Here's the link to Jenny Anderson's lead story running in this morning's (Thursday's) NY Times' Business Section: "
Despite Bailouts, Business as Usual at Goldman." And, IMHO, here's Congressional TARP Oversight Panel watchdog Elizabeth Warren's money quote from the article--which, in and of itself, is a pretty intensively scathing indictment of Goldman's greed, in general:
Despite Bailouts, Business as Usual at Goldman
New York Times
Page B1
By JENNY ANDERSON
Published Online: August 5, 2009 In Print: August 6, 2009
"Many observers on the market believe that Goldman and others of its size now have a free insurance policy," said Elizabeth Warren, the chairwoman of the Congressional oversight panel for the $700 billion bailout fund. "Whether they do or not is less important than the fact that many in the market believe they do. That means at some level Goldman is playing with the American taxpayers' future."
More from this latest, high-profile Goldman-Sachs takedown piece in a moment, after I provide a little more context.
Let's start with a question: Would you continue to play in a poker game with someone who's already won 97 of the first 100 hands? (IMHO, based upon sheer statistical probabilities flying in the face of rational thought, that's what most Main Street investors in the U.S. are doing with Goldman-Sachs right now.)
On Wednesday, Goldman Sachs informed the world that their second quarter trading revenue was another record-breaker: "Goldman Sachs $100 Million Trading Days Reach Record."
Goldman Sachs $100 Million Trading Days Reach Record
By Christine Harper
Aug. 5 (Bloomberg) -- Goldman Sachs Group Inc. made more than $100 million in trading revenue on a record 46 separate days during the second quarter, or 71 percent of the time, breaking the previous high of 34 days in the prior three months.
Trading losses occurred on two days during the months of April, May and June, down from eight in the first quarter, the New York-based bank said today in a filing with the U.S. Securities and Exchange Commission. The company made at least $50 million on 58 of the 65 trading days during the quarter, or 89 percent of the time.
Goldman Sachs, which was the biggest U.S. securities firm before converting to a bank last year, posted the biggest profit in its history during the second quarter as revenue from trading and equity underwriting reached all-time highs. The company, which has returned $10 billion to the U.S. Treasury and paid $1.42 billion in dividends and to cancel warrants, also made its largest market bets during the period.
"It's very counterintuitive to think that they'd be able to generate this much profit and this much revenue in the middle of an ongoing recession," said William Cohan, a former banker at JPMorgan Chase & Co. and Lazard Ltd. and author of "House of Cards" about the collapse of Bear Stearns Cos. "But the fact that so many of their competitors are out of business or severely wounded has put them in a very strong position..."
Bold type is diarist's emphasis.
By my count (I believe the Bloomberg story, above, is inaccurate), there were 63 trading days in the second quarter, and Goldman turned a profit in 61 of them (that's 96.8%, or approximately 97%, of the entire time), with that profit being greater than $50 million per day on 58 of those days, and greater than $100 million per day on 46 of those days.
To provide even more context, here's something from the comments section on a story about all of this over at Zero Hedge today....
[NOTE: For anyone that wants to accuse me of pulling quotes from "a rightwing blog," a couple of points: 1. ) Zero Hedge just won a "First Amendment Award" from leading finance blog, Wall Street Cheat Sheet, for being at the forefront of the Goldman story for many months, and, 2. ) while I don't agree with everything Tyler says over at his site, any finance blog that has a leading headline story about Joseph Stiglitz being an "American Hero" running at the top of it for many days--which is the case over at Zero Hedge right now--is definitely not a "wingnut" outlet.]
Anonymous
on Wed, 08/05/2009 - 20:42
GOLDMAN's 97% SUCCESS RATE JUST NOT PROBABLE.....
...New York Stock Exchange statistics show that Goldman Sachs is the most active member firm by volume of shares traded by "program trading," or computer-assisted trading. In the latest period posted on the NYSE's Web site, July 20-24, Goldman Sachs and its subsidiaries traded 924.8 million shares, roughly double the 463.7 million traded by its nearest competitor in the week, Morgan Stanley.
I am not so concerned with the money - $50M or $100M each day is irrelevant ... the more you risk (with taxpayer backstop) the more you can make. The winning percentage is what gets me... it's simply impossible. For those who argue they have the best risk management - kudos. That still does not get you a 97% win ratio. Goldman has tons of traders, some win - some lose each day. There is no way they are ALL hitting on cylinders. What this data tells me is they have a daily cash machine running by being ahead of regulators.
Why do I say that? Look at the High Frequency Trading - it is like doping that goes on in athletics. The financial firms are always ahead of the regulators. Markopolos says the SEC is full of attorneys ... no offense to attorneys, but to actually regulate brilliant profit driven financial people who are smarter than you, you need to have brilliant people with deep financial acumen who understand how the (dark parts) of the markets work. Not attorneys - frankly you need turncoats from inside these firms you try to regulate - but due to the pay scale you will never get them. So the technology is way ahead of the regulators, even if the regulators were not already captured in our financial oligarch system. Goldman says it themselves when they tried to explain to clients that "hey only 1% of our revenue is HFT!"
"The most significant challenge ahead is for the regulatory framework to keep current with the rapid pace of innovation in the marketplace."
That should send a chill down your back. From Goldman's own mouth - they say to the world: look - it is not our fault the regulators are behind the times. And we're certainly not going to tell them about our innovations or how we make money - we're a big black box; we just make money. Period. Until they (the regulators) catch up, we will have this sandbox and do as we please. By the time they (the regulators) ban what we are doing now, we'll have innovated to the next step of getting around the regulators.
Now, back to this morning's lead business story in the NY Times, "Despite Bailouts, Business as Usual at Goldman."
...Goldman executives are dismissive, even defiant, when critics argue that the bank is playing a heads-we-win, tails-you-lose game with American taxpayers. And yet the questions keep coming. Last month the story of Goldman's postcrisis success -- and conspiracy theories surrounding it -- leapt from the business pages to the cover of Rolling Stone.
The idea that nothing has changed for Goldman Sachs strikes many outsiders as absurd. In this era of mega-bailouts, Goldman is widely perceived, on Wall Street and in Washington, as too big and important to fail. If its bets pay off, Goldman profits and its employees get rich. If its bets go bad, ultimately taxpayers will have to pick up the bill...
Folks, this is today's New York Times doing almost a full-fledged takedown of Goldman-Sachs. And, note their use of the "business as usual" term, which happens to be the exact phrase used in a Roger Ehrenberg quote highlighted in a Naked Capitalism piece from Tuesday (I also included this in my diary from yesterday):
From Roger Ehrenberg's comments posted at InformationArbitrage.com. Ehrenberg is still young, but prior to retiring from the industry just a few years ago, he was a Wall Street insider and widely recognized as one of the sharpest derivatives traders in the world:
What we have is a return to business-as-usual. Except it's worse than that. The US taxpayer has been systematically looted out of hundreds of billions of dollars, yet the press is focused on Andy Hall and his $100 million payday. Whether this is too much pay for Mr. Hall misses the big picture. Yes, the Wall Street pay model is messed up, and I recently provided an alternative approach. But how about the fact that Goldman Sachs is posting record earnings and will invariably be preparing to pay record bonuses, not nine months after the firm was in mortal danger? Whether anyone will admit it or not, without the AIG (read: Wall Street and European bank) bail-out and the FDIC issuance guarantees, neither Goldman nor any other bulge bracket firm lacking stable base of core deposits would be alive and breathing today.
--SNIP--
...When the crisis hit. It stood with the rest of Wall Street as a firm with longer-dated, less liquid assets funded with extremely short-dated liabilities....In exchange for giving the firm life (TARP, FDIC guarantees, synthetic bail-out via AIG, etc.), the US Treasury (and the US taxpayer by extension) got some warrants on $10 billion of TARP capital injected into the firm...
--SNIP--
...There is not a Wall Street derivatives trader on the planet that would have done the US Government deal (with Goldman Sachs) on an arms-length basis. Nothing remotely close. Goldman's equity could have done a digital, dis-continuous move towards zero if it couldn't finance its balance sheet overnight. Remember Bear Stearns? Lehman Brothers? These things happened. Goldman, though clearly a stronger institution, was facing a crisis of confidence that pervaded the market. Lenders weren't discriminating back in November 2008. If you didn't have term credit, you certainly weren't getting any new lines or getting any rolls, either. So what is the cost of an option to insure a $1 trillion balance sheet and hundreds of billions in off-balance sheet liabilities teetering on the brink? Let's just say that it is a tad north of $1.1 billion in premium. And the $10 billion TARP figure? It's a joke. Take into account the AIG payments, the FDIC guarantees and the value of the markets knowing that the US Government won't let you go down under any circumstances. $1.1 billion in option premium? How about 20x that, perhaps more. But no, this is not the way it went down....
--SNIP--
Where we are left today, dear taxpayer, is a lot poorer. Unless you are a major shareholder and/or bonusable employee of Goldman Sachs...Further, such a crisis could have provided the opportunity and the impetus for a re-look at capital markets risks, getting CDS users to support a central credit derivatives exchange and revised capital rules to incentivize better gap management. The banks lobby like hell against these changes, because it cuts into their fees, notwithstanding the systemic benefits such changes could have on the global financial markets. Banks now lobbying with US taxpayer dollars against changes that could protect the US taxpayer from more harm in the future. SOMETHING IS TERRIBLY WRONG WITH THIS PICTURE, yet all anyone wants to talk about are executives getting paid too much. It's called missing the forest for the trees, and it is a fixture of both those trying to sell newspapers (get clicks) and run our Government, and it pisses me off.
Yes, it may be business as usual for Goldman Sachs, but federal subpeonas regarding Goldman's derivatives trading, harsh words from a leading market professional (and many other market players, too), and Goldman's very own outrageous hubris all point to the newer reality that many are openly telling us: "What's good for Goldman-Sachs" is now quite toxic for Main Street.
Granted, while it may be wishful thinking on this diarist's part, if the old line about "...knowing the problem is half the solution..." is true, then these latest epiphanies finally coming to the fore may all be good for America, at least in the long run.