Good Lord. In the last 24 hours we've seen CNBC's Charlie Gasparino, MSNBC's Dylan Rattigan, Fox News' Bill O'Reilly and now the Wall Street Journal call BULL-SH*T on Goldman Sachs!! Richie and I can finally take off our tin-foil hats and stop moving our location every 12 hours!
We told you that Matt Taibbi's searing piece on Goldman Sachs would finally start the mainstream debate on Goldman's abuse of power and privilege, and it did just that. Then yesterday's $3.4 billion Q2 earnings release replete with the old modest;
"Hey, we're just doing what we've always done. It's the same business that twenty other guys do, I guess we are just a little luckier than the others.
This seems to have just set just about everyone over the edge. Like Gasparino said yesterday, and we've been saying for a long time. Goldman is a hedge fund with the full privileges of a Federal Bank Holding Company. That hedge fund got clobbered last year, got bailed out, got all the term funding they needed at super low rates, levered and "risked" back up and now they are killing it. It's like shooting fish in a barrel. They are pissing down our collective legs and laughing at us.............LOUDLY.
Anyway, check out the WSJ today A Tale of Two Bailouts. Here's my favorite part;
Goldman's traders profited in the second quarter from taking advantage of spreads left wide by the disappearance of some competitors (Lehman, Bear Stearns) and the risk aversion of others (Morgan Stanley). Meantime, Goldman's own credit spreads over Treasurys have narrowed as the market has priced in the likelihood that the government stands behind the risks it is taking in its proprietary trading books.
Goldman will surely deny that its risk-taking is subsidized by the taxpayer -- but then so did Fannie Mae and Freddie Mac, right up to the bitter end. An implicit government guarantee is only free until it's not, and when the bill comes due it tends to be huge. So for the moment, Goldman Sachs -- or should we say Goldie Mac? -- enjoys the best of both worlds: outsize profits for its traders and shareholders and a taxpayer backstop should anything go wrong.
We like profits as much as the next capitalist. But when those profits are supported by government guarantees or insured deposits, taxpayers have a special interest in how the companies conduct their business. Ideally we would shed those implicit guarantees altogether, along with the very notion of too big to fail. But that is all but impossible now and for the foreseeable future. Even if the Obama Administration and Fed were to declare with one voice that banks such as Goldman were on their own, no one would believe it.
Beautiful.
Why doesn't Goldman pay for our expensive healthcare reform? They have the bucks.
Posted by: RL | July 15, 2009 at 10:03 AM