Goldman Sachs Backlash Is Picking Up Steam 34 comments
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Goldman Sachs (GS) has been able to stay above the fray more than most of its (former) competitors over the last 6 months. Its share price has stayed above single digit-ville and Buffett’s investment in the company was seen by many as the Omaha Good Housekeeping Seal of Approval.
Now that AIG has been incinerated in the mainstream media, Merrill has hidden itself under B of A’s (BAC) skirts and the dynamic duo of Lehman and Bear are no longer here to be kicked around, taxpayer furor is beginning to turn its attention to Goldman, and the blogosphere’s criticism of the once-teflon firm is reaching a boiling point.
Exhibit A: On April 12th, Karl Denninger of The Market Ticker gave voice to the rumor that GS is about to report the 2nd best quarter in their history, to the tune of $12 billion or so.
The outrageous part, if true:
Gee, you don’t think being paid by the taxpayer through AIG’s “conduit” for losses that didn’t (yet) happen at 100 cents on the dollar might have anything to do with that, do you?
And further (and potentially much worse) there is the repeated statement by Goldman executives that they were “fully hedged” against a potential counterparty default by AIG.
One wonders - was that “hedge” to be short the equity on AIG itself, perhaps?
Why was Goldman made whole on their counter-party risk with AIG? Was this really done only in the service of unwinding the AIG mess cleanly, strictly for the benefit of the taxpayer’s 80% stake in the insurer?
In addition, was Goldman short the equity of AIG as a means to being “fully hedged”? If so, was this kosher and in the spirit of the bailout cash that Goldman received?
Denninger thinks not:
If in fact Goldman (or anyone else) was “hedged” against a possible credit loss from their CDS with AIG and they were able to collect on that hedge (no matter what it was) those payments through AIG need to be clawed back immediately as nobody is entitled to be paid twice for the same risk and reap what amounts to a windfall profit by quite literally engineering a multi-billion dollar transfer of funds from the Taxpayer to the firm!
He goes on to call for congressional investigations:
Someone in Congress needs to look into this now; there are already rumblings of investigation. Those rumblings need to get a lot louder and turn into subpoenas, not “polite inquiries.”
Exhibit B: Goldman doesn’t much like online criticism. It has stooped to suing blogger Mike Morgan for running a site called GoldmanSachs666.com with the excuse that he is infringing on their trademark or intellectual property. The truth may be that they just don’t like what he’s been saying about their role in the collapse and subsequent receipt of taxpayer money.
From the Daily Telegraph UK:
The bank has instructed Wall Street law firm Chadbourne & Parke to pursue blogger Mike Morgan, warning him in a recent cease-and-desist letter that he may face legal action if he does not close down his website. Florida-based Mr Morgan began a blog entitled “Facts about Goldman Sachs” – the web address for which is goldmansachs666.com – just a few weeks ago.
Morgan continues to post on his blog and reportedly welcomes his day in court. This is embarrassing for a firm the size of Goldman Sachs and the claim of IP Infringement is clearly an obfuscation of the truth behind why they would go after a blogger.
News of this lawsuit along with the speculation that the AIG bailout was truly a Goldman bailout is spreading around the web as we speak. Questions are also being asked about whether or not then Secretary of the Treasury and former Goldman Sachs CEO Hank Paulson used his influence to package the AIG rescue the way he did, with firms like Goldman getting back 100 cents on the dollar during AIG’s destruction.
Exhibit C: There is, however, some defense being made of Goldman Sachs, but it may not be heard above the din.
Eric Oberg, an excellent commentator on TheStreet.com, took the details of Goldman’s involvement with AIG and the bailout and constructed a soup-to-nuts explanation why this was not a sweetheart deal. He is an ex-Goldman employee, but makes it a point to disclose this. Before shooting off at the mouth (or keyboard), I believe financial bloggers and journalists should read his piece from April 9th, “The AIG Bailout Was Not a Gift to Goldman“. The article may require a subscription to RealMoney Silver, but here’s a quick taste:
As most readers know, I am a proud Goldman alumnus, so I will save the “Goldman taking over the world” conspiracy theorists some time: If you believe in that nonsense, you can stop reading now, though I believe you are doing yourself a disservice by ignoring the actual story.
None of this should be controversial; this was not a gift of money from the taxpayer to the counterparty — in fact, it allowed for the unwind of AIG in an orderly manner, a manner which protected the taxpayer’s 80% stake in AIG. Maybe now we can drop the showboating witch hunt and perhaps focus on issues that have some validity.
This story will likely get bigger and by the time the bus tours to protest in front of Goldman execs' homes begin, there will be many who have made up their minds, regardless of the facts. To understand the Goldman controversy, I recommend starting with these three articles.
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This article has 34 comments:
Paulson arch enemies' in the business were, Lehman, Bear, and Merrill Lynch. These companies don't exist anymore.........THINK ABOUT IT !!!
Paulson finally got what he wanted !!!
Good thing we don't live back in the day's of the Roman Empire, or DO WE ?????
One day we will all find out that this entire "made up" finanicial crisis" was so that Paulson could get what he wanted prior to Bush leaving office !!!
GS has now emerged the apparent victor, stirring resentment and reviving anti-semitism. After vilifying AIG, public attention now turns to GS which appers to have profitted from AIG's demise.
Public anger would be far more useful if it were channeled into calling for an overhaul of the loopholes that permitted naked CDS, naked short-selling, and other zero sum games to turn the financial system into a gambling casino. That would mean repealing CFMA and re-inventing the SEC as a law enforcement agency.
Whoever buys these shares deserves the losses that will inevitably follow from that purchase.
I don't know where to what extent or where Goldman would have reported the $13 billion gain from AIG but it is reported Fixed Income, Currency and Commodities (FICC) was the key driver in the earnings surprise. The division’s revenues swung $10 billion qoq, to $6.6 billion from a negative $3.4 billion.
But notes indicate other divisions did not perform as well. Revenues fell 20-30% year over year in all other major business lines, such as equity trading, investment banking, asset management and securities services (prime brokerage).
The third link about the AIG bailout not being a gift to GS brings up a rather garish ad touting a market caller who said October was the bottom.
Combining the need for a subscription with the clear lack of credibility in the advertising, I question the validity of the "non-gift" perspective. I haven't read the article, so it's currently a question.
On Apr 14 10:59 AM wakeup call wrote:
> One week ago the information on the linking of Goldman Sach's to
> the AIG bailout came to light in detail. Since that time there has
> been virtually zero follow-up. I guess Goldman is too powerful from
> both the perspective of being just about the only remaining investment
> bank(commercial bank when convient) and having its past executives
> so firmly intrenched in the federal government. AIG might be too
> big to fail but Goldman is too powerful to be investiated
Don`t hate or envy them bc they come from the most expensive Ivy league schools and collect millions upon millions in yrly compensation.
The criticism comes solely from jealousy.
Too many people in America are educated just enough to make a living (if that) and they are jealous of those highly educated few who make fortunes on Wall St.
Look through the archives of the NYT and you`ll find these same class war issues come up over and over again whenever the counrty goes through a financial hardship.
Anti-Semetism: Rubbish!!!
Whether they are Jewish, Christians, Muslims, Buddists, etc. it shouldn`t matter.
GS executives are brilliant and deserve what they can get. After all, this is a Capitalistic system we live under.
Obama said while in Europe, " Americans don`t hate the rich, they want to be rich"!
Problem is, the masses are financially illiterate and unable to scrape out more than a paycheck to paycheck existence.
G. Bush himself said, "We shall give every American at least and eight grade education". Enough said!
So much undeveloped talent going to waste. Enough Said!
If it was capitalism - why did Goldman take the bailout money, why did they convert to a bank overnight.
If these Ivy leaguers are so smart - why do we continuously have booms and busts. Do you think it was smart to invest in worthless subprime mortgages?
Goldman is simply a politically connected crony. In our corrupt system of Govt. Goldman thrives, while investors suffer. Goldman and the likes are simply shameless crooks out to loot invetors.
On Apr 14 02:57 PM R4475 wrote:
> GS is the Financial master of the universe!
>
> Don`t hate or envy them bc they come from the most expensive Ivy
> league schools and collect millions upon millions in yrly compensation.
>
>
> The criticism comes solely from jealousy.
>
>
> G. Bush himself said, "We shall give every American at least and
> eight grade education". Enough said!
>
> So much undeveloped talent going to waste. Enough Said!
MBIA settled the very same CDSs much below par at the same time.
Goldman is simply good at stealing public and investor money –as long as our system of corruption does not implode we will continue to see the same.
GS has now emerged the apparent victor, stirring resentment and reviving anti-semitism.
______________________...
Anti-semitism? These guys have the government in their pocket. What does anti-semitism have to do with this?
We are calling for government to investigate them. Is that all you guys ever do is scream anti-semitism when the jig is up?
Sorry bud, not on my watch. There is something here and it needs to be followed, scrutinized, and charges laid if required.
Using that tired old argument used to work - not any more. Jewish, German, American, it doesn't matter - if you are a criminal you are criminal. That is what inquires are for.
In fact for you to throw this out means there must be something there for us to see. Right?
Leave that crap out of this.
You must be on coffee break and had to post it huh. What re you their secretary or something.
We'll see if they are that smart or just another group of insiders influencing events.
Time will tell. If they were that smart they wouldn't be in this mess.
All = David Rockefeller
Connect ALL the dots
oxdown.firedoglake.com...
plungerspeaks.blogspot...
more here: moneyneversleepsblog.b...
In the meantime, the Gov't will bring in congressional interns to man the trading desk and as blood runs in the streets, cry about how unfair it all is.
What I find outrageous is that Goldman was short AIG **AND THEN GOT PAID AT 100 CENTS ON THE DOLLAR** for positions that HAD NOT DEFAULTED through a "passthrough" via AIG from The Taxpayer!
THAT is outrageous.
If you have fire insurance you're entitled to collect on it if you have a fire. You're NOT entitled to collect on it AND THEN steal the value of the policy A SECOND TIME from The Taxpayer!
If no money was given to AIG, would taxpayers have a "stake" to protect?!?
And just how does giving $130 billion to AIG profit the taxpayer?
Oh, and how much of Goldman Sachs' profit came from Athe government's gift through AIG?
Henry Paulson, where is that rat?!?
ragingcapitalist.blogs...
Essentially CDS's were distributed among the top 20 banks of the world. and it being a zero-sum game. The profits and losses will be realized soon, because some of the players have gone down.
Secondly. What is the source of GS revenue. Its essentially revenue from Deals (other than false reporting adn Government Benevolence). Since the deals in the market have come to a standstill. The revenues would slow down. Hence I think it would be a crazy bet to put more money on GS.
Two things: As it seems we need more clarity, books need to be opened on GS, AIG and all TARP recipients and, the Fed.
If, as the geniuses of Wall St. claim, lower pay there will cause an exodus, I would welcome any help possible in the real economy. Doubtful though their resumes look post-meltdown, financial engineering has been for too long where the money is.
Watch the movie The Money Masters to see the historical perspective and what they are doing right now. Also watch The Debt of the Dictators to see what the IMF is and what they have planned for our lovely planet.
Note that no one every goes after a Goldman Exec.