Tuesday, April 14, 2009

All Hail Government Sachs

Goldman Sachs pulls itself together, posts a huge quarter, doubles its stock price, raises $5 billion with a $123 top-tick, frees itself from the TARP, and resumes its perennial habit of Wall Street domination...while the rest of the financial system collapses in a heap of taxpayer-subsidies...

What an amazing turn around! Imagine that given their D rating in the last quarter of 2008 government sachs rakes in the cash!

Goldman Sachs set aside $4.7 Billion for salaries and bonuses last quarter, after taking in a profit of $1.7 billion. That means Goldman’s employees stand to profit far more than its shareholders from this quarter’s outperformance.

The $4.7 billion in compensation is 50% of Goldman’s total revenues for the quarter. The first quarter of last year, compensation ate up just 48% of Goldman’s revenues.
As Heidi Moore at the Wall Street Journal reports, Goldman’s rising compensation comes despite the fact that the firms has cut its headcount by 7% since the end of last year. That means that the remaining employees are each taking an even bigger slice of the pie.
The size of that compensation set aside will likely annoy current shareholders. After all, it is almost as large as the public offering Goldman is proposing to help it pay back TARP. If Goldman hadn't been so eager to set aside so much revenue to pay its employees, the current shareholders would not need to be diluted as much to pay off the TARP.
To put it slightly differently, the executives at Goldman are basically using the planned offering as a way of paying a special dividend directly into their own pockets.

At the same time, Goldman’s surprisingly robust earnings seem to have come in part because Goldman has been putting more money at risk. The Value at Risk estimate—a measurement of the amount Goldman thinks it could lose on most trading days—jumped to $240 million from $157 million for the period in 2008. Of course, that additional risk was basically costless to Goldman’s employees since their firm was propped up by government support.

It’s hard not to conclude that Goldman wants to pay back the TARP as quickly as possible in order to ramp up risk and pay. But since taxpayers will continue to implicitly back Goldman even after the TARP is repaid, this raises serious concerns about moral hazard. Do we really want Goldman making another “Heads We Win, Tails The Taxpayer Loses” bet?

All That Glitters Is Goldman Obama Takes Center Stage, After Goldman Surprise.

How golden is that after backing the resident it seems to have all paid off most handsomely.
President Obama continued collecting money for his 2010 Senate re-election campaign even after he resigned his seat from Illinois, including a maximum $2,300 donation the day after Christmas from a top executive of a Wall Street firm that had received a government bailout.Four contributions - $4,800 in all - were donated to the Obama 2010 fund on Dec. 26, according to Federal Election Commission reports.The money came from some of Mr. Obama's top presidential fundraisers: Bruce A. Heyman, managing director at Goldman Sachs, which received a $10 billion bailout last year; Steven Koch, vice chairman at Credit Suisse First Boston; and John Levi, a lawyer at the law and lobbying firm of Sidley Austin LLP.

The donations are legal, but the timing is unusual because Mr. Obama formally left the Senate on Nov. 16 and already had a surplus in his Senate campaign treasury.

From No Quarters...Let’s start with the numbers. Why is a first term Senator pulling down almost $300,000 a year from Goldman Sachs, Lehman Brothers, Bear Stearns, Fannie Mae, Freddie Mac, AIG, Countrywide Financial, and Washington Mutual? He has not even completed his fourth year in the Senate and received a total of $1,093,329.00 from these eight companies and their employees. (all data from OpenSecrets.org). John McCain’s numbers, according to OpenSecrets.org for the period 1990-2008 (i.e., 18 years worth of data) only collected $549,584.00. In other words, Barack is receiving $273,582.25 (and 2008 is not over) per year while McCain raised a paltry $30,532.44.

Want another shocker? Barack Obama has received more from one source–Goldman Sachs $542,252.00–than McCain has from all of the companies combined. Who the hell is more beholden to lobbyists? And why does a junior Senator from Illinois rate this kind of dough?

“No doubt many donors give simply because they want to be part of history,” said Craig Holman, a campaign finance lobbyist for the non-partisan watchdog group Public Citizen.
“But donors and bundlers who represent special interests with business pending before the government and who dole out five-figure checks to the inaugural committee usually want a seat at the table with the new administration.”

$1.14 quadrillion get a load of this!

No, that's not a made up word. A quadrillion is one thousand trillion dollars. Not $4 trillion, but $1000 trillion – and change.

Here's the breakdown, according to the
International Bank of Settlements, which acts as banker for the world's central banks:

1) Listed credit derivatives stood at USD
548 trillion;
2. The Over-The-Counter (OTC) derivatives stood in notional or face value at USD
596 trillion and included:

a. Interest Rate Derivatives at about USD 393 + Trillion;
b. Credit Default Swaps at about USD 58 + trillion
c. Foreign exchange derivatives at about USD 56 + trillion;
d. Commodity Derivatives at about USD 9 trillion;

e. Equity Linked Derivatives at about USD 8.5 trillion; and
f. Unallocated Derivatives at about USD 71+ trillion.

World derivative debt is $1.14 Quadrillion USD. For the US banks share of that see Table 1, page 22 of 33 at


The jig is up folks. The US banks are essentially bankrupt, with $10.5 trillion in assets vs. $176 trillion in derivative debts.

G20 world leaders should WRITE OFF this toxic speculative derivative ‘debt’.

Put in further perspective, the entire world’s GDP, according to the CIA’s world book, is $71 trillion USD annually. Compare that with that $1.14 quadillion and you now understand that a huge transfer of wealth is taking place, crowding out legitimate recovery efforts.

Last week Forbes talked about 1.4 trillion dollars that have gone ‘Up in Smoke’.
Today... Stock analysts mull implications Goldman's results...
But some analysts say the performance can be chalked up to funds Goldman received from American International Group Inc. (AIG:

, , ) after the insurance giant was bailed out by the government.

Goldman is "one of the major beneficiaries of our tax payer dollars and the great irony is in an alternate universe, the quarter in which Goldman's reported earnings were twice street expectations would have been the quarter in which it declared bankruptcy," said Dan Greenhaus, an equity analyst at Miller Tabak & Co.
Now you may have an idea why Government Sachs Golden boyz want to get out as quick as they can. Little wonder Government Sachs Golden boyz want to shut the 666GoldenSachs blogger I referenced down.

Update like the Loons would ever allow the obamamessiah to be taken down...
The Crisis That Could Bring Down Obama


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Anonymous said...

You mentioned the 'quadrillion' of NOTIONAL value in the total derivatives market. There is a big difference between NOTIONAL value and the ACTUAL risk/exposure resulting from the derivative contract.

The notional refers to the amount of underlying asset that is used to as a 'reference' of sorts to calculate payments from the derivatives referencing that underlying. Saying that this notional is some kind of 'debt' that must be balanced by assets is ridiculous and completely misinformed.