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Bill Donius

Bill Donius

Posted: April 23, 2010 02:32 PM

An ROI Analysis on Goldman's Great Return on Lobbying

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It turns out Goldman Sachs knows how to make good political investments too. Goldman made individual and PAC political contributions totaling just over $31 million since 1989. Although a staggering amount, it pales in consideration with their return...$13 billion!

As a retired banker, I marvel at the spectacular return. Lobbying really does work extremely well. It was reported recently AIG was negotiating to pay out 60 cents on the dollar on their credit default swap investments. The final number turned out to be 100 cents on the dollar after Treasury and the Government became involved. Consequently, Goldman was made whole on their payout, pocketing an additional $5.2 billion more than originally proposed with a 40% haircut on the payout.

Let's calculate their potential return. Total all of their lobbying expenditures over the past 21 years, for simplicity, let's ignore all the other political benefits that may have inured to their benefit over this period. They arguably received $5.2 more than was expected (when the rest of the financial services industry was taking big discounts on every type of distressed asset sale). Their cost: $31 million. Their return on investment: $5.2 billion divided by $31 million equaling a 400 fold return on investment. Close to a twenty fold return every year for 21 years over stated political giving. Damn, that's good! No wonder investors want them to invest their personal wealth. That's a better return than even Bernie Madoff's fraudulently stated great return on investment.

 

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