Posted on 07/20/2009 12:21:49 PM PDT by Ernest_at_the_Beach
Money can't buy love? For proof, look no further than Goldman Sachs. Last week, the firm reported a spectacular quarterly profit -- close to $3.5 billion for the bank and about $385,000 in compensation for each employee for the first half of the year -- and right on cue, the braying began for the heads of the Goldmanites. Earlier this month, Rolling Stone's Matt Taibbi, in a comprehensive exercise in conspiracy mongering, primed the pump of outrage with his article "The Great American Bubble Machine." Now a chorus of supporters has chimed in, shocked that in a recession the evil Goldman could turn such profit.
The rhetoric of outrage has come full circle: Before, the villains were the banks that were stupid and greedy enough to fail; now the villains are those -- a small club, basically just Goldman and J.P. Morgan Chase -- that have been smart and greedy enough to succeed.
What began as an effort to keep the financial industry from repeating its mistakes has turned into, as at other points in history, an attack on the idea of trading profit. It is no longer enough that the banks should be reformed; the opportunity to make this kind of profit should be eliminated.
This now-fashionable line of attack is badly misguided. Goldman and J.P. Morgan are reaping great rewards as the last firms standing in a game in which everyone else has been cowed or crushed. Yes, they're able to do that partly because the government has kept the financial system afloat. (Would anyone really prefer that it had not?) But the essence of the outcry is that we must punish Goldman for having been right. This is a mistake.
(Excerpt) Read more at washingtonpost.com ...
Jason you are a mescheguna, now Bernie Madoff, he’s a mensch!
But that is the number one goal of liberal Demowits...
Yeah, sure, Jason. That's why GS bought $13 billion in credit default swaps from AIG and never got around to making sure AIG could cover them until the last minute.
Any more of your divorced-from-current-reality bullbiscuits you wish to dump into this thread?
Actually, Jason, you are probably correct in one regard in reference to GS risk management - they apprently were smart enough to have a revolving door between their company and the federal goverment so that if things did go south regarding being overleveraged, they had access to Uncle Sugar’s wallet.
Meanwhile the treasury made $1.4 billion lending GS $10 billion for less than a year, for a 23% annual rate of return in a market going smash. The treasury was also smart. You weren't. This apparently bothers you.
AIG covered them ONLY WITH A $185 BILLION GOVERNMENT BAILOUT.
You are truly sick and deranged if you can post that with a straight face.
After dumping $13 billion into GS via the AIG bailout. Which means they sunk $13 billion into a black hole to get $1.4 billion back. That might sound like success for a government employee, but to taxpayers it is a big wet bite in the arse.
You are measuring other means actions against a world that does not exist in which you own everything and are the tyrant of all policy and capital. We are all capable of doing the math and seeing what actions would work well in that fantasyland. But the rest of us are also capable of seeing that it is a fantasy of your own devising and not the reality in which we live, work, and act economically. Criticising other men as supposedly dumb for living in the real world, not between your ears, is flat stupid.
Goldman lives in the real world, and got paid just fine in the real world. This apparently bothers you. But calling them stupid for any of it, is merely pretending.
You continue to operate under the delusion that you can create money for yourself by directing that third parties not pay their debts. You can't. Remotely.
If AIG failed like Lehman failed, the treasury would not have been a dime richer. It would have been several trillions poorer. So would a lot of other people, probably including you, but that is neither here nor there.
One entry accounting is the essence of financial idiocy...
You are truly twisted and sick. GS only got paid because AIG got massive federal bailouts. GS did not perform any audits of AIG to ensure AIG could cover its CDS exposure. That is a failure of risk management.
I work with PII and SPII information. My company gets audited every year by our clients to ensure we are safeguarding the data properly. One would think that AIG would have done something similar with a company with $13 billion in CDS underwriting.
The fact that you cannot tell between honest business and bad business leading to a bailout speaks volumes about your pure depravity.
No, I am simply pointing out that GS failed to ensure that AIG was capable of making good on their CDS commitments. Instead, it took a federal bailout to cover AIG. That is a cold, hard fact that you are unwilling to face in your worship of the jackasses who brought us the financial meltdown in the first place.
Excuse me? I am not allowed to be critical of the very folks who helped engineer the financial meltdown and then went to the government for massive bailouts to stay afloat? You truly are sick.
And now you are going in circles. You first say that AIG made good on the CDS obligations, yet now say that if the fedgov had NOT intervened, AIG would NOT have been able to meet those obligations and the likes of GS could have failed. You just made my point about the failure of GS risk management for me, in your efforts to spin this.
Companies such as GS, in their zeal to increase their leverage, were on the hook to AIG for billions of dollars in CDS coverage - obligations that by any objective standard, AIG could not meet, hence the need for a federal bailout. GS only got the AIG CDS money because of a government bailout. That meant they were not properly assessing risk - it meant that whether or not they stayed in business or went out of business like Lehman was entirely up to the willingness of the goverment to perform a bailout of AIG.
And yet you have the unmitigated gall to hector me for pointing out what is obvious to ANYONE who has to deal with risk management on any level. Go stuff your pom-poms where they will do more good.
GS is a trillion dollar bank, that routinely makes that kind of money on the spread between its funding costs to carry a position that size, and what its assets earn for it.
In the CDS market, AIG was not required to post extra collateral against open CDS positions as long as it kept its AAA rating, but it paid its actual losses as they occurred. When it lost that rating it needed extra capital to cover its CDS exposure. AIG is a $2 trillion bank, with $500 billion in "float" (money in its possession on which it owes nothing, accruing to it for insurance contracts, between the time it collects premiums and pays out claims). It had a solvency danger certainly, but not a liquidity one in the conventional sense, given this massive access to uncallable capital it doesn't even pay interest on. Regulatory restrictions on use of capital of its insurance operations to support its trading operations were the cause of its immediate liquidity difficulties last fall. In normal times, that capital can be accessed for the firm as a whole by selling a profitable insurance division if necessary. Needless to say, last year that was not possible.
It is not obvious AIG will lose money for the treasury gross. It may, maybe as much as $100 billion. Or it may not. But it certainly would have cost many times those figures to let it fail. Lehman made that clear as day.
GS wasn't hedging large cash market positions in low quality mortgage securities at AIG, as most of the big European banks were. Those were the lion's share of the AIG CDS market winners, and their winnings matched losses on low quality mortgage debt, which they had only risked taking positions in because they believed they were hedged by CDS's from AIG. Goldman was merely betting that those mortgages were trash, and it was right. Its trades there were almost pure profit if AIG paid. If it had defaulted instead, they would have received something from a dismembered AIG, a year or two down the line. They would not have lost anything on it any way it is sliced. It is not like they lent $13 billion to AIG. Quite the contrary.
You continue to pretend that AIG paying out on its debts is some grievious wrong. It is nothing of the kind, it is ordinary commercial morality being upheld. You continue to regard it as somehow uncapitalist or horrible that the treasury helped it to meet its obligations. It is nothing of the kind, it was simply the right move to support the whole market last fall and stop the credit collapse Lehman set off. Allowing that collapse to continue would not have saved the treasury anything, or US taxpayers anything, or you anything. It would have costed all of the above, more.
You don't need to like any of that for it to be true. Your approval of any of it is not required by any of the adults involved in any of it. Your reckless slanders of them are just that, slander, made up, entirely between your ears. None of them did anything wrong in any particle of it. AIG was dumb in some of the promises it made, and its shareholders have paid for it; numerous banks were dumb to underwrite so many poor quality mortgages to American deadbeats on mainstreet, and everyone has paid some for that. But neither Goldman nor the treasury have harmed you in the slightest in any of it, and your railing against them anyway is the purest ideological spite and class warfare drivel.
Your righteous indignation is not righteous at all and utterly unjustified. They are simply much better men than you are in every respect - better capitalists, better citizens, better at financial and economic policy, morally better in that they are not accusing others unjustly - and I side with them against your ignorant ranting. Is that clear enough?
Uh, yeah, sure. They did such a great job that they completely missed the fact that if the economy went south, AIG would need $185 billion in government money to meet its obligations. And if the government refused to go through with the bailout, GS could go the way of Lehman. Yeah, that is world-class risk management. /sarcasm
You are the most obtuse weasel I have ever seen posting on FR, and that is saying something. Companies that screwed up the financial system so badly to where the Fedgov has put out $4.7 trillion are paragons of virtue and capitalism, and I'm some ungrateful slob for pointing that out.
Go sell this shinola to someone stupid enough to buy it. In case you haven't noticed, very few on FR will.
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