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Wednesday, July 22, 2009

Goldman Sachs: The Great Vampire Squid Watch — July 22, 2009

Items of Interest:

Goldman Sachs Payments to U.S. Give 23% Return to Taxpayers -- Goldman Sachs Group Inc.’s repayments to the government of last year’s bailout money, including an agreement today to repay warrants, generated a 23 percent annualized return for U.S. taxpayers.

Goldman Sachs agreed to the Treasury’s request for $1.1 billion to repay warrants the government received when it invested $10 billion in the New York-based firm last October. The payment is in addition to $318 million in preferred dividends.

That 23 percent return compares with the 42 percent surge in Goldman Sachs’s share price since October, and the 5.1 percent gain in the Standard & Poor’s 500 Index. Goldman’s decision follows criticism of the bank by lawmakers who questioned its decision to set aside a record $11.4 billion to pay employees in the first half of the year...

NY Magazine:
Goldman Sachs Buys Back Warrants for $1.1 Billion -- On the face of it, it's a decent deal: If we are getting this right... So while Goldman is making nice to the taxpayer, they're not exactly being obsequious...

Lloyd C. Blankfein, chairman and CEO of Goldman Sachs
"This return is reflective of the government's assistance, which benefited the financial system, our firm, and our shareholders," said Lloyd C. Blankfein, chairman and CEO. "We are grateful for the government efforts and are pleased that this additional money can be used by the government to revitalize the economy, a priority in which we all have a common stake."
US Government Gets 23% ROI on Goldman Sachs' TARP Warrants -- IMHO, $1.1 billion is a drop in the bucket compared to that $23.7 trillion number SIGTARP top cop Barofsky says we're on the hook for in terms of bailout schemes...

Blankfein is lying through his teeth. He never wanted in on this advanced money laundering scheme.

Ryan Grim / Huffpo:
Ignoring Watchdog Report, Treasury Gives Three Major Banks Sweetheart Deals -- Four major banks have repurchased warrants from the Treasury Department since a congressional watchdog reported that the backroom deals where the prices were negotiated were ripping off the taxpayer...

Wilson speculated that Goldman Sachs decided to pay fair price to avoid more of the bad press that's been coming its way the last several months....

Goldman 'warrants' raves from Congress -- Legislators applaud news of the investment bank's 'full and fair' TARP warrant repayment, but pressure builds on Treasury to deliver more big payback checks...

The Atlantic: Goldman Sachs Makes Us All Rich

Oh wait, there's still still $22 billion in outstanding FDIC-guaranteed debt

Matthew Goldstein / Reuters:
Goldman, what about the FDIC-backed debt -- Goldman Sachs is trumpeting the fact it just paid the federal government $1.1 billion to buyback the warrants it gave the Treasury Dept. as part of last fall’s baillout package. But Goldman still is benefiting from the government’s largess by sitting on some $22 billion in FDIC-guaranteed debt it sold this past winter.

Goldman can’t say it’s truly free of government assistance until it retires this $22 billion in long-term debt that it sold to investors...

Until Goldman does that, it’s still fair to say Goldman is trading with the implicit backing of the federal government.
Tyler Durden / Seeking Alpha:
Flash Trading: Goldman Sachs Front Running Everyone Else -- There is a curious article in the latest edition of Traders Magazine. It is curious mostly because it was allowed to be published, as it definitively peels off the cover of what truly happens at the pantheon of stock exchanges, that dominated by a private club of select high frequency traders, who obtain better and faster pricing than everyone else, and where the group of "select few" is seemingly legally allowed and even encouraged to front-run the "every-one else" (you, dear reader, are most likely in the latter camp). If you ever wondered why HFT [high frequency trading] generates profits of over $20 billion a year, please read this article...
Tyler Durden / Zero Hedge:
Charlie Lets Zero Intelligence Have It -- Not even sure you [Charlie Gasparino of CNBC] deserve a response to this, as apparently you have completely missed our prodding which had nothing to do with you being on Goldman's pay and everything with you doing the responsible journalistic thing, i.e., asking the tough questions which you purport you did, instead of being fed the party line. We appreciate the other side of the story: we can get that from Goldman's press releases and 8K's - you are supposed to read between the lines and find out what it is in the story that your new friends at 85 Broad are not telling you. But if by now you have not realized what your job as a journalist entails, it would be a folly for Zero Hedge to try to educate you at this late stage in your career...
Mess That Greenspan Made:
Keiser: "Goldman Sachs are scum" -- In case you missed this one... Max Keiser goes off on Goldman Sachs in a way that makes a lot more sense today than it would have a year ago.
Goldman Sachs Internal Memo -- Internal Memorandum No. 8121b

ATTN: Employees of Goldman Sachs...

We had a few hard months there, didn’t we? They regulated our corporate jet so that we could no longer use it to fly from hole to hole on the green. Dave had to drain his money pool to half capacity. I stopped injecting gold into my blood. They don’t call it a recession for nothing. One day, we’ll look back on the year we received only five-figure bonuses and laugh...
WSJ Marketbeat:
Bailout Was ‘Terribly Unbanksmanly’
T T Ram Mohan / The Economic Times:
Gold-mine Sachs is an illusion -- That leaves us with two other factors that might explain Goldman’s abnormal returns: superior information and the ability to influence regulation. In his book, The Greed Merchants, Philip Augar, a former investment banker, argues that large investment banks benefit from superior information gained from the sheer scope of their operations. Knowledge about clients gained from underwriting or advisory business, for instance, can be deployed in trading and private equity...

We may not give credence to all the conspiracy theories about Goldman. But we do know that sustained abnormal returns are something of an illusion created by serious market imperfections. These imperfections must be fixed as they entail a huge cost, the cost of recurring financial crises.
The Washington Post:
Wall St. Jacks Up Pay After Bailouts -- Lawmakers Warn Against Return to Pre-Crisis Levels

Goldman Sachs caused a stir last week when it disclosed it had set aside a record $6.6 billion for compensation expenses in the most recent quarter, bringing the total for the first six months of the year to $11.4 billion. If that pace continues for the rest of the year, Goldman's employees will earn an average of about $773,000, more than double the figure last year and even exceeding the $700,000 paid in 2007, when compensation on Wall Street hit a record high...
Tom Gregory / Tipte.com:
Vatican Bombshell!: Goldman Sachs IS The Holy Ghost! -- L’Osservatore Romano is reporting that The Vatican has declared Goldman Sachs to be The Holy Ghost. The revelation has inspired hordes of the religious faithful to descend upon the firm’s New York headquarters and drop to their knees – a position Goldman Sachs brought the rest of the world to in 2007...

Calculated Risk

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