Goldman Sachs (NYSE:GS) will have a piggy bank of more than $11 billion to dole out in bonuses at year’s end, and that is making the company sweat. I wonder why.
From the Daily Beast:
How worried are Goldman Sachs executives about their ability to manage the coming media tsunami when bonus season comes around?
Paranoia might not be too strong a word to describe the mind-set. People inside Goldman tell me that some senior executives say they believe the onslaught of negative stories detailing Goldman’s manifold ties to upper levels of government, charges that it somehow fraudulently profited from the subprime crisis, and now the press about the firm’s record earnings is so out of proportion to reality that the coverage contains an element of anti-Semitism—subtly playing off the racist myth of a conspiracy of Jewish bankers controlling the world for their own benefit. (Goldman was founded by a Jewish immigrant, and after years of being run by Gentiles Jon Corzine and Hank Paulson, is once again run by a Jew, Lloyd Blankfein.)
One thing is certain: Goldman’s top executives might be getting much richer at the end of this year, but the firm’s reputation is sinking and may well sink further.
Consider this: Goldman produced record earnings in the second quarter, and if it just cranks out mediocre profits for the remaining two, Blankfein would be on course to receive a bonus of $50 million or more, according to people inside the firm.
This after Goldman was rescued from extinction (this is where I agree with the conspiracy theorists) nearly a year ago, when the financial crisis became most acute, with a $10 billion capital injection from the federal government, not to mention the tens of billions of dollars that flowed right to Goldman’s bottom line when the federal government bailed out AIG and honored all those insurance contracts Goldman held on its own portfolio of risky debt.
Of course, the flacks at Goldman would tell you that Goldman was among the first to repay its loan, and amazingly, they continue to spin that the firm wasn’t really bailed out when the Feds bailed out AIG. (Their rationale is too nonsensical to explain; trust me on this one, they’re full of shit.) Where they’re less full of shit on is the difficulties they face in dealing repairing the firm’s image.
Goldman also concedes that the recent attacks on the firm have hit home, particularly for Blankfein, after The New York Times reported that former Treasury Secretary (and former Goldman CEO) Hank Paulson spoke to Blankfein far more than any other CEO during the height of the financial crisis last year, suggesting that Goldman received preferential treatment. “Is Lloyd worried about our image? Nobody likes negative publicity. It’s unpleasant,” the spokesman says.
I don’t know… I am not always into conspiracy theories, but the fact that the Fed is stacked with former Goldman Sachs guys and Bear Stearns and Lehman Bros. were left to rot and take down the system, but then the Fed stepped in to save - amongst others - Goldman Sachs, you have to wonder, what else did Goldman expect? For Americans to joyfully sing in the streets?
Now that I’ve moved to NYC I get a vibe speaking to investment bankers that there was a sort of Goldman envy before the meltdown… and since the meltdown and “selective bailout”, that envy has turned to anger amongst regular people on Main street. I am all for capitalism and understand the intricacy of Goldman having repaid the loan, but I also understand why people will think: “once again, Wall Street reaps the profits while Main Street incurred the costs”.
Anyway, it will be interesting to see what, if anything, happens once the news of the big bonuses hit the street.