Congratulations, Goldman — and I wish you many, many more
Image via CrunchBase
Many more profitable quarters, that is. And yes, I know you’ve set aside a boatload of money to (over)pay your people. And no, that doesn’t bother me at all. You made a boatload — and so did your shareholders.
The naysayers are already emerging — hey, Goldman got bailed out, it shouldn’t be taking all these risks, it owes the government, it has to restrain compensation, yada yada.
But Goldman’s performance in particular is raising questions about how its rapid return to making strong profits will be perceived by lawmakers and taxpayers who helped it with the multibillion-dollar cushion last fall after the nation’s financial industry was shaken to its foundations.
Goldman, along with other banks, also benefited from a government program that allows banks to issue debt cheaply with the backing of the Federal Deposit Insurance Corporation. In addition, it received money from the government’s bailout of the American International Group, being paid 100 cents on the dollar for its $13 billion counterparty exposure to the insurer.
via Goldman Posts Big Profits; Beats Forecasts – NYTimes.com.
The fact is, Goldman was clamoring to repay our money long before the government allowed it to — and forked over the cash as soon as the government grudgingly agreed to accept it. If it benefited from the AIG debacle, it did it legally — and hey, guys, that’s our capitalistic systen, rewards as well as risks.
To me, Goldman’s robust second-quarter earnings — net profits of $3.44 billion, or $4.93 a share — is heartening on multiple levels. The most important one: If a well-managed company, taking realistic risks, can do this well, then maybe, just maybe, our financial system isn’t an unmitigated disaster at its core, and will be salvageable sooner than I had thought.
Once again, fingers crossed, toes crossed, eyes crossed (I ‘m afraid my body is going to calcify in this position, I’m using it so often lately!)
BTW, Rick Newman elaborated on all this on Seeking Alpha. I definitely commend his post to all of you who are having the knee-jerk “Off with their heads” reaction.
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Claudia,
Calling up your company’s former boss, who now runs the Treasury, and getting him to funnel $14 billion in taxpayer money to you through the AIG bailout is… capitalism?
Converting to bank holding company status and getting $28 billion in FDIC backing for new bonds under the Temporary Liquidity Guarantee Program is capitalism?
Getting untold millions or billions in cheap money lent to you via the discount window at the Fed thanks to your new bank holding co. status, and having not even the congress know how much public money you got or at what price, that’s capitalism, too?
Let me ask you something. If I told you that my company could get an unlimited amount of cheap money from the government any time it wanted, would you buy shares in my company, too? Exactly how much skill does it take to make money under that scenario?
All this frantic slobbering to congratulate Goldman on the big returns they made with our money is revolting, pure peasant behavior. It’s a joke.
Gee, Matt, what do you really think?
In response to another comment. See in context »Yeah, I believe all those things are capitalism. Look at the contrast between Goldman and BofA. BofA lied to its shareholders every step of the way, with the government’s blessing. Goldman lied about nothing, repaid the money as soon as it could, did not take money out of shareholder pockets to line its own. Far as I’m concerned, it managed beautifully through this crisis, took advantage of opportunities that were dropped in its lap, made the right call on risks — and is now reaping the rewards. Peasants should be so lucky.
I must be a “peasant”. My financial advisers convinced me to invest a substancial amount of money with Goldman – six figures – and all they did was take their 8% and loose my capital. Who do you have to know to make money with them? Not that I would ever want to invest money with a company that operates the way they do. My son’s neurosurgeon received $6500 for over twelve hours of surgery twenty years ago, and these theives get an average of $1M a year, plus another million in bonuses this year, and we are supposed to support capitalism at the expense of the American taxpayer’s life savings?!! I read your article just to see what you had to say in support of Goldman and the “others”, but since I don’t agree with your perspective, I won’t be interested in any further comments written by you. If the operations on Wall Street exemplify the capitalism at it’s best, I predict the United States “empire” is going to fall.
In response to another comment. See in context »Claudia, Goldman didn’t have to “lie” because the system is rigged in a way so it can’t lose.
Goldman didn’t have to “lie,” because it never went on the record drawing attention to the windfall it would get when AIG’s losses paid by taxpayers and passed through.
The fact that one doesn’t have to “lie” doesn’t make it any more commendable, or for that matter, remarkable.
Henry the 8th never had to wash blood off his hands, and that’s no lie. (He never did any actual beheadings, and if he did, I’m pretty sure he had a disposable peasant or two to lather him up.)
In response to another comment. See in context »Mr. Taibbi nails it, here.
Ms. Deutch, without the repeal of Glass-Steagall (flooding the financial services sector with incompetence and unimaginable greed) and Phil Graham’s “modernization” of financial services (see High Risk success rate for CITI or BoA, for example), AIG would still be just an insurance company.
Goldman is not at fault, but there is something very wrong and we are yet to see the worst of it.
JT Easthill
In response to another comment. See in context »But we are in total agreement. What I’ve been hollering for lo, these many months, is that it is futile to lash out at financiers who legally game the system to their own advantage. What we have to do is fix the system, close the loopholes, stop expecting that the Blankfeins of the world will suddenly emulate Mother Theresa.
In response to another comment. See in context »Dear Ms. Deutsch,
As a unit director of a competing capital markets group, I, once, held Goldie (GS) in very high esteem, indeed, mirroring your stated sentiments; thorough, sharp, and innovative were cool (in the days that we bet house capital). These sentiments have waned as The Street shed its ethical and productive codes for opportunistic chicanery.
Goldman may be the best of what is left, but this is hardly praise worthy any longer.
JT Easthill
In response to another comment. See in context »Again, we totally agree. I’m not saying they are praiseworthy in terms of ethics or doing good for society or any of that stuff. I’m saying that they are brilliant at keeping their activities one nanometer to the correct side of the law, and that the only way to stop them is to change the law.
In response to another comment. See in context »Far too many of us are, indeed, peasants in this economy. I’m with Matt on this one.
But what, exactly, did you want Goldman to do that it didn’t do? And what do you object to in what it’s doing now?
In response to another comment. See in context »maybe not use illicit means to screw the entire country out of a generation of earned wealth?
what about them fucking us all in the ass gets you off so hard?
In response to another comment. See in context »try as I might, I cannot find Goldman’s hand (or any other body part) at work when i look at the (extensive) damage my 401K and my NYTimes stock portfolio have suffered in the last year. I’m no apologist for the financial bandits — take a look at my portfolio of BofA, AIG, etc., posts. I just don’t believe that turning a profit is in and of itself a sign of malfeasance. In Goldman’s case, I genuinely believe it was excellent strategy, tactics and management.
In response to another comment. See in context »“I cannot find Goldman’s hand (or any other body part) at work when i look at the (extensive) damage my 401K and my NYTimes stock portfolio have suffered in the last year.”
okay, Matt has detailed how Goldman has effected stocks, created bubbles, and then when stockholders lose money goldman ends up racking up profits because they hid pertinent information from their clients… yet you’re here claiming that because you yourself can’t find an impact on your own portfolio, that they are free of guilt and that you should support them? It is clear to anyone who has read this thread that you didn’t even read a lick of his rolling stone article, since in it he addressed these issues you are raising, yet you keep raising them…
In response to another comment. See in context »and did you honestly ask what he would object to? did you read any of his articles or are you just reveling in the amount of cash goldman is getting at the expense of everyone else without regard to what matt has or hasn’t written?
In response to another comment. See in context »oh and one more thing:
“Far as I’m concerned, it managed beautifully through this crisis, took advantage of opportunities that were dropped in its lap, made the right call on risks — and is now reaping the rewards.”
So even though they completely circumvented regulation and abandoned the notion of an even playing field, you’re congratulating them? did you make friends with the biggest cheaters in school because they fucked the system but managed to get good grades? go back and read what you’re saying, seriously. you’re congratulating a small group of rich people for abusing their power. do you realize how disgusting that is?
In response to another comment. See in context »I despised the students who cheated. I had no problem with those who gamed the system. If there are loopholes, why castigate those who find them and exploit them?
In response to another comment. See in context »We clearly have a genuine disagreement here. But I’m not tempted to retract anything I’ve said — even on second reading.
And I’ll leave it to Matt to thank you for your support, not my place.
“I had no problem with those who gamed the system. If there are loopholes, why castigate those who find them and exploit them?”
you just said you despise cheaters, but if someone found a smart way to cheat, we should think they are awesome.
I considered elaborating on this but by the time i finished reading your post i puked all over my keyboard.
In response to another comment. See in context »They shouldn’t have had their former CEO funnel 13 billion dollars to them via AIG, that’s what. Twit.
In response to another comment. See in context »I want Goldman to invest in America – not for profits but because it’s the right thing to do. As long as making profits excuses any behavior that isn’t provably illegal – we will never get out of this mess.
In response to another comment. See in context »But that’s where we run into fiduciary reponsibility problems. You want Goldman to take its shareholder’s money, invest it in companies or activities that will not make a profit, because it’s the “right” thing to do? I’d be all for the company setting a policy that its grossly overpaid executives dedicate a portion of their own compensation to invest in clean energy projects, whatever.
In response to another comment. See in context »wasn’t your previous column about Bank of America about you criticizing them for “bamboozling”? you realize goldman did that, too… yet you support them.
Are you married to a goldman banker? are you on their payroll? why the double standard here?
My, Russ, but you have a way with words and imagery. I wish I could write as elegantly as you do.
Again, semantics. Exploiting loopholes is not cheating, smart or otherwise. My accountant and I do everything in our power to make sure that I take absolutely every legal deduction I can, even those that may violate the spirit of the tax law, as long as they don’t violate the letter. To you, that’s probably smart cheating. To me, it’s just smart.
I don’t think there is a way to be elegant about fucking people’s lives over because you have friends in high places, but you’re welcome to try.
Sorry but I support this country and its laws, even if I don’t agree with all of them. Apparently Goldman (and you, yourself) live in a world that is outside the United States, shafting taxpayers, hardworking citizens who are doing what they should by expecting those in power to exercise their duties with respect to those whom they represent. Clearly your ideology cheat-or-be-cheated works for you, but it doesn’t work for the millions of people who have lost livelihoods as a direct result of the amoral system you seem to support. To you, if someone loses in our economic system, even if it is because some sleazeball higher-up in a bank hid the bank’s failings from everyone who should, under the law, have known about it, then it isn’t the banker’s fault for doing the wrong thing, it’s the ordinary citizen’s fault for not trying to cheat the system. What you are opining is completely amoral and, quite frankly, unAmerican. You are taking a position against the law abiding, honest citizens of this country and patting yourself on the back for it. How do you sleep at night?
In response to another comment. See in context »But exploiting loopholes IS cheating when it’s your own former boss who’s handing you the loophole and handing you my goddamn tax money! They buy their way into government, change the rules to suit them, take public money from the rest of us to bail themselves out when they make mistakes, and you think that’s fair? But hey, if you don’t object to paying taxes to subsidize Lloyd Blankfein’s bonus, don’t make it my problem. Just send him a check directly!
In response to another comment. See in context »I noticed the view count on Claudia’s articles is significantly higher when she’s attacking you and your article, Matt (well, more you than your article). This one already has five times the views of most of her other ones…
I guess that’s a loophole someone could use to get more reads on here.
In response to another comment. See in context »excuse me, Russ? I’m attacking Matt and his article? I thought I was just expressing my opinion.
In response to another comment. See in context »But you are absolutely right, boy is this getting play. Not yet there with a few months ago (see: “Now I get it — Enron was the victim”) — but then, you wouldn’t like that one, I was sounding off about corporate criminality, you might have had to agree.
Matt, I finally read your 7-bubble piece in its entirety. Impressive research, scholarship and writing. Tongue nowhere near cheek, compliment heartfelt. And yes, there are examples of illegality that you cite of which I was totally unaware.
In response to another comment. See in context »But I found myself getting much angrier at the Washingtonians and the investors than at GS. As I’ve been asking again and again, where the hell were/are the regulators?
I remember writing numerous pieces during the tech boom, pointing out that Silicon Valley IPOs did everything in their power to NOT make profits, because the track record was that as soon as they went into the black, investors dumped the shares. That mania can’t be laid at Goldman’s doorstep.
And Calpers, TIAA-Cref, etc. — they employ investment officers who are supposed to understand the risks involved in (crap)mortgage-backed securities and esoteric financial instruments, and steer clear of them. I can understand individuals and even nonprofits who invested with Bernie Madoff, for example — but sophisticated money men, the guys running the feeder funds, HOW could they not have known that there is no such thing as a guaranteed annual double-digit return? Same thing with huge pension funds — how could they invest in things that no one understood?
“Exploiting loopholes is not cheating, smart or otherwise. My accountant and I do everything in our power to make sure that I take absolutely every legal deduction I can, even those that may violate the spirit of the tax law, as long as they don’t violate the letter. To you, that’s probably smart cheating. To me, it’s just smart.”
Wow, Claudia! I didn’t know you went for the “smartest guys in the room” bullshit. Do you agree that these loopholes you exploit should remain in the tax code? Do you take advantage of any that you don’t agree with? Or do you take advantage of whatever is there because, what the hell, you don’t make the rules? Just how do you expect things to change if we’re all so willing to play like the big boys do?
I must be, by your definition, quite dumb indeed. I don’t even deduct my charitable contributions because I don’t think my giving should come out of the national piggy bank! What I should do is quit my job and go on welfare so you can support me – obviously you can afford it. Oh, wait,…… I don’t run a bank.
In response to another comment. See in context »Mark, you can’t really think I’m sticking up for the tax code, can you? No, I don’t think that mortgage interest should be deductible yet rent should not, favors homeowners who are generally richer. And I don’t think they should have elimninated the deduction for credit card interest. And I certainly don’t think the alternate minimum tax should kick in on what is now lower middle class incomes. And on and on — but yeah, I feel zero guilt at taking the meager deductions that I get.
And yes, I deduct my charitable contributions. In fact, I write larger checks with that fact in mind. Something my relatives have long known — I might buy them a $50 birthday present, but if they opt for a contribution in their name, it’ll be twice that amount. Far as I can tell, charities benefit from that more than from your refusal to deduct on principle.
In response to another comment. See in context »Well,…yes, I think you’re sticking up for those parts of the tax code that serve your personal interests. As in, “…but yeah, I feel zero guilt at taking the meager deductions that I get.” And along the same lines, you’re sticking up for Goldman’s taking advantage of their connections and loopholes because it serves their interests. You call it capitalism, I call it greed and self interest.
I don’t expect society to pay for my charitable giving any more than I want to pay for Goldman’s gaming of the system. If we agree, as I thought we had elsewhere, that the system is the problem – we can’t turn around and game it like the rich, albeit on a smaller scale. Can we? Obviously we differ.
Personally, I think all deductions above a reasonable per person standard deduction should be eliminated. If we would all give up our other deductions and loopholes – rich, poor, connected or not – maybe we could afford things like real universal healthcare and 100% clean energy.
Given the system we do have, Matt makes a great point when he says there’s a difference between following the rules, and having your friends write the rules so that you can’t really lose. People wouldn’t put up with that kind of shit in a Little League game, yet it’s seen as good business in a broader context. It seems ridiulous to me.
In response to another comment. See in context »Actually, we agree a lot more than you think. I would love to see all deductions eliminated (okay, I’ll compromise, keep the per-person standard deduction so that someone with a bunch of kidlets gets to keep more money than I do). I would certainly like to see the tax code simplified so that accountants and tax lawyers would become obsolete. And I certainly would like to see universal health care, eradication of hunger, equal educational opportunities for everyone, research into cures for cancer, AIDS, etc.
In response to another comment. See in context »But those are not on the list of options. So if they are going to tax my unemployment insurance payments, I will deduct any money I spend looking for a job. If they will use my money to fund the war in Iraq, I will take absolutely every (unfair) deduction I can, and funnel some of that extra cash to causes in which I believe. Sorry, but I cannot feel guilty about ay of that.
I can’t believe what I’m reading!! You have managed, I think deliberately, to MISS the whole “bleeping!” point, Deutsch, of Taibbi’s article and everything else said about your terms of endearment for Goldman Sachs. This has nothing to with true Capitalism or the Free Market working the way it’s supposed to work. The FACT is GS, its obscenely rich bosses (Paulson, Rubey, Blankfein, Buffett, et.al.) and its politically well placed and powerful minions, RIGGED the system to benefit…ITSELF! They did this not only during the “Bubble” years leading up to last year’s collapse but most glaringly in the months since. Paulson was Treasury secretary, for G sake, becoming the most powerful man in the universe last fall with his dictator-like mandates and trillion dollar Tarp bailout. He did this in my view to save his and his buddies’ fortunes with GS. Nothing more. You call this Capitalism?? I call it THEFT of the taxpayers of the most grand kind. I wish Congress and this Administration had the balls to take on GS but I just don’t see that ever happening, especially when GS and most of the investment community in NYC are lining the pockets of the Dems in Congress. We all know that to be a fact. So next time Deutsch, don’t be so “bleeping” obvious with your allegiances.
Mike, I’m having a bit of trouble with your math — Paulson rigged a trillion-dollar bailout solely to give Goldman $10 billion for 8 months? Seems to me if he wanted to rig the system entirely in favor of his alma mater, he’d have let more of its rivals fail.
As I’ve said in numerous prior posts, the problem wasn’t a rigged system, it was no bleeping system at all. Regulators looked the other way as banks handed out fraudulent mortgages, as wall street firms created esoteric instruments that no one but themselves could understand and that — surprise, surprise — benefited no one but themselves. The whole system needs overhauling. But to blame Goldman for succeeding, rather than focus in on BofA’s godawful subterfuges, or AIG’s incompetence, makes no sense to me at all.
In response to another comment. See in context »I’m sorry, but you have to be kidding. Bear, Lehman and Merrill all went down and were all top competitors of Goldman. How many more did Paulson need to let fail? Of course Treasury decided to save AIG, the counterparty to $13 billion in gambling^WCredit Default Swaps for Goldman. Somehow the Fed managed to funnel tax payer money through Maiden Lane so Goldman could get its massive payday.
Who was in the meeting when it was decided to save AIG? Paulson, Geithner and Llyod Blankfein. I wonder what Llyod’s opinion on saving AIG was? Then we can look at who took over as the CEO AIG, Edward Liddy, a board member at Goldman until he took the job at AIG.
If we turn back the clock a few years we see what kind of hand Goldman had in getting rid of the net capital rule, leading investment banks to leverage up over 30:1. None other than Goldman CEO, Hank Paulson, was the tip of the spear in that charge.
This isn’t capitalism, this is cronyism in a plutocracy. For at least a decade you haven’t been able to throw a rock in Treasury without hitting a Goldman alum.
In response to another comment. See in context »Claudia, did I just here you say “let them eat cake”? Today is Bastille day. I don’t brag on the French very often, but I will say that they have a novel and highly effective way of dealing with their corrupt aristocrats. Food for thought..pardon the pun. Viv La Revolution.
I’m wondering who the “them” is in this context? If I were sticking up for Bernie Madoff or AIG, I’d get it. But whose mouths has Goldman snatched bread from?
In response to another comment. See in context »With Lehman out of the way it seems that Goldman is the best bet in town and maybe if they keep it up they can become the only bet in town and far, far, too big to ever fail. After all it is the government that is supplying the money and insuring all these bets. Buying Goldman is certainly better and safer than buying American bonds because the country is broke. Why….let’s think….oh yeah I remember.
hey, I wish I had bought Goldman stock way back when. Then again, I also wish I’d bought Google and Microsoft and…and boy, do I wish I’d sold my New York Times shares
In response to another comment. See in context »I enjoyed your discussion, but let’s face it: Matt thinks that ethics matter, Claudia thinks that ethics is a cheap Greek wine.
How sad life would be if good Greek wines weren’t available to those of us who can’t afford Chateau Margaux. Maybe we should make wine tax deductible, as long as you drink it for medicinal purposes.
In response to another comment. See in context »Okay, I’ll be serious. Of course I think ethics matter, I just don’t think that anyone who makes a profit in a down economy is by definition unethical.
“Of course I think ethics matter, I just don’t think that anyone who makes a profit in a down economy is by definition unethical.”
yet you have no problem with goldman making profits in a clearly unethical way… in fact you encourage it…
you realize you are contradicting yourself, right?
In response to another comment. See in context »In the world of the interweb, people such as yourself are commonly referred to as “trolls”. Saying one thing, then moving the goalposts while contradicting things you have previously stated.
We can’t even have a rational discussion on the issue with you because we get responses like your most recent one. You say it’s good that goldman did bad things and cheated the system to make a profit, then you turn around and say that ethics matter. You can’t have it both ways. Stop being a troll.
In response to another comment. See in context »in my profession, we call what you are doing here eggregious misquoting. I’ll argue with you all you want — but I will not defend things I did not say and would not say. I would say your behavior is far more troll-like than my own. But hey, whatever rocks your boat. You’re on my blog page, I’ll reply to your comments.
In response to another comment. See in context »I agree with you, Claudia! America has always been about survival of the fittest – not survival of those who go like lemmings to the sea and complain about why things are completely fair. Gee, even Jimmy Carter admitted life just isn’t fair.
There IS light at the end of this recessionary tunnel and if its Goldman holding the flashlight out front – well, that’s just ok with me.
Maybe, Claudia, its all about optimism vs pessimism or reality vs fatalism.
The fatalists, of course, would have nothing to pooh-pooh the rest of us over if all was going in a positive direction!
DD
Diane Diamond… Are you a stripper or something?
In response to another comment. See in context »Oh sorry, it’s “Dimond”.
my point still stands.
In response to another comment. See in context »Bless you, Diane — I was just telling Andrea how wierd (albeit kinda fun) it feels to be attacked from all sides, with absolutely no one agreeing with me (except of course for Rick Newman, which is why I linked to his post from mine.)
In response to another comment. See in context »Diane, I am at heart an optimist. But I can’t get a case of Warm Fuzzies from Goldman’s performance, because the money Goldman makes isn’t spurring job growth.
In fact, it’s Goldman’s rush to position itself for carbon markets that is most depressing of all. The fact that MY tax dollars has now shored up a reckless financial operation, which is attempting to permanently insert itself to skim from all my future energy bills (which are, in fact, going up in cap-and-trade) is enough to leave me more than a little sad and angry.
If getting leverage as arbiter of the carbon markets is such a great and profitable thing to be, then Goldman can do what any other company does and raise the capital to get involved.
Oh, that’s right. It did. From the same place GM just got its infusion.
This isn’t about bonuses and abuses, and wishing for schadenfreude. It’s about ending the revolving door that has made the Fed immune to inquiry and sunlight; and by proxy, Goldman Sachs immune to the world.
In response to another comment. See in context »“America has always been about survival of the fittest – ”
Actually, America has always been about survival of the greediest – Rockefeller, Carnegie, Ponzi, Morgan…
“not survival of those who go like lemmings to the sea and complain about why things are completely fair.”
Did you mean ‘unfair’? Such behavior implies survival without political dissent. Didn’t Americans just have an eight year lesson on that?
“There IS light at the end of this recessionary tunnel and if its Goldman holding the flashlight out front – well, that’s just ok with me.”
…Right, you have officially left the building with that statement.
In response to another comment. See in context »You mistake Adam Smith for Charles Darwin.
In response to another comment. See in context »Claudia…. your article is called “Congratulations, Goldman — and I wish you many, many more”
Does anything else really need to be said?
Hell, it took halfway down this comments section before you even decided to read Matt’s article (notice this was after vociferously defending goldman’s actions despite clearly having no knowledge whatsoever of what they did).
And “egregious misquoting”???? I copied and pasted exactly what you posted. You do realize that everyone on here can just scroll up and read what you typed, right? Just because you claim further down the page that something never happened doesn’t erase your previous posts.
Yeah, exploiting loopholes is not cheating, but the thing is – - – no one looks for loopholes unless they ARE CHEATING!
Once you know it’s there, you’re going to be really stupid to ignore it, but who would look for it except someone who felt “entitled” to special treatment?
Semantics yet again. I’m using the word loophole because all the rest of you are. But let’s get that supercharged word off the table and look at what you’re saying. Do you really believe that 100% of people who use an accountant to prepare their taxes, on the assumption that he/she will spot every deduction opportunity, are really cheaters at heart? During the Bush administration, did you think it was righteous to fork over as much money as you could to a government of the rich, by the rich, for the rich. Me? I felt good about every penny I could legally wring out of my tax bill. And trust me, you would have liked how I spent the money.
In response to another comment. See in context »I don’t know yet how I’ll feel about taxes under Obama. My guess is, I’ll still try to take every possible deduction, but I won’t feel as triumphant about finding them
Claudia,
Despite the other pieces you’ve written, with regard to GS you seem to fall for the “corporate mystique”–whatever is good for business is good for everyone–hook, line, and sinker.
But do you really believe that the system we have now, where a few privileged executives have power beyond a regular taxpayers wildest dreams, is the best system for everyone?
Goldman isn’t a light at the end of the recessionary tunnel. It’s just back to business as usual. And that’s a shame for the rest of us.
It’s a lot easier to accept the status quo, as you seem to, than to try to fight it, as Matt Taibbi has done.
Hey, not fair, ladies! I don’t quibble with all of your who disagree with me. But if you look at what I’ve written on health care, on cap and trade, on AIG, you simply cannot say I stick with the status quo or favor the rich.
In response to another comment. See in context »I just genuinely believe that Goldman has acted within the system. That’s why I keep mentioning the tax code — the way they’ve figured out what is or is not legal to deduct is unfathomable to me, but I take any deductions I can. Goldman is exploiting every loophole it can, too.
I’ve stood up for General Electric in past posts also — sure, the company “manages earnings,” as it has been accused. That’s what conglomerates do — they take a writeoff for Montgomery Ward the same year they take a writeup for selling Kidder, etc. It is totally legal and, given our convoluted tax and accounting codes, moral as well.
I cannot argue with Matt’s scholarship — everything I know about Goldman’s history, I know from him. And there are some pretty ugly episodes of which I was totally unaware. But none of that persuades me that the company has not navigated professionally and legally and spectacularly through this recession/depression. I do not have any knee-jerk adulation of the rich, as many of you have accused; I just don’t have anny knee-jerk hatred of them either.
But… surely you must understand that the term “legally” has no meaning if it’s THEM making and selectively enforcing the laws? Just look at yesterday’s profits. Goldman wrote $28 billion in federally-backed debt last year thanks to the Temporary Liquidity Guarantee Program, which was pushed through by Paulson and Tim Geithner — who himself was a former protege of Bob Rubin, who was head of Goldman. So Goldman guys give Goldman a boatload of cheap money (guaranteed by you and me, the taxpayer), they lend it back to us at high interest, turn the profits from those transactions into massive bonuses, and you want to congratulate them for that? This is extortion and robbery, even if it is “legal.” It would be bad enough if this weren’t happening in the middle of an economic crisis, but to do this on the backs of the thousands of people losing their jobs is disgusting. It’s not economics, it’s politics — a kind of reverse socialism, where the wealth is spread upward thanks to the power of the state, which collects taxes from us by force and gives that money to people who don’t need it. How do you not understand that? Are you really that blind?
In response to another comment. See in context »Brilliantly put Matt.
Claudia, I don’t know anything about you or your background. This is only the second time I’ve responded to anything on your blog. But I presume from your string of comments that you are an entrenched member of the Wall Street “transaction” class, is that not right? That is, you’ve made your money not in producing real economic activiity, whether goods or services, but as an active member of that group of individuals who feed off the genuine economic activity of others through high transaction fees. It’s hard for me to think otherwise given the inanity of your commentary. You are cheerleading for all of the wrong, amoral, things.
In response to another comment. See in context »Would it were so. Until May 2008 I was, and always had been, a salaried journalist — up to you whether you consider that a trade that produces “real economic activiity” but believe me, it isn’t one that makes you rich. And since then the most I’ve been able to command is $2 a word — hardly a “high transaction fee.”
In response to another comment. See in context »What I am cheerleading is a company that looked at the lay of the land and figured out how to profit from it. I’m the first to admit, i don’t always feel that way — I was viscerally disgusted by the banks that handed out mortgages to people who could never have paid them off, whether it was legal or not. But I just can’t feel the same disgust for Goldman. I’ve always admired the company, I knew Paulson more as head of the Nature Conservancy than as Goldman’s chief, they had a good environmental track record…I’ve already admitted that I didn’t know of the past transgressions that Matt has so thoroughly laid out. And they give me pause, and certainly tarnish my Goldman admiration. But they still don’t make me begrudge the company it’s quarterly earnings.
Yes, Matt, she is that blind. Probably sleeps with a copy of Atlas Shrugged under her pillow. One of those people who stopped paying attention to economics after the first four weeks of Econ 101.
In response to another comment. See in context »Actually, I always preferred The Fountainhead. It has one of my favorite line: “So tell me, what do you really think of me?” “The truth is, I don’t think of you.”
In response to another comment. See in context »No, I don’t think she does understand this. It’s like a form of developmental disability with people that work on Wall Street (as traders, journalists, or otherwise)–an inability to see how something might be simultaneously legal and also manifestly morally wrong. Call it “ethical retardation.”
In response to another comment. See in context »No, Matt, not blind. I am probably guilty of being an opportunist. As I’ve said in this thread, and in many posts before, there oughta be a law. I am all for regulations that make these kinds of transactions impossible — just as I am for a tax code that doesn’t favor homeowners over renters, that doesn’t tax unemployment insurance, that doesn’t allow deductions of boondoggle trips and meals. And i would happily see my taxes go up if it made universal health care possible. But i do not pretend that I do not take every deduction available to me. And in a financial world increasingly populated by thieves — Lay, Skilling, Koslowski, Madoff, etc.,etc.,ad infinitum, ad nauseum — I stick with my admiratioin of companies that opportunitically took advantage of rules and regs that should never have been there in the first place.
In response to another comment. See in context »I’m going to try this one more time, since you still apparently don’t get what any of us are talking about. I’m going to make it simple, so you understand.
Using your tax analogy, it’s one thing if you tax advantage of existing tax rules, max out on your deductions, and pay few taxes in a way that’s smarter than the next guy.
It’s another thing if you WRITE the tax rules to benefit yourself in particular, and pay less than the next guy not because you’re smarter than him, but because the next guy does not happen to have his former partner running the U.S. Treasury.
This isn’t about one set of actors playing by the rules better than another. This is about one set of actors creating the rules to benefit them, while we all suck eggs. I suppose if you’re a pure social Darwinist and you believe in the law of the jungle, that might makes right and God bless them if they can get away with it, then this makes sense. But otherwise what you’re saying is insanity. It certainly is not capitalism, what you’re describing. Will you at least concede that? Do you understand that without government help, Goldman would have gone out of business last September?
In response to another comment. See in context »When I read “Congratulations” I honestly thought it was a joke. How disgustingly delusional!
“Hey, wow, Taibbi’s piece on GS sure is getting him a lot of attention. You know, I would like some attention, too. Maybe I could do what he did and put in a legitimate effort to gather the facts and examine various perspectives. But then again, all that journalism type stuff sounds pretty tough. Maybe I could just ride the buzz by writing an article about GS, too. But I need my own spin on it … I know, I’ll write about how GOOD they are! Yeah, that’ll make me relevant! And then I can get back to my true passion – tennis.”
Sorry it’s taken me hours to respond. I was, in fact, on a tennis court. You will be absolutely delighted to know that I got trounced.
In response to another comment. See in context »Rick Newman’s gotten a lot of play on his piece supporting Goldman — how can you be sure I’m not riding his coattails instead of Matt’s?
I must say that most of you guys that have commented on Claudia’s a blog are obviously NOT GS shareholders!!! Otherwise you’d be singing a different tone. GS’s management and employee’s disserve every penny of the bonus that they receive while navigating through the worse economic environment in decades. Yes, they did receive government money which was returned plus interest. Unlike AIG that continues to receive money with absolutely no intention of returning a dime.
Talent should be rewarded handsomely especially if you can thrive while others are falling apart. Capitalism rewards those they take risk while managing expectation and absolutely no company does it better than Goldman Sachs! Like it or not Wall Street is based on greed and some gambling, in 2007 while Merrill was buying MBS (mortgage backed securities) Goldman was shorting them…… I don’t need to remind any of you how that turned out.
May the talent and Goldman continue to thrive and flourish and may they make me and many more shareholders extremely happy for “MANY MANY MANY MORE YEARS!!!!!!”
Good grief — a supportive comment. At this point I don’t know how to respond, I’m so busy dodging flak! Thanx Roei — may your portfolio grow and prosper
In response to another comment. See in context »Roe–
You’re joking, right? You must be. The AIG line is simply unbelievable.
Goldman received at least $13 billion of the money we taxpayers gave to AIG. Thanks to government intervention they got paid 100 cents on the dollar for the money AIG owed it — compare that to how much the GM creditors got in that bankruptcy. Without govt. intervention, Goldman would have sunk with AIG; instead, it gets $13 billion in capital from you and me.
They furthermore got $5.9 billion from AIG just as it was proceeding to bankruptcy, but that’s another story. Then former Goldman chief Hank Paulson, as Treasury Secretary, installed a former Goldman banker, Ed Liddy, as head of AIG, to ensure that Goldman got paid off.
And that’s just a small slice of the subsidy. When Goldman converted to bank holding company status last year, that made it eligible for $28 billion in FDIC backing for new debt — which means Goldman got a massive haul of virtually free money to play with thanks to you and me. They then took this cheap state-aided money and went back out on the market with it and made massive profits. How many times do I have to repeat this? It’s unbelievable.
FURTHERMORE, Goldman when it converted to bank holding company status became eligible for a whole galaxy of new lending programs at the Fed, including the TALF, and we have no idea how much money they got there. They also now had access to the Fed’s discount window, and we don’t how much they got there, either.
The TARP money they paid back is just a small slice of the state aid they got and continued to get in the last year. The FDIC backing is worth a mint all by itself. You might as well hook up a taxpayer-funded ATM right in front of 85 Broad.
How do you now understand that? And what exactly is the appeal in cheering on some bank that is robbing your tax money? What is wrong with you people?
In response to another comment. See in context »Humanity has become a relative term in this discussion. I’m not sure if everyone knows what it is here.
In response to another comment. See in context »I could buy your “write the rules” analogy if the rules benefitted Goldman and none of its competitors. But in fact Goldman — and JP Morgan, as the other Matt points out — needed the help a lot less than their foundering competitors. Was Goldman helped by BofA’s acquisition of Merrill (a disgusting episode for totally different reasons)? Do you believe the AIG bailout was entirely to help Goldman, that if Goldman didn’t have that $13 billion at stake it would have gone down differently? I don’t believe any of that. And as for the government backing — yep, worth its weight in gold, and had Goldman defaulted on anything, forcing my tax dollars to cover its flailing tush, I’d be as outraged as you are. But, in fact, it got access to cheap money and used it well.
In response to another comment. See in context »And let me see if I understand this. Because Goldman was not a beneficiary of the state-sponsored rescue of Merrill, you have no problem with the state-sponsored rescue of AIG, which did benefit Goldman?
And as for state backing: I know that when I need to borrow money, I have to pay real, market rates. No government agency is backing my credit card. Which means that when I have to borrow money from a bank like Goldman at those market rates, while Goldman has gotten that money for nothing, Goldman is effectively taking that whole spread from me with the state’s aid. How do you not understand that? It would be one thing if the government decided to back all of our borrowing. Instead, it decided to back one set of people and not another — which is a backdoor way of shifting money from my pocket to theirs.
And see if you don’t worry about this when all of this reckless borrowing with state backing doesn’t affect the dollar, taking value out of your savings.
In response to another comment. See in context »Matt, we don’t disagree about the unfairness of Goldman having access to cheap money, about Goldman losing not a penny on the AIG debacle, about the government backing. What I’ve been saying again and again and again is that I fault the regulators for creating a situation that so benefits Goldman. If, in fact, the government offered to back my credit card or give me dirt-cheap loans, I’d take the money gladly.
In response to another comment. See in context »I do not think that the reason for the AIG bailout was to help Goldman. Let’s turn it around — do you honestly believe that, had Goldman not had $13 billion at stake, the government would have let AIG sink? I don’t. And I’m not saying I think the AIG bailout was a good idea — i truthfully do not know — I’m just saying i think it is wrong to lay it at Goldman’s door.
And I bring up the BofA/Merrill situation as a similar example, of something that Paulson — rightly or wrongly — engineered without Goldman in mind.
I’m just waiting for someone to suggest that Goldman is behind the war in Iraq
“What is wrong with you people,” indeed.
If there’s one vibe I’m catching from your RS piece and subsequent blog update, Matt, it’s that certain people are pushing back, and the rest of us are sharpening pitchforks. Your “Great American Bubble” piece was as infuriating as your AIG piece, and to realize it’s all part of the same big swindle… you’re reporting the most un-covered part of this horrific tale, and exposing it for what it really is, and has been. To see you keeping it up in the comments sections is even more encouraging.
Personally? I’m bullish on guillotines.
In response to another comment. See in context »“GS’s management and employee’s disserve every penny…”
I’d say it’s the taxpayer who had been dis-served by Goldman.
Perhaps you meant “deserve”.
In response to another comment. See in context »I think I just saw a pig flying by my 39th floor window. I couldnt figure out what caused it til i logged on and found Claudia and i in agreement about something. Goldman navigated the financial shoals exceptionally well and Claudia is right to acknowledge their talent. Bitterness over past events, real or perceived, takes nothing away for the last 90 days. BTW, there is a strong suspicion that GS, like JPM, neither wanted nor needed TARP money, at least in the amounts they did but took it at Paulson’s heavy handed request so as not to make the real needy institutions stand out.
Paulson’s and Bernancke’s new ad hoc rules at the end of 2008 were the same for everyone. GS just did it better as has been their track record for quite some time.
This whole food fight has indeed tipped into theater of the absurd. I’m being roundly castigated by the liberals whose views I nearly always espouse — and for the very first time, my conservative arch nemesis is weighing in on my side. THe sky is dark with flying pigs! (and the rest of you, resist the opportuity to make a “claudia is a pig” comment here — it’s too easy, not worthy of you at all)
In response to another comment. See in context »Do you not realize that this has nothing to do with liberalism or conservatism, but everything to do with your lack of comprehension of what we’re talking about?
In response to another comment. See in context »This is super-interesting. This, right here, is what T/S is about. Now I’ll jump in.
I think the arguement/discussion has moved away from where the real problem was. Let’s rewind to the beginning of the crisis. Why did GS need several billion dollars of capital from the federal government? I know!! Because they were making loans that were so fundamentally flawed, nothing good could come out of them in the long term. They had so little cash on hand, that a mantis scratching itself could over-leverage them. They were buying huge chunks of what amounted to financial crack, and I’m sure someone, at least one, knew that low would be a killer. How was this allowed to happen? *glances at Matt* As has been shown, the rules started getting bent out of an logical shape, by people with huge stakes in GS.
I admit, I over simplified a few things, but I don’t want to explain everything.
Thanks for the semi-reasonable discussion.
and thank you for disagreeing without hurling one invective.
In response to another comment. See in context »I think where we part ways is, I’m of the school that says Goldman didn’t need the bailout money, that it was asked (yes, by its former boss) to take it. And as soon as it discovered that restrictions included losing the ability to pay its partners totally unreasonable amounts, it began clamoring to pay it back, no matter how much interest. Of course Goldman benefitted mightily from the loan, from getting 100 cents on the dollar from AIG, from all kinds of stuff. But I truly believe the company would be healthy and standing right now even if it had never gotten that help. As profitable? Of course not. But profitable, solvent, and poised to grow at competitors’ expense. Yep.
It wouldn’t have been healthy if it had lost that 13 billion dollars instead of having it given to it BY ITS FORMER CEO via AIG.
And stop obsessing about the direct bail-out money. It’s a tiny sum compared to the 13 billion and to the money it has gotten access to by becoming a bank holding company.
You’ve been corrected enough times on this by people more articulated than me. You are now being willfully obtuse.
In response to another comment. See in context »Should be “articulate,” not “articulated,” of course.
In response to another comment. See in context »“But I truly believe the company would be healthy and standing right now even if it had never gotten that help.”
You would help your case immensely if you could back that up with evidence. Can you?
In response to another comment. See in context »Claudia,
Goldman just posted a $3.44 billion profit. Without the AIG bailout, they’re out $13 billion. They issued $28 billion in FDIC-backed bonds and made a fortune off that. They made $736 million in underwriting this quarter, a lot of it underwriting bank stock for companies that had to pay back TARP funds via certain parameters as per govt. mandate, which is another sort of subsidy. What evidence do you have that they would be turning a profit right now minus all that help? Or do you just, you know, think that because you think it?
In response to another comment. See in context »Again, again, I’m not saying Goldman hasn’t benefitted mightily. I’m saying the AIG bailout wasn’t engineered simply to benefit Goldman.
In response to another comment. See in context »The horror of that $13 billion is that they got 100 cents on the dollar when so many others took bad financial lumps. They would not have written it off in one quarter, as you seem to be suggesting. And in terms of “They made $736 million in underwriting this quarter, a lot of it underwriting bank stock for companies that had to pay back TARP funds via certain parameters as per govt. mandate, which is another sort of subsidy.” Matt, they did not put the banks in this situation, they exploited the situation the banks were in. I’m not saying this is Mother Theresa behavior. I’m just saying it is smart and legal.
Omigod!
I just passed 85 Broad St and out comes GS CEO Lloyd Blankenfeld singing “I get by with a little help from my friends….”
Undoubtedly accompanies by an Ivy League barber shop quartet, all wearing white shoes
In response to another comment. See in context »I have just discovered this site, so I admit I don’t understand exactly how it works, but I don’t understand how someone gets to write an article when they don’t even have the first clue what they’re talking about.
“hey, guys, that’s our capitalistic systen, rewards as well as risks”
Excuse me? Putting the words capitalism and government anywhere near each other is an oxymoron, emphasis on the moron. No need to read on from there.
Postscript (pun intended): I just put up a new post, trying to put all this in perspective — i.e., getting the anger focused back on the real bad actors. Since I don’t imagine most of you are constant visitors to my page, just thought I’d note it here
That is what we are doing but you are claiming the real bad actors are in fact real good actors who should be congratulated.
Goldman off-loaded their Crap into a Trap which became Tarp with a simple sleight of hand.
Now the same trick is being used to change it again into Talf.
Matt was correct with his initial analysis of the situation back in the March piece about AIG in “The Big Takeover”, when he astutely proclaimed: “we’re officially, royally f*%$#!-ed”
That we are, indeed.
So, getting in on this a little late but coming to a very real, clear, objective conclusion after reading this post: Taibbi uses facts, research and logic to support his positions. Sorry Claudia, your conclusions are based on something more akin to wishful thinking.
I hate to burst your bubble (wait, didn’t Goldman already do that?), but there is also no Santa Claus.
Claudia you are such an ingenue. At the moment when every major private financial institution had proven itself incompetent to guarantee the flow of credit, our government gave them massive amounts of money to guarantee the flow of credit. Open your eyes to what happened: they scared everyone to death with an economic doomsday scenario right on the eve of a national election, saying that without these bailouts no one could get a loan for a car or house or education. Then, with the ostensible goal of making sure the little guy could get an adequate loan, they loaned the big guys money to loan to the little guys.
I’m trying to make this as simple as possible so that you can understand. The big guys in this case were MIDDLEMEN. You don’t congratulate the middleman for fleecing you when you should have CUT HIM OUT to begin with. What I’m saying, there was NOTHING stopping the government from LOANING US THE MONEY DIRECTLY. Are you afraid that maybe they wouldn’t have had the infrastructure to make all these loans? Well last fall there were a lot of banks that could have been bought for a song.
Whoa!
In response to another comment. See in context »I’m the one who kept saying, hey, if we need to loan money to small businesses, give the money to the SBA and let them hand it out. College loans? Cut out the middlemen, give it directly from government to students. Public option for health care? If the private insurers can’t compete, let them fail. I’ve blogged on all those issues.
I am NOT sticking up for the bailout, how it’s been handled, any of it. My argument has been, don’t blame everything on Goldman, blame it on Washington. And once again — no, I don’t buy that Paulson was simply Goldman’s DC-based puppet
You’ll have to forgive me if I don’t appreciate the nuance of your position, given that the title of your current post is “Congratulations, Goldman–and I wish you many, many more.” If you’re so upset about the way that the bailout has been handled, and you’re all in favor of government reforms so that people like Goldman can’t keep bilking the system, wishing Goldman “many, many more” profitable quarters based on such bailouts and government loopholes is a strange way to make your argument.
In response to another comment. See in context »In fact, that is the first piece of criticism of my position with which I firmly agree (sorry for the tortured english!). You are absolutely right in terms of headline as written. So let me revise: I hope that we get sane regulation in this country that would prevent Goldman or any other financial company from creating and trading useless instruments, and making huge amounts of money while honest tradesmen, etc., are floundering. If we do, and it turns out that this kind of useless wheeling dealing is all that the GS folks are good at, then a I wish them bankruptcy. If they are as smart as I think they are, then I wish them a way to be hugely profitable by funding alternate energy projects, health care companies, etc. But I still won’t budge on congratulating them for finding legal ways to exploit the horrid system we have now.
In response to another comment. See in context »OK, the part of your post that I don’t like is that you are “of the belief,” that Goldman was somehow forced against their will to take money.
When, in your life or anyone’s life, has there ever been an instance when someone on Wall Street said, “Oh no, please, don’t give me free money, I just can’t take it because I already have too much.”
I mean, come on Claudia…you gotta be either the most naive person in the world or blatantly lying through your teeth.
But that’s exactly my argument. As I’ve said in other responses, hey, if someone offers me a huge wad that I don’t deserve, I’d probably think they were nuts — but all I’d say out loud is thank you. I’m the first to admit that Goldman took the money and only clamored to give it back when it discovered that it would not be able to pay unconscionable sums to its people, and might otherwise have to submit to government scrutiny. All I’m saying is that Goldman didn’t really need it — one reason they could pay it back so quickly — and that I simply do not buy the notion that somehow the whole bailout was engineered so that Hank Paulson could hand a hefty check to his Wall Street alma mater
In response to another comment. See in context »Claudia,
I’m at a loss to understand how the fact that the AIG bailout was maybe not “simply” engineered to help Goldman lets Goldman off the hook for using taxpayer money, a ton of it, to bail out its extraordinarily irresponsible bets. Who cares if the bailout had other beneficiaries? Why does that matter?
Actually you’re wrong about them writing it off in one quarter — that is almost certainly what they would have done, or most of it anyway, writing it off in the orphaned December 08 month, which didn’t appear anywhere in their reporting thanks to a change int heir accounting procedures (they buried billions of losses in there). The point is that no matter how you rig the accounting, they would not have had all this money to convert into bonuses now if they were still being forced to pay off $20 billion in losses. As one banker I talked to put it, everyone else on Wall Street has broken bones and hasn’t had a good meal in six months and has just finished the Bataan death march — and Goldman has a big ring of government-aided baby fat. That bonus money is government money. It’s taxes and Federal Reserve credit.
And here’s another thing. Ask your grandparents how their CDs are doing this month. It’s thanks to these jerks that interest rates are so low. Because these banks get all their money essentially for free from the government, they no longer have to pay depositors market rates for their savings. That means generations of Americans who did the right thing and saved their money are getting reamed now so that Goldman Sachs bankers can buy their third and fourth yachts. Why don’t you check your bank statement, see how much interest you earned last month? Then compare it to a couple of years ago. Then ask yourself how psyched you are about those Goldman bonuses.
In response to another comment. See in context »In fact, it is unlikely they would have known they were losing the full $13 billion in time to use that orphan quarter…
In response to another comment. See in context »Matt, again, again, again — I am NOT drooling with admiration for the fourth-yacht buyers. And I am horrified that the system is such that they can make out like bandits while my grandparents — who am I kidding? ME!! — can’t even get the rate of inflation on savings.
So what I want changed is the system. That’s why, in earlier responses, I kept drawing analogies to the tax code. If I am dealing with a ridiculously complex and unfair tax code, don’t blame me for trying to take every deduction I can get. I feel the same about Goldman — close the damned loopholes, but if you don’t, don’t expect Goldman to ignore them because it’s the “right” thing to do.
So you simply don’t ask that Goldman hold itself to ANY ethical standards?
And as for not drooling – didn’t you wish them many more profitable quarters, even if it meant unethical but still legal fleecing of the system? That sounds like slobbering to me.
Have you realized that you’re essentially making a faith-based argument? “Goldman Sachs profits are good because I believe all ostensibly legal profits are good, even if they found a way to legally drown kittens in virgins’ blood and made a profit doing it. It’s called CAN-DO ATTITUDE!”
In response to another comment. See in context »Thank you, Matt, for finally being the ONLY person to bring up the disastrous effects of lowering interest rates on “average” Americans, particularly those on a fixed income like senior citizens. First 401K’s put everyone into the casino that is Wall Street, so everyone has a stake in seeing Wall Street do well. Then the media continues to conflate the health of the economy with the health of Wall Street and investment banks. Then they continue to lower conventional interest rates…20 years ago you could make a steady 10 percent on a money market account, now banks crow about a 2 percent CD or savings rate…2 percent. Meanwhile, our government refuses to cap credit card interest rates and allows card companies ample time to jack up everyone’s rate or cancel their accounts before the new “tough” regulations kick in. Thanks for genuinely sticking up for the little guy, Matt.
In response to another comment. See in context »Some more corroboration from a respected and respectable source: Paul Krugman also believes that the problem is the rules, not Goldman’s exploitation of them. I commend his column to you: http://www.nytimes.com/2009/07/17/opinion/17krugman.html?_r=1
I don’t know how you read that Krugman article and saw corroboration of anything you said. It condemns wholesale the bank’s behavior and explicitly says at the bottom that Goldman’s big profits are bad news for everyone except Goldman. Whereas your article congratulates them for doing so well and wishes them success in doing it more and more. Just FYI.
In response to another comment. See in context »Matt, and yet again — I do not say that Goldman is a role model for an ideal win/win finacial system. What i say — and what Krugman said — is that we have to fix a system that enables a Goldman Sachs to reap huge profits for making absolutely nothing of value. But until we do, don’t blame the Goldmans et al from finding a way to perform alchemy
In response to another comment. See in context »Alchemy?
That’s kind of like when Tony Snow said the Iraq War was “special.”
Been watching this discussion for awhile now and it’s as if you and Matt are talking about two different things.
In response to another comment. See in context »The thing is, we’re not as far apart as it seems. Both Matt and I find the status quo unacceptable. I’m faulting the regulators who have made the gaming possible. Matt thinks the regulators are in Goldman’s pocket. I think they have gone to far in helping the entire financial industry, yet not every financial firm has managed to turn it all to their advantage.
In response to another comment. See in context »Krugman writes, “All of this was perfectly legal, but the net effect was that Goldman made profits by playing the rest of us for suckers.”
I’m shaking my head trying to understand how that corroborates your argument. “Goldman made profits by playing the rest of us for suckers” is, rather, Matt Taibbi’s argument, in a nutshell.
Isn’t it?
In response to another comment. See in context »As i read Matt’s argument, Goldman’s role was more like Nixon, at least as portrayed by Frank Langella: “When the president does it, it’s NOT illegal.” I do not believe that the legality of Goldman’s moves is coincidental, that it would have done whatever it needed to, legal or not, to stick it’s hand in our pockets. I do not believe that Goldman in effect wrote the rules that made its actions legal. I do believe that, had Paulson come from, say, JPMorgan or BofA or Merrill or whichever, he would have made the same decisions. I hate many of the decisions he made — I do not hate Goldman or JP Morgan for benefitting from them
In response to another comment. See in context »…Krugman was saying basically the same thing Matt’s been saying…. How you could construe it as supporting your position is just mind boggling.
Claudia, you actually get paid to write articles? It’s like before each post you go and huff a tank of gas. No offense, but I’ve met hardcore meth addicts with a bigger grasp of the issues than you.
I’m willing to bet there are plenty of well educated smart meth addicts out there. You shouldn’t typecast
In response to another comment. See in context »* furthermore, these are BASIC issues. This bank CLEARLY played the American taxpayer like a fiddle and used their buddies in the government to get preferential treatment. That’s not alchemy, that is GRAFT. Have you ever heard of it?
Claudia Deutsch – “Matt, and yet again — I do not say that Goldman is a role model for an ideal win/win finacial system. What i say — and what Krugman said — is that we have to fix a system that enables a Goldman Sachs to reap huge profits for making absolutely nothing of value. But until we do, don’t blame the Goldmans et al from finding a way to perform alchemy”
It ain’t alchemy Claudia. Alchemy is when we turned a $billion package of subprime garbage into $800 million AAA rated securities.
Using your control over the government of The United States of America to eliminate your rivals, manipulate markets (please see Goldman and their program trading algos on the NYSE), gain access to guaranteed money at rock bottom rates by obtaining a bank charter…and then playing regulatory arbitrage between the Fed and the SEC that allows you to still operate like a hedge fund, etc, etc That is called racketeering on the grandest of scales.
But you make it sound like backroom dealing. I don’t think Goldman has control over the government of the USofA, its applying for regulated bank status was upfront and hashed over in public. I know I sound like a broken record, but I can’t help it — Goldman unabashedly looked at what was going on, and said “How can I make this work for me?” And no matter how tempting it is right now — lord am I tired of fighting all of you — I’m not going to pretend that I fault them for that. I do NOT NOT NOT believe they are the architects of the financial meltdown, and I don’t expect them to sacrifice their own self-interest on the altar of financial recovery.
In response to another comment. See in context »Bravo Salzman! This is theft, plain and simple, legal or not.
In response to another comment. See in context »… or Alchemy, like when you create variable rate mortgage products that continue to rise in the lowest interest rate regime in memory? Turning perfectly good mortgage pools into black holes which swallow-up good and bad risk mortgagors equally, then eventually the issuers themselves?
In response to another comment. See in context »Maybe you might want to read the new article on CNN’s frontpage, taken from Fortune magazine, about how goldman has abused the markets, the taxpayers, and the government.
but of course they’re just doing the smart thing…. helping all of us in the long run.
Fixing the system brings us back to Matt’s central argument…as long as Wall Street executives are in charge of the reform the game will continue and as Krugman stated we will see a repeat collapse.
I subscribe to that, too, never pretended I didn’t. My problem is with the whole freewheeling financial industry. I’m just arguing that Goldman is not more blameworthy than its because it’s made bundles. I still wretch at the thought of AIG — but AIG’s implosion was NOT CAUSED BY GOLDMAN!!!
In response to another comment. See in context »So even though goldman sold AIG, what, upwards of $20 billion in mortgages to insure that goldman KNEW were actually worth ZERO, they had nothing to do with AIG’s fall?
christ, claudia, terri fucking shiavo could come up with a more sensible and coherent position than you. i mean, a retarded child could connect the dots here. what is keeping you from understanding something that should be so incomprehensibly easy and simple to understand?
In response to another comment. See in context »Taibbi’s persistence has paid off. The original article was a strange congratulations to GS, and now it’s basically, “Matt’s right, but it’s the rules!” A far hue from the headline, but keep plugging away – soon enough Deutsch just may understand that GS creating the rules is responsible for the abhorrent way in which they exploited them
So far ain’t noone persuaded deutsch that goldman wrote the rules — unless you are using goldman as a generic for the financial industry, and saying its name is synonymous with that of AIG and CIT, etc. And as for backing away from that unfortunate headline, I hearby repeat the response I gave phild above:
In fact, that is the first piece of criticism of my position with which I firmly agree (sorry for the tortured english!). You are absolutely right in terms of headline as written. So let me revise: I hope that we get sane regulation in this country that would prevent Goldman or any other financial company from creating and trading useless instruments, and making huge amounts of money while honest tradesmen, etc., are floundering. If we do, and it turns out that this kind of useless wheeling dealing is all that the GS folks are good at, then a I wish them bankruptcy. If they are as smart as I think they are, then I wish them a way to be hugely profitable by funding alternate energy projects, health care companies, etc. But I still won’t budge on congratulating them for finding legal ways to exploit the horrid system we have now.
In response to another comment. See in context »“So far ain’t noone persuaded deutsch that goldman wrote the rules”
yet it was a former goldman CEO and the current goldman CEO who hashed out the terms of the bailout? you CLEARLY haven’t read matt’s rolling stone article. he goes into explicit detail about rick rubin and other goldmanites completely raping the regulations on CDO, CDS, and bank holdings.
once again you have outdone yourself.
In response to another comment. See in context »Claudia: “So far ain’t noone persuaded deutsch that goldman wrote the rules — unless you are using goldman as a generic for the financial industry, and saying its name is synonymous with that of AIG and CIT, etc.”
But the problem here too is that you haven’t offered any evidence to counter Matt’s claims. You have simply said that “you don’t belive” that GS has the kind of influence that we say that it does and that “you haven’t been persuaded” by the arguments.
As the old saying goes: “You’re entitled to your own opinions but not to your own facts.”
In response to another comment. See in context »It is very hard to prove a negative. MAtt can point at policies that benefit Goldman and say, aha! Goldman’s influence caused these policies to pass. I can point to the same policies and say, aha! these policies are helping all kinds of financial companies, most of which I’d like to see implode. I can’t prove that Goldman, or BofA, or Merrill or any other company did not bribe or cajole or do whatever to get those policies passed — i’m just not convinced that they did.
In response to another comment. See in context »REmember, way back when, i said — and still say — that maybe we would have been better off going through the torture of letting the financial system collapse, and rebuilding from scratch. I would rather the government had let banks fail, and taken the trillions in bailout money to backstop the ordinary citizens who would have lost jobs, homes,savings, etc, in the awful rebuilding process
Heads up: I’ve added more fodder for disagreement to the JPMorgan post — feel free to bash me there too. http://trueslant.com/claudiadeutsch/2009/07/17/congrats-to-you-too-jpmorgan/
Claudia –
If you had actually read and studies The Wealth of Nations, you would know that the current profits at GS, JPMorgan, Citi and BoA have absolutely NOTHING to do with Capitalism.
‘Self-interest’, according to Adam Smith is the very opposite of greed. Capitalism implies a level playing field – which we DO NOT HAVE HERE.
What we do have here is EXACTLY the uneven playing field, dominated by special interests, that Adam Smith was decrying in his thesis.
Claudia, I’ve never read your stuff before, but after citing the Krugman article it’s apparent you don’t understand the situation. Your stance seems to be that Goldman played by the rules of a flawed system and were managed well enough to beat it. The hole in this argument is that GS has infiltrated the government and influenced every action by that government to its own benefit. And Goldman didn’t create jobs or wealth in the greater economy, like, say, GE would if it had a strong quarter. So cheering this quarter’s earnings as some kind of bellwether completely misses the mark. All it means is that GS received free money and traded the shit out of it. Mostly in fixed-income and treasuries. I’d bet my house that it had an insider’s view of how the gov’t planned to disberse the bailouts and what the effect would be on gov’t bonds. It also made $ by trading commodities, using our tax dollars to hike up the price of food and oil. Make no mistake its profits have caused zero benefits in this country or this world. And I’m a right-wing finance guy for God’s sake.
Claudia,
Not interested in name calling. I’m simply trying to understand your evolving position on Goldman Sachs. I’ve read this post and following comments more than once and still have a few questions.
From what I understand:
Your former position congratulates Goldman Sachs for being a savvy risk taker, having successfully wormed the loopholes into
huge profits for their employees and shareholders.
Your current position suggests that Goldman shouldn’t be crucified for taking advantage of our corrupt financial system. It is not any more blameworthy than say, AIG, whose demise had nothing to do with Goldman Sachs. The loopholes shouldn’t have existed, and regulators are to blame. Also, GS didn’t write any rules in their favor, and should continue – legally – to exploit the horrid system in place now.
Assuming I got that right, I fail to see in your counterarguments how Goldman Sachs’ success isn’t tied to friends in high places, government backed funds, access to cheap money, all of which you stated as being unfair.
Can you provide evidence supporting Goldman’s innocence in pocketing politicians, or engaging in insanely risky short-term gain that puts all other interconnected financial institutions in peril? How about creating mind-numbingly complex financial schemes which outsmart, buy off, or intimidate regulators, not to mention Goldman employees? If they are guilty of some of this activity, wouldn’t this then enable GS to unfairly influence the market, buy their way into government, and persuade lawmakers to author rules in favor of their greed? OR if all of this corruption can be pinned on deregulation, which Goldman wields to it’s advantage, should we be encouraging banks to exploit it instead of strengthening the market and businesses toward job growth and enterprise?
Taibbi faults Goldman Sachs for such behavior, and I’m not seeing facts refuting his work.
The taxpayer is always the one player in this rigged game burdened with all the risks, with no prospect of a bailout or lasting reward. How can we applaud any bank who takes taxpayer money to secure it’s profits, win or lose?
Besides, should we really be focused on salvaging a nation of investors, or concentrate on manufacturing and building things again?
Claudia, I can’t tell if you’re being intentionally dense or just aren’t reading what you’re responding to. You keep repeating the whole, “I know they’re not saints but I’m not going to begrudge them for taking advantage of opportunities that fell in their lap” mantra, but that’s a horrible misrepresentation of what’s happened.
You can’t complain about the system being broken out one side of your mouth and congratulate Goldman for taking advantage of it (and saying it’s an example of capitalism) out the other side of your mouth, and expect anyone with a brain to take you seriously. GOLDMAN IS THE SYSTEM.
It’s not smart business. Were it not for government assistance, they’d be broke. Done. Gone, just like Lehman. But they got their friends to bail them out, pay off their debts with OUR MONEY, and went back to the tables even drunker than before, only this time with our money. They fleeced us taxpayers, and they’re continuing to do it.
Surely you’ve heard about their loan offer to CIT after the government refused to bail CIT out. What do you want to bet they’ll find a way to tank CIT (there’s no denying that their ~$6 billion in collateral calls helped tank AIG) then convince the government to pay off CIT’s debt to them with our money? If I could, I’d take every dollar in my name to Vegas and bet on that happening right now, and that wouldn’t be half as reckless as Goldman’s actions.
It’s easy to make money when you don’t have to worry about losing any.
Claudia: “So what I want changed is the system…. I feel the same about Goldman — close the damned loopholes, but if you don’t, don’t expect Goldman to ignore them because it’s the “right” thing to do.”
It’s not the system inherently, it is the influence GS has on the decision making. All the rest of the Wall Street companies seem to agree. And even if it is untrue, the conflict of interest angle should be enough to keep Paulson, Geithner, etc. out of the process.
My daughter saw me reading this stuff and got interested and read all the posts. She’s 11. “Seems like this lady wrote something stupid and is now trying to cover her butt” Ah…the wisdom of children
tragicgap:
Your analysis and conclusions about Claudia’s article and Goldman’s greed are BRILLIANT. Thanks for posting your comment.
Ms. Deutsch,
I have to believe you’re a lot smarter than your string of responses would have one believe. Goldman’s rampant use of insiders tricks to manipulate the market to its advantage is plain for everyone with a conscience to see, why can’t you see it? Matt, and others, have brilliantly exposed the fallacies in your defense of Goldman. Persons of all political stripes believe it.
Claudia states: “I still won’t budge on congratulating them for finding legal ways to exploit the horrid system we have now.”
And hooray for the southern plantations of the 19th century for their (then-legal) system of containing labor costs!
And hooray for the northern industrial giants of the 20th century who forced children to work in their hazardous factories!
And hooray for all the Wal-Marts of today who exploit their workers, support foreign sweatshops, rape the environment, and destroy local businesses!
Lay off all these patriotic, law-abiding businesses!
No, Jason, I am not a moral nihilist. But I also do not assume that rich people are by definition immoral. Nor do i take a black-and-white stance — i.e., if you are a bad actor in one area, you are by definition a bad actor in another. AND I do not see past bad actions as proof of current ones. AND I do not always believe in retroactive immorality.
For example…slavery is ghastly, we all know that now, but if you were a plantation owner 200 years ago, slavery was the way of the land. So, if you treated your slaves with incredible kindness — were you really immoral for those days? Or were you in fact a lot more moral than free-market folks who pay pittances today?
Another example. I have big problems with many of Walmart’s labor practices. However, I think its track record on environmental issues is unsurpassed. And it is the people who flock to Walmart for the bargains that is destroying small business. You lump them all together — Walmart is bad, end discussion.
And do I equate the immorality of child labor with that of esoteric financial trading and overpaying execs? I;ll bet you can guess the answer…
In response to another comment. See in context »“Moral nihilism, also known as ethical nihilism, is the meta-ethical view that nothing is moral or immoral. For example, a moral nihilist would say that killing someone, for whatever reason, is not inherently right or wrong.”
Claudia,
What do you mean “hey guys that’s what capitalism is all about, rewards as well as risks.” What risks? What risks for Goldman Sachs? That is just the point, they did not have to face the consequences of their risks. The American taxpayers took their risks – GS’ surrogate risk takers. And we are still paying and still being warned to cut our expenses and cut our standard of life while those GS employees apparently will receive nearly 1m each for three months work – work accomplished with the taxpayer’s money. This is not a free market, in fact is it even a free country, when taxpayers are required, without a vote, to invest in Wall Street, just to keep GS going?
This is from Claudia’s profile:
“I remain bored by and ignorant of esoteric financial instruments; I remain fascinated and pretty knowledgeable about management, marketing, environment, all the non-financial aspects of business.”
So, how much did you get to carry water for Goldman, Claudia? I mean, by your own admission you’re “ignorant of esoteric financial instruments”.
So what gave you the impression that you were qualified to address how Goldman raked in these enormous profits?
At least Matt did his homework. All you’ve done is write a cheerleader puff piece for Goldman.
Honesty doesn’t get me anywhere with you folks, does it? Nowhere in my original post, follow-up posts, or rejoinder comments, have I pretended that I understand credit default swaps, collaterlized debt obligations, etc. I don’t even really understand subprime mortgages. Everything I read tells me those esoteric financial instruments pretty much brought the financial system to its knees. Washington pumped huge sums in order to help it get back to its feet. I will NOT castigate Goldman or JPMorgan for figuring out how to do so,without breaking the law.
In response to another comment. See in context »And btw, am I not allowed to have opinions on health care reform either? I mean, I’m not a doctor, I’m not an actuary…
If you voiced your opinions in an intellectually honest way then yes, you would be entitled to them. Thus far you have not even come close.
In response to another comment. See in context »Claudia,
It might be a good idea to actually get a basic understanding of CDO’s and CDS’s before you form an opinion. Because if you did understand how they work you’d know that what Goldman did was not legal. They committed securities fraud!
“And it is the people who flock to Walmart for the bargains that is destroying small business.”
So folks who might (have no choice but to) shop at Wal-Mart to save a few bucks on their kids’ school supplies are immoral monsters, but Goldman execs who help create and perpetuate a “horrid” system in order to redirect billions of taxpayer dollars into their already-fat wallets are somehow praiseworthy?! Wow.
LET THEM WIN WITH THE MONEY THEY MAKE: lets hope a recession gets them….
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