bailed out too, or are you that naive to think Buffet would have bought GS shares without being ascertained that the
TARP funds were going to be provided? I'm no conspiracy theorist, but you have to be very naive also to think GS wasn't the institution to hurt the most if AIG wasn't rescued. There are too many coincidences to ignore. If you so strongly believe the government shouldn't get involved in how businesses are run, then you should be screaming at the conflict of interest between GS and the govt. Paulson - ex goldman. Edward Liddy-chosen by the govt. to run GS after being bailed-out was until then a board member of GS. Kashkari- ex GS director chosen by Paulson to oversee the bailout. Thain-ex goldman, dumped the garbage of Merryl Lynch to BoFA, which by the way Paulson said if the board rejected, he would use govt. powers to remove all of its board members.
These are facts buddy, not theories. But if you're too naive to think GS is just being punished for being successful then you're probably biased.
TARP funds were going to be provided? I'm no conspiracy theorist, but you have to be very naive also to think GS wasn't the institution to hurt the most if AIG wasn't rescued. There are too many coincidences to ignore. If you so strongly believe the government shouldn't get involved in how businesses are run, then you should be screaming at the conflict of interest between GS and the govt. Paulson - ex goldman. Edward Liddy-chosen by the govt. to run GS after being bailed-out was until then a board member of GS. Kashkari- ex GS director chosen by Paulson to oversee the bailout. Thain-ex goldman, dumped the garbage of Merryl Lynch to BoFA, which by the way Paulson said if the board rejected, he would use govt. powers to remove all of its board members.
These are facts buddy, not theories. But if you're too naive to think GS is just being punished for being successful then you're probably biased.
2009-08-06 16:24:11
hypocritical
I am not denying that the government is the biggest contributor to the success of GS. The same can go for a (seemingly as of now) successful BAC. C and AIG would be long gone down the road to Lehman if it wasn't for the government. Every bank should get down on their knees to thank the government for stepping in when they did. MY problem, however, is that in a capitalist economy, a debt is repaid through interest. As hard as it is to think about, TARP funds were an investment. A sure-fire investment. If the company is successful, they pay back with interest what they borrowed. If they are not, the government keeps throwing billions at them until they are successful. As weird as it is to think about, there is no bottom to the bag of money that the government is willing to pull from. This takes away nearly all of the risk in the government's investments. Since GS has paid back their debt, and the taxpayers have benefited (through the interest), it simply seems to me that the government has no reason to moan about how GS spends its money. Maybe when the government held a stake in the company, yes, but now that the debt has been repaid? To me (and of course this gets into political views) the government is there to ensure that nothing goes too wrong. Money is put in place to ensure that individuals have part of their livelihood at stake as well. People are neglecting to take on risk because it will eventually have a monetary penalty. No matter what way you look at it, GS would not have taken the TARP money if it did not need to because it did not want to lose interest money (or power for that matter). Therefore it is not like GS intended all this, rather they relied upon the government to step in when they messed up. The government did its job of judging whether to let it fail or save it, and now that the debt has been repaid, I simply believe that they should back off.
2009-08-06 17:33:18
Can't we have just a little love, please?
After all, PR-wise, the last few weeks have been hell for GS. The third reference (42 $100+ Trading Days in Q2) is particularly enlightening.
Two New Governmental Investigations Into Goldman Compensation And Credit Derivative Practices Disclosed
http://www.zerohedge.com/article/two-new-governmental-investigations-goldman-compensation-and-credit-derivative-practices-dis
Goldman Defends Its Trading Practices, Claims It Does Not Front-Run The Market
http://www.zerohedge.com/article/goldman-defends-its-trading-practices-claims-it-does-not-front-run-market
Goldman's 42 $100MM+ Trading Days In Q2 - An Absolute, Unprecedented Record; Just Two Days Of Trading Losses
http://www.zerohedge.com/article/goldmans-42-100mm-trading-days-q2-absolute-unprecedented-record-just-two-days-trading-losses
Breaking News: SEC Plans To Ban ‘Flash Trades' That Give Advance Info To Certain Traders
http://www.zerohedge.com/article/breaking-news-sec-plans-ban-%E2%80%98flash-trades%E2%80%99-give-advance-info-certain-traders
Goldman Sachs Clarifies Its High Frequency Trading Practices
http://www.zerohedge.com/article/goldman-sachs-clarifies-its-high-frequency-trading-practices
GOLDMAN PRINCES TOLD: SPEND LIKE PAUPERS
http://www.nypost.com/seven/08042009/news/regionalnews/goldman_princes_told__spend_like_paupers_182904.htm
Two New Governmental Investigations Into Goldman Compensation And Credit Derivative Practices Disclosed
http://www.zerohedge.com/article/two-new-governmental-investigations-goldman-compensation-and-credit-derivative-practices-dis
Goldman Defends Its Trading Practices, Claims It Does Not Front-Run The Market
http://www.zerohedge.com/article/goldman-defends-its-trading-practices-claims-it-does-not-front-run-market
Goldman's 42 $100MM+ Trading Days In Q2 - An Absolute, Unprecedented Record; Just Two Days Of Trading Losses
http://www.zerohedge.com/article/goldmans-42-100mm-trading-days-q2-absolute-unprecedented-record-just-two-days-trading-losses
Breaking News: SEC Plans To Ban ‘Flash Trades' That Give Advance Info To Certain Traders
http://www.zerohedge.com/article/breaking-news-sec-plans-ban-%E2%80%98flash-trades%E2%80%99-give-advance-info-certain-traders
Goldman Sachs Clarifies Its High Frequency Trading Practices
http://www.zerohedge.com/article/goldman-sachs-clarifies-its-high-frequency-trading-practices
GOLDMAN PRINCES TOLD: SPEND LIKE PAUPERS
http://www.nypost.com/seven/08042009/news/regionalnews/goldman_princes_told__spend_like_paupers_182904.htm
2009-08-06 19:36:47
Yet another Obotomized schill at MV
Reeves, you've dropped some carp [sic] here before but this one renders prairie pizza an appetizer by comparison. I agree that the bums in gubmint should shut up and keep their very dirty paws off, but not for the reasons [Goebbelistic flatulences] you're spewing here.
"But let's get this straight [doublespeak for revised/cleansed version]: Goldman takes on risk [illegally highly leveraged, and using our money], makes money for its clients and shareholders in a dicey market [then pays back only its TARP, none of its counterparty save or a share of the profits from using TARP and the AIG bail] – and gets hammered [oh please, whining?] by some in Congress for being bold and SAVVY?"
Bold, certainly. Savvy? mmm, in a sick, twisted way, yes, if manipulating the market and the government to your benefit is "savvy." Honest folk might opt for slimy, sleazy, underhanded, or just plain light-fingered. Bribelicious!
I couldn't be more appalled that the greatest pushers and fleecers of the people - Frank, Dodd, Pelosi, and their fellow travelers in Congress and the Administration - have the power to actually interfere with how GS rewards its clients and shareholders. Yuck. Their High Horsenesses smell of... ewww, more carp! Double yuck!
And I am shocked - Shocked! - to find hypocritical double-dealing going on in Congress. They're publicly bashing GS while privately preparing to further line their pockets with the cap-n-TRADE scam [oh yes, Boy Gore, we know why you won't debate] that GS has been pushing hard for years because the profits they'll make from it make their last quarter look like a nickel. Our nickel, btw.
Triple yuck!!!
"But let's get this straight [doublespeak for revised/cleansed version]: Goldman takes on risk [illegally highly leveraged, and using our money], makes money for its clients and shareholders in a dicey market [then pays back only its TARP, none of its counterparty save or a share of the profits from using TARP and the AIG bail] – and gets hammered [oh please, whining?] by some in Congress for being bold and SAVVY?"
Bold, certainly. Savvy? mmm, in a sick, twisted way, yes, if manipulating the market and the government to your benefit is "savvy." Honest folk might opt for slimy, sleazy, underhanded, or just plain light-fingered. Bribelicious!
I couldn't be more appalled that the greatest pushers and fleecers of the people - Frank, Dodd, Pelosi, and their fellow travelers in Congress and the Administration - have the power to actually interfere with how GS rewards its clients and shareholders. Yuck. Their High Horsenesses smell of... ewww, more carp! Double yuck!
And I am shocked - Shocked! - to find hypocritical double-dealing going on in Congress. They're publicly bashing GS while privately preparing to further line their pockets with the cap-n-TRADE scam [oh yes, Boy Gore, we know why you won't debate] that GS has been pushing hard for years because the profits they'll make from it make their last quarter look like a nickel. Our nickel, btw.
Triple yuck!!!
2009-08-06 23:43:14
Goldman is the heart of the corruptocracy
You failed to mention how Goldman made those record revenues by taking outsized risk because everyone at Goldman knows there is NO DOWNSIDE. If they fail, then the losses hit the taxpayer.
Goldman is subject to every exception in the book by their own design.
Furthermore, the Goldman was a key player if not THE key player in gutting Glass Steagall and removing the SEC leverage limits.
Goldman also miraculously got paid every penny on the dollar for what should have been their AIG losses.
THAT is exactly why people despise Goldman.
But to two extra thick layers of icing on the cake, 1) Goldman then turned around and used the taxpayers money to make outsized gains ripping off pension investments, institutional investors, and individual investors through their front-running HFT software, and to top it all off, 2) Goldman paid next to no taxes on all of those record profits.
Again, Goldman is everything wrong with this country. It is corrupt to the core and has corrupted our entire governance structure to rip off millions of others and sink them into a life of economic and actual misfortune.
Goldman is subject to every exception in the book by their own design.
Furthermore, the Goldman was a key player if not THE key player in gutting Glass Steagall and removing the SEC leverage limits.
Goldman also miraculously got paid every penny on the dollar for what should have been their AIG losses.
THAT is exactly why people despise Goldman.
But to two extra thick layers of icing on the cake, 1) Goldman then turned around and used the taxpayers money to make outsized gains ripping off pension investments, institutional investors, and individual investors through their front-running HFT software, and to top it all off, 2) Goldman paid next to no taxes on all of those record profits.
Again, Goldman is everything wrong with this country. It is corrupt to the core and has corrupted our entire governance structure to rip off millions of others and sink them into a life of economic and actual misfortune.
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