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What Would Happen If Goldman Went Under?
So, we read now that Goldman Sachs is back to making record profits ($2.7 billion in the last quarter alone) by taking higher risks (AP reports that Goldman has returned to "high-risk trading"). Great, the economy must be fixed. Or maybe it's the exact opposite -- it's a company taking advantage of a system they know is broken.
Here is what I mean. Goldman Sachs knows that they are too big too fail. And they already know what the government does when a financial company is too big to fail. They bail them out -- no matter what.
What if Goldman took too many risks in making the absurd amount of money they're making now (while we're told that the banks don't have any money to lend)? What if they crashed right now? What do you think would happen?
Everyone in the world knows that we would bail them out. The idea that Tim Geithner would let Goldman go under is so laughable that it makes me sick. Does anyone trust that guy's impartiality (other than Obama)? Does anyone believe there is even a 1% chance that Geithner and Summers would let Goldman go down?
So, if you knew that no matter what level risk you took the government would always come riding to the rescue -- and that more risk equals more money in the short term -- wouldn't you take more risk? Of course you would.
Now, that might be short term thinking and you might get yourself into a lot of trouble in the long term. Well, if you were worried about what might happen in the long term, what would you do next? Right, take out as much money from the company as you possibly could and put it into your own pocket. And guess what Goldman is doing right now? They are setting aside $18 billion to pay their employees this year.
That's called looting the store. They're taking most of the money the company made and giving it to themselves. Who cares about the long term health of the company? The employees don't own it anymore. If they can take most of the money for themselves before it gets to the shareholders and do long term damage to the company, why not do it? What do they have to lose? It's not their company, but the check they take home is their money to keep.
William K. Black wrote an excellent book called "Best Way to Rob a Bank is to Own One." That about sums it up. But these days the bank robbers have one additional advantage -- when the bank runs out of money, the government comes and fills it up again. Then, they invite them to rob it one more time.
So, who's convinced we have this financial problem under control? Who's convinced we have any idea what to do if Goldman went under? Who's convinced they have any incentive not to take more risk to make more money? Who's convinced that we have done enough to rein in banks that are too big to fail?
No, we still have the same problem we did before. I disagreed with the bailouts. I think we gave the banks an enormous amount of money with almost no strings attached. I understood the urgency of bailing out the financial industry, but if we were going to do that, we could have at least made sure that we took steps to make sure this never, ever happened again. Now, who's convinced we've done that? No one, outside of a couple of suckers who are about to get their pocket picked again.
Update: AOL Poll on this question now. You can vote here.
Follow Cenk Uygur on Twitter: www.twitter.com/TheYoungTurks
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We would all die in excruciating agony...
What would happen if they went under? Well, I for one would be dancing in the streets.
I would have lost my entire pension and retirement if Goldman had went under, so does a lot of people I know.
I agree, they should have never been bailed out. they should have followed normal processes. Declare BK , reorganize , shut down...do whatever was expected .
Who would have been hurt ? investors ?, oh too bad, thats the risk I guess. At the very least, they should stop trading. there is no room for these fraudsters and manipulators to skew the market.
I'm sorry, but this isn't right. Like the iraq war, this was based on fear. We should have stood our ground and just said NO
Many companies capture the regulatory agencies designed to protect the public from their excesses. Goldman has taken this to an entire new level and captured the entire federal government so that the U.S. treasury has become their private piggy Bank. What is fascinating is that this is now public knowledge and NOTHING is being done about it. What happened to the good old days when the criminals went to great extent to keep their corrupt dealings with the government a secret? This company is designed to suck the very life out of America. heck while they were creating their phony mortgage products they were making money selling short the very products they were peddling to the public.
I do not understand the pissing and moaning about Goldman Sachs making money.
Wasn't that the idea? Isn't that why we helped bail out the financial industry?
Would you all be happier if they failed?
duh...
"Would you all be happier if they failed? "
Yes, I would know there was an ounce of justice in this corrupt world.
I would.
I prefer the truth to come out and live with some hardship than lies to be spewed and continue to live with hardship.
The truth is all we have. That is what we voted for presidency, that is our most valuable currency.
yes indeed, the truth is what was required. We didn't get it, and we are worse off for it.
heh, i voted for kucinici and cynthia mckinney,
not the newest shiny uncle tom from chicago,
for good reasons.
majority of the american people who do not want to hear the truth
deserve every bit of grief they get.
Kucinich/Dean 2012!
Too big to fail?
Heh.
Cenk, they already failed. A long time ago. And then they turned to crime, and to high-crime.
"The truth is not in them." And that, by the way, is also a crime.
W's "administration" was happy to let the "free marketeers" do whatever they pleased. Obama's approach seems to be a sort of namby pamby talk about regulation and reform utterly lacking any real guts or teeth.
Seems as though the gambling casino Wall St has become will go right on with the public bailing the high rollers out whenever they cry "momma". Rather like handing money to a chronic boozer or druggie.....guess what they will do with the dough.
The underlying root of all these problems is inherent in unregulated capitalism. When are we going to learn that boys will be boys and GS will steal our money given the opportunity. And so will most all of the other corporations, banks and Wall Street. So why are we surprised at this? B/c we trusted Obama and his Wall Street money launders, Geithner and Summers, to do the right thing. Well they didn't. At least not the right thing for the country and it's people. They just went and facilitated the largest wealth transfer from the taxpayer to these capitalist crooks ad probably will be well rewarded by them at a later date. I fault Obama here for being too trusting of his economic advisors and not using common sense when they started giving money to the capitalists w/o any strings attached. Shame on you, Obama. Shame on you. I don't yet believe that Obama had some sinister plan here just naive when it comes to lots of money and trusting in the better side of humanity.
I love the Republicans - FREE MARKET - but not if we lose money then its BAILOUT- When will people stop putting their money into anything that is connected to Wall Street?
It would be the equivalent of Exxon going under in the Oil Industry.
You know, the Exxon that makes UMPTEEN BILLION every quarter.
But Exxon doesn't make a very large percentage return on investment.
Is that too complicated an idea?
Let's wait and see. My guess is that the sky will still be there, the sun will still be shining, and we might have the chance to do something really spectacular and new in our "economy."
Why give money to the Bankers?
Invest in Main street, and the money will STILL end up in the banks.
Where do you think people keep their money?
Why is everyone blaming GS? If you must blame, blame the govt. be it the treasury secy or Fed or Prez or Congress (whoever is responsible for whatever complain you have regarding GS).
If someone gave me free money, would I reject it?
If you let someone take advantage of you, they will.
If you let someone walk all over you, they will.
why would the real world of business be any different? If you dont like GS to make profits, have the govt. remove guarantees, remove cheap supply of capital.
As much as I despise the free money moral theology, I am afraid, you are right, my friend. Money talks, money walks... to those who listen and know how to lure it in. GS are experts at that.
:-)
Yes one can blame GS. As well as the govt. Let's not forget that GS has exGS people in power throughout the govt, not to mention the fact that GS was the biggest single contributor to the Obama campaign. If they got free money it's because they worked really hard to make it so. No one just offered the money unsollicited.
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