Michael J. Golde

Why Dick Bove Is Wrong About Citigroup

I completely disagree with the author that it was a good idea for the government to allow Citibank to repay the TARP at this time. The whole purpose of the TARP was to shore up Citibank's capital. But for the pay czar and the relatively recent restrictions on management compensation, Citibank would never have repaid the TARP at this time.

Who benefitted by the TARP repayment? The shareholders. No, massive dilution at the paltry price obtained. Is Citibank now in a stronger capital position? No, it would have been better to retain the TARP until the Citibank stock price could have supported repayment at a higher stock price.

This rush to action was precipitated by the continual and incoherent interference of the government into the affairs of all of the TARP banks. The government mishandled this situation and the management of Citibank was complicit to save themselves.

It is sickening that after all that has occurred over the past two years that Citibank is still constrained by a disastrous balance sheet that is going to spew losses for some time.

The government should have established very specific requirements for repayment of the TARP. Apparently, each bank has instead negotiated their own deal leading to a lack of consistency. Are all the banks equally or even close to being similarly fiscally sound because of repayment of the TARP. I think not and Timothy Geithner once again proves his complete incompetence and inability to negotiate in the best interest of the American taxpayer.

There is absolutely no basis for Citibank's stock to improve in the foreseeable future and, if it does, there will be massive selling driving the price back down. Is it just a coincidence the Abu Dhabi doesn't want to honor its contractual agreement for purchase of Citibank stock when the U.S. has allowed Citibank to dilute itself to such an extent by the poor offering price of $3.15?

By allowing this insanity, the government is telling foreign investors indirectly that the U.S. doesn't care if they are diluted after making massive investments in U.S. entities. Is that the message, the government wants to send to potential investors in U.S. financial institutions?

The Secret Paulson-Goldman Meeting

The problem with such a "secret" meeting is that Goldman was privately given the views and thought process of the U.S. Treasury Secretary. Clearly, if that meeting had been open to public view, it could have roiled the markets. This meeting was analogous to the good 'ole days on Wall Street where the investment banks basically received insider information before the general public.

Another example of extremely poor judgment by Paulson. Moreover, does anyone honestly think that he would hold such a meeting with other bankers in such a surreptitious way?

Goldman Bonuses Based on Socialist Policies, Not Capitalism

I intend to and thank for the support!


On Oct 21 05:39 PM Tony Petroski wrote:

> Mr. Golde: Keep the firebrand going!

Goldman Sachs: Still Arrogant and Unrepentant

Yes, they paid the government back by borrowing more money from the government at virtually zero interest and then calling it a profit. Any fool can make money by merely buying government backed instruments if given free money to do so.

Now the latest is that Goldman is essentially front-running the market. The guys are using heavy-duty supercomputers to place and immediately cancel bogus order before the less sophisticated exchange computers and execute the order. In this way, Goldman is able to see limit price offers which is supposed to be private info. Goldman is using this information in a way to prevent the average investor from getting the best fill possible on a limit or market order.

Here is a link to their current game: opinionator.blogs.nyti.../


On Jul 26 11:06 PM dividendmachine1 wrote:

> This may be unpopular but unlike most who have sucked from the teat
> of the government GS has paid them back in full and the Government
> made a 22% profit.
>
> No offense but BOTH political parties and their lobbyists have not
> paid us 1 dime and instead have looted the trasury with their salaries
> and health care and excellent pensions
>
> Is GS perfect ,No of course not
>
> But at least they aren't freeloaders like GM AIG and the politicans
> and lobbyists are.peace

Goldman Sachs: Still Arrogant and Unrepentant

Yeah, whatever happened to the investigation part of the crisis? No one has yet been help accountable and virtually no one has lost his/her job because of excessive risk/leverage, mismanagement, etc.


On Jul 26 07:01 PM xpatriot wrote:

> Didn't Bernanke & Paulson say (to paraphrase) "first let's put
> out the fire, then go after the arsonists?" Did I miss something,
> or did they go after the arsonists to give them obscene bonuses?

Goldman Sachs: Still Arrogant and Unrepentant

Whether something turns out to be a good investment should not depend on government assistance. To suggest that those who oppose government bailouts or at least government bailout where the government negotiates a worse deal than would have occurred in the private sector is not anti-capitalist.

Having said that, I would agree with you that unless the government imposes new restrictions in the future concerning leverage/risk and employee compensation or discontinues Goldman's ability to borrow from the FED, it will continue to "earn" outsized profits. But, the taxpayers got screwed and are still in the process of being screwed by the likes of Goldman.


On Jul 26 01:58 PM JCC wrote:

> I did - I purchased GS stock after the bailout. My reasoning was
> that they were in pretty good shape and would soon pay the moneyback.
> I also felt that after the financial meltdown that they would profit
> handsomely. It turned out that my logic was correct. Furthermore,
> I think that they have a year or more of unbelievable earnings in
> the future.
>
> For the record, GS did nothing illegal. You might not have agreed
> with the TARP, but it critical last September to stem the financial
> meltdown. The monetary supply was not flowing, and similar to your
> vascular system, this would have resulted in an economic heart attack.
>
>
> No question we need to stengthen the regulatory environment to avoid
> or mitigate a future meltdown. Also we need to modify the system
> so that businesses will not be able to jeopardize the future for
> a near term quarterly report. But in our society, as businessmen,
> we have an obligation to return earnings to our shareholders providing
> that we don't break the law.
>
> I have to say that I am amazed at all of the negative chatter from
> many of you. These views certainly prevent you from making good investments,
> and they almost sound anti-capitalist.
>
> On Jul 26 12:24 PM Chemist29 wrote:

Goldman Sachs: Still Arrogant and Unrepentant

So, basically, if Goldman "gamed" they system and was essentially given billions of dollar of free money via direct and indirect TARP and FED borrowings, you think that's just fine.

The earning of a company are not supposed to be based on government assistance. The American taxpayers were duped in the Goldman deal because the U.S. didn't even get comparable terms to Warren Buffet. That's the point.

If Goldman made its profits without government assistance, I would be the first to congratulate them for a job well done and would have no problem with a generous employee bonus pool. But that's not what happened here.


On Jul 26 12:24 PM Chemist29 wrote:

> if you think goldman makes too much money for its shareholders, buy
> the stock.

Goldman Sachs: Still Arrogant and Unrepentant

Goldman Sachs, AIG and a host of "too big to fail" financial institutions put the entire U.S., if not the World, economy at risk by taking on way too much leverage/risk. But, if you truly believe in capitalism, they should have been allowed to fail due to their lack of risk management. Instead, the U.S. chose which institutions to bail out and which not to. The U.S. did that to prevent unforeseeable adverse consequences to the economy as opposed to doing nothing. But, the government gave these firms trillions of dollars of TARP and guarantees without negotiating proper terms for such assistance. The U.S. should have essentially owned a substantial portion of these firms. Instead, they didn't even get the same type of terms as Warren Buffet. That is part of my argument about why Goldman is arrogant and unrepentant. I assure you if private investors would have given Goldman the same financial terms as the U.S. government, Goldman would have had to give up a lot more ownership, dividends, warrants, etc.

So, to call Goldman the best investment bank on its merits, is a bit ludicrous. Basically, they just got an incredible deal from Uncle Sam and the FED to stay in business and borrow cheap money to generate easy profits. So, it is absurd for Goldman to go around now and act as if their employees with their skill enabled they to make record profits.

In sum, the U.S. screwed up big time in negotiating terms with Goldman and other financial institutions. The result now is that Goldman and those organizations are receiving windfall profits thanks to the American taxpayer.

On Jul 26 10:47 AM Ferdinand E. Banks wrote:

> I love hearing that the compensation issue will be rectified, and
> hopefully sooner rather than later. Outside of that however I would
> feel better if I had not read this article.
>
> I taught finance for about 15 years, and was not averse to perusing
> the financial newspapers and other publications. It eventually became
> quite clear in my mind that GS was perhaps the best investment bank
> in the world, as I mentioned in my finance book (2001). That being
> the case, I really don't see the point in pretending that the US
> and the world would be a better place if GS was allowed to go into
> the can.

In Support of Goldman Sachs

While I agree with the basic premise of your argument that the government is primarily at fault for allowing Goldman Sachs to "game" the system to its advantage, that assumes that Goldman Sachs had nothing to do with setting up the rules of the "game".

Case in point is Hank Paulson, former CEO of Goldman. He was primarily responsible for shoving an ill-thought out TARP program down the throat of Congress and President Bush because of fear-mongering. As a former Wall Street titan, he simply didn't understand that sometimes the big buys who nearly bankrupted this country should not benefit. Goldman Sachs and the others were lucky to be in business after the TARP and probably would have failed without the TARP. Yet, no one has been held accountable at Goldman or Bank of America or Citibank, among others. On the contrary, the government aided and abetted their return to profits (record profits at Goldman) at the expense of the American taxpayer. So, Goldman, in effect, had a point person heading Treasury who was thinking about resolving the crisis as if he were still in the corner office at Goldman.

Moroever, Goldman's conversion to a bank holding company was a sham and should never have been approved unless it was actually going to become a commercial bank. Goldman has never taken a customer deposit and has not made a traditional business working capital or operational loan. So, Goldman got to call itself a commerical bank and benefit from the TARP and FED borrowings while still remaining a "de facto" investment bank. Somewhere along the way, Goldman either received preferential treatment with respect to its bank holding company status or Goldman's requirements to function as a bank holding company were never enumerated. Either way, Goldman received better treatment than other bank holding companies.