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Goldman's Great Return on Lobbying: An ROI Analysis

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It turns out Goldman Sachs knows how to make really 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 their spectacular return. Like crime, lobbying really does pay!

The background: 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 what would have been a 40% 'haircut', as the say in the business, on their 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 billion 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 ROI (return on investment): $5.2 billion divided by $31 million equaling a ROI of 400 or a 400 fold return on investment. Close to a twenty fold return every year for the 21 years of political giving. We're not even including what they made as a result of the other products they were able to sell thanks to financial deregulation.

Damn, that's good! No wonder deep pocketed investors give them personal wealth to invest. That's a better return than even Bernie Madoff's!

After the politicians get done figuring out financial reform, they may need to turn their attentions to the harder task of reforming financial contributions in politics.

Note: William A. Donius is the former Chairman and CEO of Pulaski Bank and Pulaski Financial Corp. in St. Louis, Mo. He remains a Director and Consultant to the bank. In retirement, he is an active board volunteer in the STL community and is writing a book. This essay represents his personal view and may not represent the view of the bank.

Donius was elected CEO of Pulaski Bank in 1997. He took the bank public in 1998 with Pulaski Financial Corp. NASDAQ listed PULB as the holding company. Under his leadership the bank grew from $168 million to $1.3 billion. Pulaski Bank is the largest purchase market, mortgage originator in St. Louis and one of the top three in Kansas City. Pulaski Bank was voted the Best Place to Work in St. Louis in 2007, received a Torch Award from the Better Business Bureau in 2008 and is ranked as one of the best performing smaller banks/thrifts by industry publication SNL.

Donius was appointed to a two-year term on the U.S. Federal Reserve Board TIAC Council in 2008. Donius served a four-year term on the Board of Directors of America's Community Bankers ending in 2007. In addition, he served as Chairman of for profit subsidiary, America's Community Bankers-Partners for two years.