Hey, Goldman (and Deutsch) bashers — a little perspective
Image by gynti_46 via Flickr
I’ve been so busy responding to all the vitriolic comments on my “Congratulations, Goldman” post that I paid scant attention to any of the other news today. But I finally curled up with the NYTimes Business Section (yeah, real romantic, I know) and was treated to the following parade of villainies. Why aren’t you all ranting against Moody’s, or Wells Fargo, or…the list is endless. If nothing else, it should put your hatred of Goldman in perspective.
(1) Calpers is suing three rating agencies for giving triple A ratings to a bunch of structured investment vehicles, causing Calpers to lose well over $1 billion. Calpers “also criticized what it contends are conflicts of interest by the rating agencies, which are paid by the companies issuing the securities — an arrangement that has come under fire as a disincentive for the agencies to be vigilant on behalf of investors.”
(2) Banks are again making a mint on mortgages, helped by ever more favorable regulations.
Mortgage securities prices have rallied, allowing banks to book hefty gains on their investment portfolios. And accounting tactics — like new rules that let banks book lower losses on troubled assets and reductions in reserves for future losses because of mortgage modifications — may further burnish their results…..
Under the program, Bank of America could receive as much as $6 billion to offset part of the losses it incurs from lowering monthly loan payments and to defray its costs, according Treasury Department data.
JPMorgan Chase is eligible for $3.5 billion. Wells Fargo could get as much as $2.9 billion. Citigroup and GMAC stand to collect more than $1 billion each.
Aggressive accounting could also pump up the lenders’ results. Most of the big banks took advantage of an 11th-hour rule accounting rule change in the first quarter to book smaller losses on troubled securities. Jack T. Ciesielski of The Analyst’s Accounting Observer estimated that without the change, earnings for the biggest banks in the Standard & Poor’s financial index would have been almost cut in half. In the second quarter, the impact could be even greater. ………
So far, the government has agreed to funnel $18 billion of taxpayer money to lenders, investors and borrowers to keep Americans in their homes.
(3) A rich Brit has mounted an advertising campaign to discredit a bank that invested his money badly, and to pressure it to make him whole.
Mr. Mills, 59, has accused Coutts, the private banking arm of Royal Bank of Scotland, of presenting its A.I.G. Life premier bonds, which were backed by the A.I.G. enhanced fund, as a safer investment than it really was and then failing to inform him and other clients of A.I.G.’s problems, even when customers asked whether their investments were secure.
Mr. Mills, who made his fortune by bringing the frequent-flier loyalty concept to Europe, contends the bank’s “negligent” advice cost him £8.1 million, or $13 million.
Bogus credit ratings, potential bank windfalls on the backs of struggling homeowners, money managers who put clients into “safe” investments like AIG…and all of you are spending all your anger on Goldman for making a profit and preparing to pay big bonuses? I think that’s really strange.
Oh, and you might take a look at BreakingViews assessment of the Goldman situation – in a nutshell, the company has an image problem right now, and knows it, but in fact has done nothing worse than navigate well through a bad situation
Post Your Comment
You must be logged in to post a comment
T/S Members
Log in with your True/Slant account.
[quote]Bogus credit ratings, potential bank windfalls on the backs of struggling homeowners, money managers who put clients into “safe” investments like AIG…and all of you are spending all your anger on Goldman for making a profit and preparing to pay big bonuses? I think that’s really strange.[/quote]
It seems willfully obtuse to suggest that all this popular outrage at GS is just b/c they turned a profit this quarter, although clearly it’s easier to wish ill on the mugger who still has your wallet than the one that took your wallet and got hit by a mack truck. That’s just human nature. And I can’t speak for anyone else, but personally, I have a finite amount of anger to expend at any given point, and GS will have to do for a target at present. Hopefully those giant bags of money they’re sleeping on and wiping themselves with will help soothe their hurt feelings.
I’d agree with you — if I think that Goldman had mugged anyone. But I don’t. They took advantage of turmoil in their industry. Yes, Paulson is from Goldman — so explain to me how that persuaded him that BofA should swallow Merrill Lynch? Goldman paid a dividend on its bailout money, and had a pretty hefty tax bill. Sorry, I still don’t put them in the category of the gonifs, just of the opportunists.
In response to another comment. See in context »Do you also think Jim Cramer was unfairly bashed by Jon Stewart?
Nope. Stewart accused him of things he actually did. Goldman is for some reason being made the whipping boy for everything that’s wrong with the financial system.
In response to another comment. See in context »A little perspective, huh? If you think the issues that you listed were not and are acceptable from a moral or legal point of view, I don’t see why you don’t see the similar mindset and MO as a problem with Goldman-Sachs.
Mr Taibbi has already addressed the “they were all doing it” excuse in his blog. Go read it.
You professed your admiration of G-S’s ability to exploit the system to their advantage and I agree that you can admire it in the same way as you can admire the cunning of many mobsters in getting their way.
“that you listed were not and are acceptable from a moral or legal point of view”
Should of course read: “…were not and are not…”
In response to another comment. See in context »But they’re not “all doing it” — it, in this case, being a way to profit legally from the system as it has unfolded. Goldman didn’t cause the subprime mortgage debacle, Goldman didn’t lose its shirt on esoteric financial instruments, Goldman made lemonade from lemons. I’ve conceded that I did not know about the past transgressions that Mr. Taibbi chronicled — but I still feel admiration for everything they have done this year.
In response to another comment. See in context »I don’t even know where to begin. OK, we should ALSO direct our vitriol at the rating agencies and money managers investing in “safe” AIG securities. So what does this mean about GS? They should ALL get 100% of my anger!
Then you heap implicit “congratulations” again for navigating through these tough times. How tough were they after getting paid dollar for dollar on bad AIG bets, getting a nice little cushion from FDIC and getting unknown amounts of cheap dough from the FED window. Damnit, how bad was the situation? They got all the help in the world to correct a problem of their own making… and for the low, low price of $14m is taxes! And we are all supposed to take it easy and treat them with kid gloves? What a joke!!
What’s your agenda with this rubbish?
I don’t have an agenda at all — and no, I don’t own any Goldman stock (more’s the pity). And yes, they have benefited mightily from government backing, government loans, access to cheap money. I had an unpopular view on the whole Richard Grasso salary situation too — i was mad as hell at the board of the NYSE, but I wasn’t mad at Grasso. If the NYTimes had ever said to me, Claudia, we think we’ll pay you $100 million a year to write for us, I would have thought they were nuts — but all i would have said was, Thank you.
And we part ways when you say Goldman is benefitting from a situation of its own making — I still don’t see Goldman as this all powerful evil body that managed to engineer our whole fiscal debacle to serve its ends. The Goldmanites are smart, but not THAT smart.
In response to another comment. See in context »Moody’s, the last time I looked, didn’t get $20B from the government to cover bad bets that it made. Nor did it get any zero-cost loans.
The other banks you mention that are getting billions in welfare from the government should be prosecuted, I mean castigated, but when you are trying to correct errors in a process, you usually target the largest source of defects (I used to be a quality control engineer, a long time ago, when people expected quality from large companies). So if we’re going to address the issue of financial firms profiting from the transformation of government debt into no-strings-attached welfare, then let’s start with the most egregious of firms.
And besides, this all started when you gushed about Goldman’s performance. Now would be a good time for you to retract your compliments, as they were not any more deserved than the adulation that showers gangsters who distribute food and stolen merchandise to the poor and middle class in their neighborhood. Then we can focus on the valid issues you raise in your back-handed defense of Goldman (lots of other kids were stealing candy, too!”).
Nope, not retracting a thing. But would like to rewrite your synopsis of my view. I would indeed be delighted if I saw Goldman playing Robin Hood — but my admiration never went so far as to suggest it is making any attempt to pay society back. Then again, I don’t think it’s acting like a gangster.
In response to another comment. See in context »My whole premise is that Goldman acted in true opportunistic manner but didn’t steal a thing. What i’m trying to say is, hey folks, focus your anger on the kids who are stealing candy, not on the guys who’ve found a legal way to use government owned commodities to make candy on the cheap and sell it at a huge margin. Maybe not nice — but certainly within the bounds of capitalistic behavior
Your headline was “Congratulations, Goldman”. You were celebrating their success at the expense of the country. OK, you’re giving them the benefit of the doubt by saying they were merely opportunistic, and had no hand in precipitating the chain of events that resulted in the windfall profits. While I don’t agree with that analysis, is it still the kind of behavior you want other companies to emulate? Suck as much money out of the government as you can?
I wish somebody asked Paulson yesterday why the government made Goldman whole, by giving them $9.5B because the value of AIG’s collateral had decreased, even though Goldman had not suffered any losses. Why is that acceptable to any capitalist?
In response to another comment. See in context »1.) Calpers needs to look up due diligence. Credit agencies have been under fire for double dealing since Enron. What changed since then?
2.) Maybe changing Mark to Market wasn’t a good idea and maybe Washington needs to look up the word “reform.”
3.) Rich Brits usually win and he isn’t a very loyal bank customer. Maybe he didn’t read the fine print that said AIG are liars with pants on fires or something like that.
4.) Justice Department tactic to embarrass companies is a good idea. It works in High School.
5.) How does it feel to be the most popular girl at True/Slant?
I get the sense that Calpers is accusing them of gross incompetence, the financial equivalent of medical malpractice, even more than of doubledealing. Don’t know where I stand on mark to market, to be honest. I think the British guys tactic is a hoot. And the most “popular” gal on T/S? I’m getting bashed more than Goldman — and I’m not even getting rich in the process!
In response to another comment. See in context »Look over there!
Sorry, I can’t see winning a fixed race as deserving of reward. I see GS as the equivalent of Barry Bonds – juiced to the max with their insider advantages. The only investment in today’s market that deserves praise is an investment in American manufacturing or services – any further investment in financial instruments is just rubbing salt in our recession.
Agreed — if in your analogy you will make steroid use legal.
In response to another comment. See in context »And boy, would I love to see more investment in what is now pejoratively called “old economy” things. We totally, completely, unequivocally agree — but, it doesn’t really have much bearing on whether Goldman should be ridden out of Wall Street on a rail.
But at some point steroid use was legal, we hadn’t figured out that it was lethally harmful down the road. And the unethical things that GS has been doing so far should be illegal, the legal system just hasn’t caught up with them yet. Hopefully, all the people that have been giving you grief will prevail and the lawmakers will write laws that protect the taxpayers from those too big to fail. I’m not holding my breath.
In response to another comment. See in context »We’re not as far apart as you think. I’ve been ranting about the “too big to fail” idea since long before I got embroiled in this Goldman brouhaha. If something’s too big to fail, then it’s too darned big, period, and probably should be broken up. In fact, I did a feature in May for Institutional Investor on Frost Bank, a Texas bank that successfully rode out the S&L crisis of the 80s and is riding this crisis out too, without taking government money, etc. Why? It has simply refused to expand beyond Texas, it has stayed away from esoteric financial instruments, it got out of the credit card business years ago, etc. It is small and profitable.
In response to another comment. See in context »But back to point: I don’t know exactly which aspects of Goldman’s behavior you would like to see made illegal. So maybe we agree, maybe not, I don’t know. But the fact is, the behavior is legal now, and unless we repeal ex post facto, it will be legal in hindsight, even if it becomes illegal going forward.
Agreed, if in your analogy, the person making steroids legal is Barry Bonds.
In response to another comment. See in context »Actually, the analogy would be Barry Bonds’ former coach making steroids legal. And then I might point out that this coach has also worked with Sosa, etc., and that many of his current and former clients will bulk up from steroids, not just Bonds
In response to another comment. See in context »See, usually I hate extended analogies, but this is good because now you’re writing about baseball. You can say all the stupid shit you want and – as long as you’re only talking about baseball – we can all be friends!
In response to another comment. See in context »banks never fail and bankers can and will relocate
nice imagery and equally nice image up on top
cheers
olga shulman lednichenko