Goldman Sachs: tone deaf, politically stupid or foolish?




Probably all of the above and then some. Time makes a great point which is that Congress is still in the process of writing new regulations, so to splash record high bonuses in the face of the public during a recession – a recession caused by Wall Street, no less – is amazingly stupid. Nobody wants the banks to fall back into technical insolvency but at the same time, it leaves everyone wondering why they bothered to pitch in and help a struggling industry. As always, there is never any appreciation or compromise by this industry. Let them win this battle and see how they do with the long term war. And there is no doubt Wall Street has declared war – class war – on the public with their gaudy numbers. It’s as if they are begging to feel the full force of the tax code and regulations by a Congress who will running for reelection next year. Time:

In a clear departure from the historical norm, the White House is not cheering the return of huge profits to Wall Street. On the contrary, the recent windfalls at Goldman Sachs and JPMorgan, and the promise of giant year-end paydays for banking executives and traders, has caused a bit of consternation in the West Wing, coming as it does so soon after the taxpayer bailouts saved the entire financial system from total collapse.

“If I were a Wall Street firm, I would perhaps be cognizant of the fact that the financial regulatory-reform process is only beginning in Congress,” warns a senior White House official, speaking about the political problems that huge paydays at Wall Street firms could create later this year, when new laws to regulate the industry will be written on Capitol Hill. Officials have also begun to worry aloud whether the Wall Street firms learned anything from the catastrophic financial crisis that was largely of their making or whether they are now returning to the old business of making short-term profits that create long-term risks.

More after the jump.

Yesterday CNNMoney had a great article about the greedy and arrogance of a business that was once considered the “classy” team on Wall Street. Now they’re the lead example of selfishness in an industry that is already considered the most selfish of all businesses. Now Goldman is fighting with the US government to pay the least possible on money loaned to them and others to keep the industry afloat. No “thank you” or consideration for the assistance, but instead, a big fat “screw you” to return the favor. CNNMoney:

Under the law, Goldman, like other early TARP repayers, has the right to force the Treasury to sell back the warrants after a lengthy set of price arbitrations.

When I say that taxpayers kept Goldman alive, I’m not talking about the $10 billion of TARP money or the $12.9 billion of AIG (AIG, Fortune 500) bailout money that Goldman got. The $10 billion was nice, but not necessarily essential to Goldman’s survival, and Goldman says it was holding enough assets and collateral to get all or almost all of the $12.9 billion had the government not bailed out AIG.

Rather, I’m talking about the way that U.S. and foreign governments — in other words, taxpayers — saved the world’s financial system, saving Goldman in the process. Had many of the world’s biggest institutions collapsed, which would have happened without taxpayer aid, Goldman would have been wiped out because the firms that owed it money wouldn’t have been able to meet their obligations.

I’m also talking about the Federal Reserve Board moving with lightning speed last fall to allow Goldman to become a bank holding company. By giving Goldman access to vast amounts of money it was making available to bank companies, the Fed ended panicky demands from Goldman customers that the firm immediately return the cash and securities it was holding for them. That was the equivalent of a run on the bank, which no institution can survive. Stopping it saved Goldman.


An American in Paris, France. BA in History & Political Science from Ohio State. Provided consulting services to US software startups, launching new business overseas that have both IPO’d and sold to well-known global software companies. Currently launching a new cloud-based startup. Full bio here.

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