Goldman Sachs - Biggest Profits Ever - How?

Today Goldman Sachs posted record profits.

Goldman Sachs Group Inc. posted record earnings as revenue from trading and stock underwriting reached all-time highs less than a year after the firm took $10 billion in U.S. rescue funds.

Second-quarter net income was $3.44 billion, or $4.93 a share, the New York-based bank said today in a statement. That surpassed the $3.65 per-share average estimate of 22 analysts surveyed by Bloomberg and was 65 percent higher than last year’s second quarter.

Oops, not so fast! Goldman is being blasted for using the same risky trading model that caused so many other firms to bring the economy to it's knees. Bloomberg:

Chief Executive Officer Lloyd Blankfein, after repaying the government’s bailout money along with $426 million in dividends to taxpayers, is reverting to a business model analysts deemed irretrievably broken during the global credit crisis. While rivals including Morgan Stanley have pared risks, Goldman Sachs has increased them this year.

Previously in something wicked, we noted the various smells originating from Goldman Sachs.

Now various others are noticing the stench.

Glenn Greenwald over on goes through the history of the financial crisis with headlines ablazing on Goldman Sachs. One thing to remember, we have no idea who the Federal Reserve has given access to $2 trillion dollars worth of funds.

Goldman has had access to massive amounts of Fed lending in order to fuel its bulging profits.

Elliot Spitzer on Bloomberg TV about Goldman Sachs' blow out profits:


Note Elliot Spitzer mentions many topics on hidden subsidies we have covered here. Most notably the great credit default swap AIG Screw Job. Note Spitzer almost mentions Populist Rage and how unusual it is for Populist Rage to be objective, analytical clear! (Congratulations to all EP bloggers for keeping your heads with well cited and referenced rants!)

Robert Reich:

Meanwhile, Goldman is still depending on $28 billion in outstanding debt issued cheaply with the backing of the Federal Deposit Insurance Corporation. Which means you and I are still indirectly funding Goldman's high-risk operations.

So the fact that Goldman has reverted to its old ways in the market suggests it has every reason to believe it can revert to its old ways in politics, should its market strategies backfire once again -- leaving the rest of us once again to pick up the pieces.

Now what this $700 Million stock sales really implies ....

But what is one supposed to do when Goldman Sachs clearly has a revolving government door and pretty much can get whatever they want?

What was that about too big to fail?

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These FDIC guarantees were huge!

We often overlook these and focus on the TARP money. FDIC agreed, through the Temporary Liquidity Guarantee Program, to guarantee the unsecured debt of participants.

I wonder if this is what Goldman Sachs was really after. They issued $2 billion in FDIC guaranteed debt which was rated 'AAA'. I am sure they leveraged that $2 billion nicely.

Remember, Goldman Sachs was not "forced" to accept TARP funds. They actually applied and were approved in record time to be a bank holding company.

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I remember that

but I can't keep track of all of this....if GS leveraged again...40:1, 50:1 to "trade" after the crisis....

I also noticed many saying GS still has massive toxic waste on the books and were asking what happened with that in the various video interviews I watched.

Here's another issue I have with TBTF, if it takes a forensic team from hell and still no one can figure out what is going on with various funds, finances in a company (and seriously we must have thousands of interested parties pouring over GS at the moment).....

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Nothing changed at Goldman Sachs

Goldman Sachs VaR Reaches Record on Risks Led by Equity Trading

Here is what someone said in the article:

“Do we want other people trying to emulate what they’re doing, perhaps not with the same skill or resources?” asked Arthur Wilmarth, a professor at George Washington University law school who specializes in issues related to banking. “Regulators ought to be concerned and say ‘Is Goldman making this money with any kind of reasonable prudence?’”

Reasonable prudence is the big question. They are still a bank holding company is so where are the regulators? Goldman Sachs is hedging that TBTF will help them again. FDIC debt guarantee program doesn't expire until 2012.

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I don't think so

Seriously, no one of any stature has been availed of an inside look at GS's books. Ideally, the GAO - or possibly now the bank examiners (or both) - should have been auditing GS.

Last time I checked, forget where now, but sometime in 2008 the BIS analysis suggested GS had an estimated $30 trillion derivatives exposure.

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Here is a question for the Obama Administration:

Goldman Sachs' profits were driven by trading - hardly a reliable source of revenue. So, if GS trading tanks will we bail them out again?

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According to Fed and SEC - nope!!!

What Spitzer said truly should apply, legally speaking, as a bank holding company which operates as a super-sized hedge fund, GS should not be covered for any bailouts. The existing regulatory measures should apply - yet haven't really ever been applied to Goldman Sachs - neither when they were an investment firm, and especially not now since they've become a bank holding company - strange brew indeed!

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Lawmakers "Hail" GS Profits

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If those "lawmakers" were

If those "lawmakers" were either honest or not terminally ignorant (and often it's difficult to distinguish with them - although usually it's dishonesty), they would realize that the chronic speculation on Goldman Sachs' part is extraordinarily disruptive and detrimental to the economy of the US, and probably a number of other countries as well.

Rigged markets and speculation are the true economic killers. Again I would recommend and remind anyone who has yet to read this report to take a few minutes to peruse it.

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Their competitors went out

Their competitors went out of business, and are probably hampered by bailout rules. It wouldn't be surprising if Goldman Sachs has more opportunities.

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I can't believe I didn't think of this much sooner.

This very obvious. I must be slipping with age.

Geithner/Summers are the best thing for the financial oligarchy (pretty obvious). Both Geithner/Summers will rely on multi- multi- million dollar jobs when they leave the government. So, they don't want to upset their future employers by being aggressive. They need to preserve the TBTF institution for their own personal gain when they leave the government.

A smaller more competitive less powerful financial sector means smaller compensation packages for them when they leave.

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We needed someone who understood Wall Street

and the economy and had nothing to lose by standing up to the financial oligarchy. Geithner and Summers certainly don't fit that description.

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The current power in charge seems

to like big, big corporations. They like to give them financial help and work hand in hand with them. Hm? What is that called when the government works hand in hand with big corporations?

The coming universal health plan is a financial gift for big corporations, not so much for small business. It seems that small business is not in vogue with the current powers.

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