Goldman Makes Bucketfuls

By Big Tent Democrat, Section Economy
Posted on Mon Apr 13, 2009 at 03:35:59 PM EST
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Goldman Sachs announced its quarterly earnings after the close of the market, apparently the news was very good for Goldman (1.8B and $3.39/diluted share and will raise $5 billion in a private offering) and will be giving back the TARP money it took (apparently $10B) as soon as possible (How does tomorrow sound to you Goldman?). No word on whether the backdoor bailouts given to Goldman via AIG would be returned . . .

How much of that profit comes from AIG counterparty positions? More . . .

Goldman is being criticized for giving the TARP money back:

Richard X. Bove, a bank analyst with Rochdale Research, believes that it would be a “horrible mistake” for Goldman to pay back the TARP, according to a note he sent to investors Monday morning. “I have continually believed that extreme measures are being taken in this current financial crisis because hysteria has replaced sound thinking,” Mr. Bove wrote. “If Goldman Sachs makes the decision to bend to this hysteria by selling 80 million shares of stock it would be a black mark against management.”

To Mr. Bove, swapping the cheap government equity by diluting current shareholders makes little sense and challenges the notion that the money is placing an undue burden on the investment firm. “The fear of excessive regulation exists today, not as the result of actions taken by regulators, but due to the constant flow of intemperate statements by Congress and the new Treasury,” he said. “It is totally unlikely that any of these statements will ever become law.”

There are two things worth noting in this critique. First, the obvious, it is ridiculous for Goldman to give back the cheap money the government has shoveled at them. I say this from the perspective of the well being of the Goldman shareholder, who is about to find his holdings diluted.

Second, these folks really freaking believe this Masters of the Universe nonsense. Bove's entire critique is that compensation regulation will NOT be imposed on TARP fund receiving entities so do not worry about it. My critique is do you REALLY think the folks who would leave are worth sacrificing this cheap money for? Really?

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Goldman Makes Bucketfuls | 86 comments (86 topical)

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Well, golly, (5.00 / 1) (#3)
by Anne on Mon Apr 13, 2009 at 03:54:24 PM EST

is there a rest of the story here that will just get glossed over?

While Goldman said FICC had more than doubled its revenue to $6.56 billion from the same time last year, its holdings of hard-to-sell assets continued to decline in value. Credit products included a $1 billion loss, net of hedges, tied to junk-debt origination, and mortgages included a net loss of about $1 billion on residential loans and securities.

Can someone tell me what these profits mean for the credit markets?

Have to stop typing as I need both hands to keep my brain from exploding over trying to make real sense of this kind of news...

AIG saves the day (5.00 / 1) (#12)
by Big Tent Democrat on Mon Apr 13, 2009 at 04:12:07 PM EST

which means you and me and all taxpayers.


BTD ...here is a link to a story about the money (5.00 / 1) (#22)
by steviez314 on Mon Apr 13, 2009 at 05:04:29 PM EST

Goldman got from AIG and how it's not quite as nefarious as you think:

Of the $13B, $5B was just a straight return of securities lent (AIG's CUSTOMERS securities were lent out to Goldman..standard stuff).

Another $3B was for collateral for trades. We can discuss what it would mean if collateral postings would be put into general question (see Lehman for results).

The last $5B was for AIG to get out of CDS insurance it had written by actually buying the underlying bonds (which were not in default). So, sure AIG didn't have to pay the $5B, but then it wouldn't have the bonds either. And it would still be short the CDSs. So in effect, it took possession of the underlying security rather than just having the bet on.


Well (none / 0) (#28)
by Big Tent Democrat on Mon Apr 13, 2009 at 05:25:30 PM EST

you saw the problem before I had to respond -

"The last $5B was for AIG to get out of CDS insurance it had written by actually buying the underlying bonds (which were not in default). So, sure AIG didn't have to pay the $5B, but then it wouldn't have the bonds either. And it would still be short the CDSs. So in effect, it took possession of the underlying security rather than just having the bet on."

AIG has bonds worth what now? Surely not $5B.


But it no longer ha a contingent CDS (none / 0) (#29)
by steviez314 on Mon Apr 13, 2009 at 05:32:17 PM EST

liability on their books, that would be equal to par less the bond's market value (and like an option, with time value and volatility risk).

Effectively it just settled the trade early.

There is also an advantage to them having the bonds on their balance sheet--they can sell them if they need liquidity (they'd be frozen if all they had was a short CDS). In addition, parties that own bonds and CDSs usually have no incentive to work with the underlying companies to maximize the bonds' values--they are hedged. AIG will have both these abilities.


Settled the trade (read bet) (none / 0) (#30)
by Big Tent Democrat on Mon Apr 13, 2009 at 05:33:38 PM EST

with our money. that's the problem.


Actually it seems that AIG had already posted (none / 0) (#32)
by steviez314 on Mon Apr 13, 2009 at 05:39:38 PM EST

collateral with Goldman on the CDSs, which was returned, so they effectively paid the bonds' market value.

I.e., they paid $5B and got back bonds and collateral worth $5B.

You got the details? (none / 0) (#35)
by Big Tent Democrat on Mon Apr 13, 2009 at 05:44:27 PM EST

this would be excellent news.

And AIG should sell those bonds in orderly fashion and get ready to close the doors.

the brand name is sh*t.

this should be in Chapter 7 mode.


It's in the article I linked, and I'm 90% sure the (none / 0) (#37)
by steviez314 on Mon Apr 13, 2009 at 05:46:32 PM EST

guy knows what he's talking about.

And yes, if they have the bonds early rather than the contingent liability, they should sell them.

I don't know if these moves were replicated with other counterparties, though.


Reading the article (none / 0) (#38)
by Big Tent Democrat on Mon Apr 13, 2009 at 05:48:58 PM EST

and I am already troubled by it.

First this:

Goldman received $5 billion in cash that had been previously lent to AIG, and returned $5 billion in government and agency securities to AIG, which AIG had pledged via repo. If AIG did not pay the loan back, Goldman was free to liquidate the collateral it held -- whether AIG was in bankruptcy or not, as per the terms of the standard repo docs. So to not pay back the money would have simply meant that Goldman would have liquidated the bonds it held as collateral in order to get its money back. This is a total non-event.

This is only a "non-event" if the collateral REALLY is worth 5 billion dollars. I do not see how it could have been. I'll stop reading now because just with that I am finding it hard to believe this writer with all due respect.


finally an admission (none / 0) (#39)
by Big Tent Democrat on Mon Apr 13, 2009 at 05:52:59 PM EST

that Goldman was overpayed and you have to accept it now - your source after all:

To interfere with contractual collateral posting mechanisms, and suggest that AIG shouldn't pay, is simply not thinking through the situation. Think of what that would imply for collateral posting mechanisms more broadly. The posting of collateral is a key risk mitigant that enables the credit markets to function. What would happen to mortgage rates if the banks had to consider that they may not have their loan secured by the collateral of the house and had to solely rely on the ability of the borrower to repay on the basis of credit score alone ... are people prepared to buy homes at credit card rates?

You see? We can't cast doubt on "collateral posting mechanisms" ERGO AIG had to make Goldman whole even though the collateral did not have the same value.

Your "source" admits overpayment.


Sorry, that's not what that paragraph is saying. (none / 0) (#47)
by steviez314 on Mon Apr 13, 2009 at 06:04:11 PM EST

AIG owed Goldman more collateral for some other bet. They could either have posted it or not. It not paying off the bet, just a collateral posting.

They ended up posting it. Not an issue of overpayment or not.

Now obviously, you don't think AIG should have honored that contractual collateral posting since they received taxpayer money, even though they were not in Chap 11 or 7. My opinion is that would create a systemic breakdown. How could anyone lend even on a SECURED basis, if they felt the security would not be posted as collateral.


Look (none / 0) (#49)
by Big Tent Democrat on Mon Apr 13, 2009 at 06:08:29 PM EST

you say it was no cost.

I say that if it REALLY wqas no cost, then Goldman and AIG and the Obama Administration amount to the dumbest folks on the planet because they bought themselves a PR nightmare for no good reason.

Goldman should have kept its side of the trade and avoided the PR nightmare if that was the case.

Occum's Razor.


No. Goldman had a chance to settle the CDS trade (none / 0) (#56)
by steviez314 on Mon Apr 13, 2009 at 06:21:49 PM EST

now. What if they waited, the underlying company went bankrupt in 5 years, but oops, AIG had disappeared by then. They had a good reason to close out that trade now.

The $5B repos had to be undone--AIG wanted their customers' securities back and Goldman wanted their money back.

The bad PR is from lousy explaining. And frankly, I think I'm kind of explaining the mechanics well to a smart person, and making no progress either.

If disdain for the finance industry is so great that even an innocuous repo market explanation is pooh-poohed, then no PR would have mattered.


: Nope (none / 0) (#61)
by Big Tent Democrat on Mon Apr 13, 2009 at 06:44:31 PM EST

Not convincing at all. Why did the trades need to be unwound now?
I am completely skeptical.

And more of the same (none / 0) (#40)
by Big Tent Democrat on Mon Apr 13, 2009 at 05:54:51 PM EST

"So could we have allowed AIG to fail? Not without a price -- a price we got an inkling of when Lehman failed. That was the whole purpose of the AIG intervention to begin with: to ensure the (semi) orderly functioning of markets, and to prevent an already vulnerable system from suffering a massive shock. This was the defusing of a bomb so that no further damage was done. We did so by having AIG be a viable, but unwinding, entity."

This remains we have to save the Masters of the universe argument I have consistently rejected.

In fact, the article infuriates me.


If I May... (5.00 / 1) (#73)
by santarita on Mon Apr 13, 2009 at 08:32:42 PM EST

I don't think that the government's actions are about AIG or Goldman. It is about trying to pursue an orderly unwinding of intricate transactions so as to avoid the chaos that would result from precipitous action. In two to three years, many of the institutions that you think the government is trying to save will be gone or fundamentally changed. Look at what has happened already: iconic institutions have disappeared in a fairly short period of time: Bear Stearns, Lehman, Wachovia, Wamu, and Merrill.

Some of the remaining large financial institutions may remain fairly unscathed because they were prudent enough to capitalize for the risk that they were taking and have better management and better business operations. But even those institutions will, in all likelihood, be greatly changed. So I don't think the government is trying to save the Masters of the Universe. I think the government is doing its part to shore up the American leg of a global financial system.


: At a cost of a trillion dollars at least (none / 0) (#74)
by Big Tent Democrat on Mon Apr 13, 2009 at 08:34:50 PM EST

Unacceptable.
I oppose.

You're way too cynical: (none / 0) (#42)
by steviez314 on Mon Apr 13, 2009 at 05:55:55 PM EST

If short term gov't and agency securities aren't worth par, we're all in a heap of trouble.
Remebember, these are securities that are in AIG's CUSTOMERS accounts, and were lent out with standard hypothecation agreements. Those customers want their securities back, not cash. AIG even has a bigger fiduciary responsibility to those customers than it does its creditors.

This was a standard repo arrangement, done every day by every bank, broker, insurance company, etc in the world.


I really doubt the writer (none / 0) (#46)
by Big Tent Democrat on Mon Apr 13, 2009 at 06:01:23 PM EST

at this point.

Short term T-bills? That's basically money.

What agency? Fannie and Freddie?!?? Ahhh.


Fannie and Freddie debt trade at least at par (none / 0) (#51)
by steviez314 on Mon Apr 13, 2009 at 06:16:52 PM EST

if not higher:

The point also is that it is the customer's securities and risks. If BTD has $10M (face value) of Fannie Mae bonds in his AIG account, he wants them there every day. If AIG has lent them out to Goldman for $8M cash (due to a collateral haircut), they need the $8M to give back to Goldman to get those bonds back for their good customer, BTD.

That's all the repo market is.


They back it back (none / 0) (#55)
by Big Tent Democrat on Mon Apr 13, 2009 at 06:21:13 PM EST

at par? Why not buy it in the market?

This simply does not make sense.


They don't buy it back at anything. (5.00 / 1) (#57)
by steviez314 on Mon Apr 13, 2009 at 06:24:37 PM EST

Securities are lent in exchange for cash. Then the same amount of cash is returned (plus interest) and they get the securities back.


See (none / 0) (#60)
by Big Tent Democrat on Mon Apr 13, 2009 at 06:43:28 PM EST

You made my point.

The collateral dropped in value.

They made Goldman whole. AIG had the money and Goldman had the colateral.

Goldman wanted the money back. Why?


No the collateral did not drop in value. (none / 0) (#65)
by steviez314 on Mon Apr 13, 2009 at 07:00:26 PM EST

And it wasn't AIG's collateral. It was their customers'.

I'm just not sure how to explain the repo market to you.


So AIG's custmer was made whole? (none / 0) (#66)
by Big Tent Democrat on Mon Apr 13, 2009 at 07:02:11 PM EST

What customer? Was there a difference in value? who made up the difference?

And BTW, what is the purpose of this market?


All margin customers of any broker has, as part of (none / 0) (#67)
by steviez314 on Mon Apr 13, 2009 at 07:11:38 PM EST

the standard agreement, allowed the broker to lend out their securities in exchange for cash.

The broker then uses the cash to fund their operations. All banks and brokers use the securities of their customers as collateral for short term financing.

It's how parties with excess cash get some extra return on their idle funds--by lending it out on a secured basis to ones who need cash.

There is no difference in value, this is not a trade or bet. Just a loan secured by assets. If you can pay the loan back, you get the assets back. The customer was always at risk for any change in the collateral's value--they legally were always his, he just lent them to AIG who lent them to Goldman.


So who were the customers? (none / 0) (#68)
by Big Tent Democrat on Mon Apr 13, 2009 at 07:18:20 PM EST

As you now say, someone was made whole at the government's expense? Who?


The AIG customers are people like you and me, (none / 0) (#69)
by steviez314 on Mon Apr 13, 2009 at 07:32:41 PM EST

except with more money. Say somebody who has a $1 million 30-day treasury bill in their account.

So AIG uses that bill as collateral to borrow $999,900 dollars (its a 30-day teasury after all), which it then uses to finance its business. Maybe they use it to buy 90-day treasury bills to take advantage of the yield spread.

That loan rolls over every day, or maybe once a week. At the end of the loan, AIG gives back to Goldman $999,900 plus interest and gets the treasury bill back.

This is all transparent to AIG's customer. It's always his bill and he can sell it and get whatever the market will bear at that time.

So maybe the customer heard AIG was in trouble and wanted to sell his bill and get the cash out...but Goldman's holding onto his bill for now. So AIG needs to pay off the loan and get the bill back.

Sounds like a run on the bank almost. Imagine telling depositors that they can't get their money out. Now imagine telling every brokerage customer that those securities they own that have been lent out aren't coming back to them.


Maybe like you (none / 0) (#72)
by Big Tent Democrat on Mon Apr 13, 2009 at 07:39:23 PM EST

Not like me.

I do not have a million dollars in the stock market.


insightful posts... (none / 0) (#75)
by of1000Kings on Mon Apr 13, 2009 at 10:52:15 PM EST

even if my compassion for the traders isn't strengthened...


: Compassion is absolutely (none / 0) (#80)
by gyrfalcon on Tue Apr 14, 2009 at 12:15:02 AM EST

not the issue, never has been, never will be.
The issue is that the financial system doesn't implode and take us all with it. That in the course of making that happen the banksters and traders don't crash and burn like an unemployed construction worker is a deeply unfortunate and incredibly frustrating but unavoidable side effect, but that's all it is, a side effect-- reverse "collateral damage."
Reconcile yourself to the fact that no matter how bad things get, or no matter whose solution is employed to keep the economy stumbling along instead of totally crashing, these people will always, always come out in better shape than you and I will. That's one o' those "side effects" of the hyper-capitalist system under which we live.

BTW, the Repo market is $4-5 Trillion (none / 0) (#70)
by steviez314 on Mon Apr 13, 2009 at 07:33:57 PM EST

Half that no? (none / 0) (#71)
by Big Tent Democrat on Mon Apr 13, 2009 at 07:38:48 PM EST

Given that you are counting both sides of the deal?


: No, not half--even though there are 2 parties to (none / 0) (#82)
by steviez314 on Tue Apr 14, 2009 at 04:57:42 AM EST

the loan, it's still just one loan of x dollars.
That estimate has probably been reduced though since September/Lehman. Since repo financing is so short term, it's being somewhat less relied upon to avoid liquidity crises.

Late to this post but wanted to (none / 0) (#86)
by standingup on Tue Apr 14, 2009 at 11:45:27 AM EST

add a little information to shed some more light on the situation with the payments made for the securities lending program. In this case the customers were AIG life and annuity insurance subsidiaries. They had an agreement with AIG Investment to manage their securities lending portfolio. AIG Investments came up with a new strategy to boost their profits and started investing the collateral they received for the securities in asset backed securities with subprime exposure. (see WSJ - An AIG Unit's Quest to Juice Profit ) for a more detailed account.

The losses in the securities lending collateral account started in 2007. (See Bloomberg AIG to Absorb $5 Billion Loss on Securities Lending) As the problems for AIG the parent escalated, more of the counterparties began returning the securities and by September they were in a full blown run with the life subsidiaries needing $20 billion to cover the returns. Even if the insurance companies had the cash, they were still faced with billions in losses because of the decrease in the value of the collateral investment account.

This might have been a standard repo agreement but the way collateral was invested was not standard and probably factored into the government's decision to help AIG unwind the securities lending operation.


Good info (none / 0) (#31)
by Catch 22 on Mon Apr 13, 2009 at 05:35:47 PM EST

I never did believe the "backdoor" story but I was short on facts and could not mount a fact based persuasive argument. Given that Goldman held a conference call on the story in your link the information given will be able to be confirmed through other sources.

This should put to bed the "backdoor" story. But it won't. Many but not all of those wedded to the story will still throw it out there because no way/no how can they give in now or they will be branded as wrong. That can't stand. Better to keep a false meme going than to be branded wrong - facts be damned.


: my only question is... (none / 0) (#76)
by of1000Kings on Mon Apr 13, 2009 at 10:56:53 PM EST

would this be considered giving a certain debtor/creditor special treatment if AIG were to file for bankruptcy?
I mean, especially if the bonds that AIG was receiving back were not worth the money they were paying back...(but as you say, the bonds are their customers, not theirs, and I'm no accountant and never want to be one so I'm not sure how that works on the asset list...they were using them as collateral, so common sense says they have to be listed as an asset, but trading doesn't use common sense)
just wondering aloud...

They got our money (none / 0) (#21)
by Cards In 4 on Mon Apr 13, 2009 at 04:56:36 PM EST

through AIG and they got our money through TARP. They'll return the TARP money but they'll keep the money from AIG.

Good to know our tax money is keeping those millionaires off the welfare rolls.


The books are all so cooked... (5.00 / 2) (#4)
by kdog on Mon Apr 13, 2009 at 03:56:19 PM EST

we're probably better off burning them and starting over.

It is called "creative accounting" n/t (none / 0) (#6)
by MO Blue on Mon Apr 13, 2009 at 04:00:06 PM EST

An oxymoron if ever I heard one. (none / 0) (#7)
by oldpro on Mon Apr 13, 2009 at 04:04:21 PM EST

So true n/t (none / 0) (#41)
by MO Blue on Mon Apr 13, 2009 at 05:55:41 PM EST

: the funny thing is that a handful of the largest (none / 0) (#77)
by of1000Kings on Mon Apr 13, 2009 at 11:00:08 PM EST

accounting firms have been regarded as fraudulent (at least in terms of fishy tax activity on behalf of their clients) for quite some time, and yet it's just basically acecepted--or excepted for a little word play--(for it would take quite some time and quite a lot of luck to press the issue with any foresight of victory)

I wonder (5.00 / 2) (#9)
by Steve M on Mon Apr 13, 2009 at 04:08:41 PM EST

if there will be any shareholder derivative lawsuits arising out of the decisions of firms like Goldman to return the TARP funds.

I mean, if the executives are deciding to return billions of dollars of cheap government money because the executives don't like the limitations on executive compensation that come with them, that's not exactly thinking in the best interests of the corporation...

Indeed (5.00 / 1) (#10)
by Big Tent Democrat on Mon Apr 13, 2009 at 04:09:40 PM EST

I'm looking for plaintiffs right now . . . Kidding.


The decision of the Goldman board (3.50 / 2) (#15)
by Green26 on Mon Apr 13, 2009 at 04:46:02 PM EST

will be protected by the business judgment rule, assuming the board makes an informed decision.

My view is that the company and shareholders will be better off with management and the board being able to run the business without the TARP restrictions, as well as the whims of short-sighted senators like Dodd.


Wow (5.00 / 3) (#16)
by Steve M on Mon Apr 13, 2009 at 04:47:07 PM EST

Thank you for the expeditious ruling, Chancellor. I guess that legal question is forever settled now.


: Heh (none / 0) (#18)
by Big Tent Democrat on Mon Apr 13, 2009 at 04:52:02 PM EST

short-sighted senators? (none / 0) (#78)
by of1000Kings on Mon Apr 13, 2009 at 11:05:06 PM EST

why I've been using that apt terminology to describe the acts of a lot of these CEO's as well...(I can't stay at this company for a year making little money, what if the company doesn't do well...oh wait, I run the company, it's my job to make sure the company does well...man, I better get out of here, go for some easier money somewhere else...I can't be here for 2 or 3 years waiting to make money just because it's my mess, I'm short-sighted)

might be the word, or hyphenated word, of the day...

I'm feeling extraordinarily sardonic today...


Calling Governor Corzine. . . (none / 0) (#13)
by andgarden on Mon Apr 13, 2009 at 04:15:19 PM EST

(He still has stock, right?)


Just wondering (none / 0) (#33)
by Catch 22 on Mon Apr 13, 2009 at 05:40:09 PM EST

Do you want to see as much TARP money returned to taxpayers ASAP or not?


Huh? (none / 0) (#44)
by Steve M on Mon Apr 13, 2009 at 05:58:17 PM EST

How would money be returned to taxpayers? Is there a proposal for a tax rebate on the table?


Surprised I have to spell it out (none / 0) (#48)
by Catch 22 on Mon Apr 13, 2009 at 06:07:22 PM EST

for you.

Most people keep saying it is taxpayer money going to TARP recipients. That the money could be used for schools, etc. That the money could be used for additional economic stimulus, etc. So if most people keep saying it is taxpayer money going to TARP recipients and the banks give it back then it is taxpayer money that can be used in other ways.

So do you want to see as much TARP money returned to taxpayers ASAP or not?


Sorry (none / 0) (#53)
by Steve M on Mon Apr 13, 2009 at 06:18:28 PM EST

but I must decline to play your little word game. The money may be returned to the government, but it is not going back to the taxpayers in any scenario.


Actually (none / 0) (#54)
by Big Tent Democrat on Mon Apr 13, 2009 at 06:19:37 PM EST

I think he was being straight up - he meant to the government. At least I think so.


: Sure (none / 0) (#58)
by Steve M on Mon Apr 13, 2009 at 06:30:05 PM EST

but then he wouldn't be able to toss around the goofy Republican-style rhetoric about "giving money back to the taxpayers," now would he?
Look, this is a guy who as we speak is arguing that "the Left overwhelmingly wanted the surge to fail." Yeah, I was at those meetings where we prayed for all the soldiers to come home in body bags, weren't you? I still can't fathom why you keep letting him come back under new aliases and spew garbage day after day.

As BTD said (none / 0) (#59)
by Catch 22 on Mon Apr 13, 2009 at 06:33:36 PM EST

I was being straight up.

Obviously our money does not become taxpayer money until the government takes possession of it. Now if some of the TARP money was taxpayer money in possession of the government and it is given back to the government then it is taxpayer money returned to the government. Of course you know that and just didn't want to answer my original and legitimate question.

So I will ask again: Do you want to see as much TARP money returned to taxpayers ASAP or not?


You are a clown (none / 0) (#63)
by Steve M on Mon Apr 13, 2009 at 06:49:09 PM EST

a straight up clown.


: Well attempts at personal insults (none / 0) (#64)
by Catch 22 on Mon Apr 13, 2009 at 06:55:10 PM EST

makes you what, a serious upstanding person? Not hardly. I see a few times in this thread you are being a smartas* to people who are making factual posts so I'd say it is not me that is the clown as no one is making you post what you are.
Sorry you are incapable of answering such a simple question as to if you want TARP money returned ASAP. Obviously you don't or you would just say so.

Here's the GS earnings press release: (2.00 / 1) (#8)
by Green26 on Mon Apr 13, 2009 at 04:07:45 PM EST

http://www2.goldmansachs.com/our-firm/press/press-releases/current/pdfs/2009-q1-earnings.pdf

Goldman wants to get out from under the TARP restrictions, to be able to pay what it needs to be its talent, and to be able to pick off talent from other TARP companies who are restricted from paying its talent what they'll need to keep them.

Good for them (5.00 / 2) (#11)
by Big Tent Democrat on Mon Apr 13, 2009 at 04:11:36 PM EST

that's how you get to implement that approach - on your own dole, not the taxpayers' dole.


Yes, that's true. (2.00 / 1) (#17)
by Green26 on Mon Apr 13, 2009 at 04:47:53 PM EST

However, why should the TARP recipients be put at a competitive disadvantage in running their businesses?


they put themselves (5.00 / 3) (#19)
by CST on Mon Apr 13, 2009 at 04:52:43 PM EST

at a competitive disadvantage by having a failing business model.


Can't agree with you on the (2.00 / 1) (#24)
by Green26 on Mon Apr 13, 2009 at 05:11:21 PM EST

failing business model stuff. Goldman Sachs' business model, which is the same as the other investment banks with a bit less risk in several important areas, sure hasn't failed. Nor has Morgan Stanley's. Nor has Wells Fargo's.


: then give the money back (5.00 / 2) (#26)
by CST on Mon Apr 13, 2009 at 05:20:57 PM EST

in my mind - if you need TARP - you failed. Just because other businesses also failed, doesn't mean they didn't too.
If they are not failing, they don't need the money - and they don't have to play by gov't rules.

: Ya forgot Lehman....n/t (none / 0) (#34)
by kdog on Mon Apr 13, 2009 at 05:41:03 PM EST

Cuz (none / 0) (#20)
by Big Tent Democrat on Mon Apr 13, 2009 at 04:54:00 PM EST

they are on the dole and can not implement these policies with tax payer money in the face of public opposition to such policies being financed by their money.

If Goldman gives back the TARP money, then good luck to them.

If they keep it, well, then they play by the rules of the government.

Are you saying (none / 0) (#25)
by Green26 on Mon Apr 13, 2009 at 05:13:51 PM EST

the Dodd compensation limitations are a good idea?

Do you think the limitations will help or hurt the businesses and recoveries of the TARP recipients?


I am indeed (5.00 / 1) (#27)
by Big Tent Democrat on Mon Apr 13, 2009 at 05:24:06 PM EST

I want banks to opt out of TARP.


Companies that stay with TARP (none / 0) (#43)
by Catch 22 on Mon Apr 13, 2009 at 05:57:30 PM EST

will be hurt by congresses new rules. And if they are hurt they may not survive. And if they don't survive there will be less competition which will bring higher interest rates and less services especially in regional areas. The community bank may become a thing of the past and that is not a good thing.

The new congressional rules is an example of politics writing bad policy with no vision into the future.


Give it back (none / 0) (#45)
by Big Tent Democrat on Mon Apr 13, 2009 at 05:59:43 PM EST

Really? (5.00 / 1) (#50)
by Catch 22 on Mon Apr 13, 2009 at 06:11:25 PM EST

And if they need it to survive short term it's too bad? You seem to want them to have a no-win/no-win situation. That is exactly the kind of "no vision into the future" that I was talking about.


Receivership (none / 0) (#52)
by Big Tent Democrat on Mon Apr 13, 2009 at 06:18:01 PM EST

That's the free market my friend.


Well Receivership (5.00 / 1) (#62)
by Catch 22 on Mon Apr 13, 2009 at 06:45:55 PM EST

is not exactly free market either. And it is not any cheaper. In fact it is probably more costly because the S&L deal cost the government net money as did other Receiverships in the past.

If you go with Receivership then what you are going to have is a bunch of smaller banks geting taken over by the giants which again is what most people do not want to happen. If you let that happen you make the people who you want to have less power actually get more power. So watch what you wish for. The trade-off for limiting executive pay may make those very executive stronger in the end by them opting out and the smaller banks getting hurt either way they turn. But if a short term moral victory now is worth the long term consequences of business as usual with the kicker of less competition then by all means support that position. Just don't complain when the cards fall where they will.

Personally I want to see the smaller banks survive to promote a more diverse competitive marketplace.


there are plenty of reports that community (none / 0) (#79)
by of1000Kings on Mon Apr 13, 2009 at 11:16:46 PM EST

banks are actually flourishing right now, at least in terms of deposits, I'm sure their accounting numbers still do not look pretty...

probably because you're average citizen trusts the community bank more at this time, right or wrong, can't say for sure (the community banks seem to claim that they haven't made the same risky decisions as the larger bank/investment conglomerates..haven't looked for proof of that, but it makes sense in the common way, not that this has much value in the financial world)


: As far as I've been reading (none / 0) (#81)
by gyrfalcon on Tue Apr 14, 2009 at 12:20:50 AM EST

deposits from average citizens are such an incredibly tiny aggregate player in this whole siuation as to be meaningless. I have not read, have you, of such large numbers of the public transferring their measly checking accounts from big banks to regional or local banks as to be so much as a blip on the balance sheets.
Public confidence is simply not an issue here-- largely thanks to the FDIC. Be grateful for that. Runs on banks played a huge part in bringing on the Great Depression.

It can do so today, then. (5.00 / 1) (#14)
by Cream City on Mon Apr 13, 2009 at 04:44:39 PM EST

Tick, tick, tick. . . .


Talent? (none / 0) (#84)
by cal1942 on Tue Apr 14, 2009 at 07:43:16 AM EST

jeez.


Counterparty (none / 0) (#1)
by reslez on Mon Apr 13, 2009 at 03:47:35 PM EST

Goldman Sachs received $12.9 billion from AIG.

But Goldman Sachs is by no means unique. Deutsche Bank and Societe Generale got $12 billion apiece.

Eliot Spitzer asks this interesting question:
What is the deeper relationship between Goldman and AIG? Didn't they almost merge a few years ago but did not because Goldman couldn't get its arms around the black box that is AIG? If that is true, why should Goldman get bailed out? After all, they should have known as well as anybody that a big part of AIG's business model was not to pay on insurance it had issued.

How much? (none / 0) (#2)
by Romberry on Mon Apr 13, 2009 at 03:49:29 PM EST

Apparently every last penny of "profit" can be traced back to taxpayer money coming through the backdoor via AIG.

AIG was used to pass through 12.9 billion dollars to Government Sachs. If GS just posted a profit of 1.8 billion and received 12.9 billion through AIG taxpayer pass-through, that would sort of indicated that GS was not in great shape without that money. Our money. Paid out at par.

My question when I see "profits" these (5.00 / 1) (#5)
by nycstray on Mon Apr 13, 2009 at 03:57:08 PM EST

days is: are they real profits?


: The joys... (none / 0) (#36)
by kdog on Mon Apr 13, 2009 at 05:44:54 PM EST

of a rigged game....nothing new stray, we're just starting to notice it more with all this new rigging being constructed to reinforce the old rigging that fell down under gluttonous weight.

The Masters of the Universe's (none / 0) (#23)
by inclusiveheart on Mon Apr 13, 2009 at 05:06:25 PM EST

Stars will realign in their favor by hook or by crook.

I guess we'll have to wait for the next bubble to form and burst if we hope to fix this financial system because this is about way more than executive compensation - and these guys are going to do everything in their power to eliminate any leverage the government might have in changing the regulatory environment.

: Anything short (none / 0) (#85)
by cal1942 on Tue Apr 14, 2009 at 07:50:55 AM EST

of a total systemic change will put us in the same spot. Worse, our general decline as a nation will continue until little is left.
Nothing changes politically until the finance system is reworked.

BTD..in the Goldman Sachs conference call (none / 0) (#83)
by steviez314 on Tue Apr 14, 2009 at 07:11:33 AM EST

Tuesday AM they said that all AIG transactions were value for value and their AIG related P&L was zero.

Since Goldman marks all their assets to market, this means those transactions didn't screw the taxpayers.