The Wall Street bonus season is fast approaching and so is the anxiety level among the financial industry's CEOs. Goldman's Lloyd Blankfein is in the biggest tizzy. Just a few days after telling a newspaper reporter he was doing "God's work" at Goldman Sachs by trading stocks and bonds and keeping the markets liquefied, he has now apologized for risk-taking that nearly tanked the firm last year. More than that, he has now confirmed a story I broke weeks back about how Goldman was planning a large charitable contribution as a way to make $20 billion in bonus money, earned mostly from the government guarantees that Goldman still feasts off of, seem a bit less obnoxious. Goldman is putting aside a whopping $500 million -- the largest such donation in company history -- to help small businesses
I wondered if it ever dawned on Blankfein or his partner in this charity binge Warren Buffett -- also a Goldman shareholder -- that this money may not be theirs to do as they please. Such a major donation like this one, I am told by one prominent Wall Street CEO, should have been approved by all shareholders, blessing from the Oracle of Omaha notwithstanding.
Buffett, of course, is a legendary leftie so I understand where he's coming from; Blankfein, less so, which makes me all the more suspicious. The firm will use the money to provide educational aid and funding for 10,000 small companies. These are among the hard hit victims of the banking crisis because they can't get loans and financing to expand and in many cases survive.
But that doesn't mean any of this is right. The last thing shareholders need is such overt do-gooderism. If Goldman isn't the evil empire some in the media proclaim it to be -- populating government with its former foot soldiers who then craft economic policy to advance the firm's agenda -- then there's no need to spend shareholder money, at least not so much of it, on charity. And what say did the rank and file shareholder have in such a major cash layout? None, which should spark plenty of debate among shareholder rights advocates even if their saintly Mr. Buffett is throwing his full support behind the measure.
All of which brings me back to Lloyd Blankfein, who has spent the past four months trying to figure out how he can justify accumulating an expected $20 million in bonus money that will be handed out to his flock of bankers and traders in the coming weeks. The bonus bonanza comes just a year after Goldman was ready to go under with the rest of the Wall Street risk-takers. And were it not for extraordinary measures to prop up entities like AIG, which insured Goldman's risky assets and designated Goldman a commercial bank (meaning it was protected by the Fed) on top of a $10 billion loan, Goldman would now be in Lehman Land.
Yet it survived because of the government (translation: The American Taxpayer), and now as it maintains many of those same perks, Goldman has become immensely profitable and is building a war chest of bonus money mirroring pre-financial crisis levels. It is an odd circumstance that the home of the free market -- Wall Street -- makes money feasting off of government protections, but that's what's going on across the financial business as bonus pools begin to swell with profits. Goldman just does it better than any of its peers. That's why you're hearing Blankfein making so many dopey statements of late -- everything from his ridiculous claim Goldman wasn't bailed out, that its exposure to AIG was minimal, to some of his recent whoppers, like he doing God's Work whenever he trades a stock or completes an investment banking deal.
I put his mea culpa and this charity thing in the same category. I don't need Blankfein to apologize for risk taking, I just want him to do it with house money, not the taxpayers', and rescind his firm's Too Big To Fail status and convert into a privately held hedge fund or something along those lines. Small businesses really don't need a handout from Blankfein and Buffett to survive and prosper so they can begin hiring people as unemployment approaches 10.5%; they need lower taxes and a better business environment from a president both men and many of their counterparts on Wall Street helped elect with huge donations of the non-charitable kind.
To be sure, Blankfein and Goldman are not as evil as their critics make them out to be. The firm wasn't at the center of the financial crisis; its risk taking was large but not as systemically evil and threatening to the health of the financial system as that of Citigroup, or Merrill Lynch, as I show in my book about the financial crisis, The Sellout. And yes, while the firm does have in place its partners in key decision-making government jobs (former treasury secretary Hank Paulson, the former Goldman CEO, was the man behind last year's bailout of the firm after he let Lehman fall into bankruptcy) I can make a case that other firms have just as much stroke in Washington. Why else would mega banks JP Morgan and Citigroup remain intact even as Obama economic adviser Paul Volcker calls for the reinstatement of the Glass-Steagall act, which would force both firms to break up? It's because the President listens more to JP Morgan CEO Jamie Dimon than just about anyone working at Goldman Sachs, or for that matter any of his own economic team.
But it takes more than being less bad (and less of a political animal) than your counterparts to be considered a good CEO. Somehow I just can't imagine former GE CEO Jack Welch twisting himself in knots trying to rationalize what CEOs are supposed to do, which is to make money. And what CEO would attempt to buy off public outrage about handing out billions in bonus money, if such outrage isn't justified in the first place?
For all these reasons I am recommending two things: Mr. Oracle should use his considerable clout to release taxpayers from their Goldman Sachs subsidy and make the firm a hedge fund or something different than a government protected "bank." Second, I think it's about time for Lloyd Blankfein to step down and resign as CEO of Goldman, and really start doing God's work by sparing the rest of us the stupidity of listening to his excuses.
Robert Reich: Breaking Up the Big Banks, and Why Congress Won't Do It
Two ideas are floating around Washington regarding how to handle 'too big to fail' banks, but only one is supported by the Treasury and the White House. Unfortunately, it's the wrong one.
Fire Geithner and Summers
Impeach Obama.
Seize Goldman Sachs and the major banks
Re-direct their assets and the remaining TARP funds directly to the unemployed, the elderly, and
to minority children needing first class educational opportunities.
Then we could pick some of Wall Street's most avaricious and have a national barbecue.
I wonder how much of that $500 million will find its way back into the friends and families of Goldman-Sachs executives via million dollar small business loans to their kids Kool-Aide stands and the like.
koolaide stand
They are beginning to feel the heat and they're scrambling for a dark corner like all rats and roaches...
I have strong doubts about this. Mark my words, Goldman is not any healthier than it was before the bailout, and the individuals involved are more than likely inflating the numbers and manipulating the market in order to profit from the illusion and provide sufficient self-protection, after which they will all pull out, just moments before they pop the balloon and end the party.
Please find the Ratigan GS video, it is brilliant.
your hope that a new CEO will not be so outrageous will not change public perception or public opinion regarding goldman ---- you say, they do what they do better than anyone else --i say what they did was unethical, bordering on criminal ---and i dont really care how much money they make ---it is tainted
so obscene in fact gasparini could not say it twice-----20 BILLION became 20 million farther down in the piece ----
you can forgive gasparini for saying twenty million
-twenty million is quit a huge sum of money and would represent reasonable expectations given where the company was
but the real sum is TWENTY BILLION which makes it that much more obscene
http://www.mcclatchydc.com/227/story/77791.html
Charlie Gasparino can say anything he wants, but Goldman consistently crossed the line into illegality during the housing bubble. They knowingly sold valueless bonds and helped drive the bubble into the meltdown. They weren't the only ones, but their power and their high profile should earn the rest of us more than $500 m of their largesse-- a rounding error as far as their earnings go. If their leadership isn't put in jail, the government should at least put a claim on their ill-gotten gains. Those folks are lucky they have jobs and aren't in prison.
You guys in the media need to wake up and learn how to read a balance sheet.
It took you guys a while to figure out that GS was saved when AIG, the dysfunctional casino was given taxpayer money so they could settle bad bets. Pathetic how a guy who writes for a music publication got more things right about this story than all the "business journalists" combined.
When will you figure out that not only did GS leach $ from taxpayers, but did what was the equivalent of buying an insurance on a building and then setting fire to that very building.
Goldman Sachs = Warren Buffett = Goldman Sachs
Buffett is arguably the single largest individual beneficiary of the People's bailout money.
And, do you think he wasn't involved in Goldman's decision to convert to a bank holding company last year in order to get access to EVEN MORE federal money and to have access to customer deposits as well?? Check out: http://www.nytimes.com/2008/09/22/business/22bank.html
I URGE you to do some digging into the antics of Warren Buffett through the years.
eg. 9/11 loan fund ... government subsidies ... environmental disrespect
I agree that they don't need the backstop now and should shirk the "bank holding" status, but that isn't going to call off the dogs that have blamed Goldman for the crisis, which we both know is far from the truth. I find it astounding that everyone complains about the AIG pass-thru for Goldman, but doesn't care at all about the same deals that were given to Societe General or Deutsche Bank, whose profits don't benefit the US government or the US taxpayer that backstopped them - and were paid almost the same amount of money.
The bottom line is that Goldman has only become such a public pariah because of their profitability. Everyone else has the same backstops, but we only hear about Goldman, not Morgan Stanley or JPM (not to mention the other counterparties previously mentioned). Along the same lines, if it weren't for the 100% payouts, tons of municipalities would have been bankrupt.
From my perspective, Goldman is the principal target b/c they make themselves the principal target. Goldman and the Morgans are public companies here in the U.S., so when they use the People's Tarp money to make billions in proprietary trading profits (in especially vulnerable markets) before returning the Tarp funds and then report such profits, people find out and become, in my view, understandably peeved. And that makes them a target .... a huge Target.
No apology will suffice. No explanation or damage control measure will undo what has been done. In my view, they have committed a crime against the public trust. And, I believe that if Obama didn't feel he needed them to get re-elected and to act as a financial military in ongoing gov't financing (the same way European suffered the Rothschilds) he would press them into disarray.
No, I'm not just targeting Goldman ... nor is profitability the key ... I'd have been just as outraged had they lost all the money ... BUT since they profited, they should forfeit that profit in a windfall profits "tax" ... call if a give back ... whatever ... they should just do what's right and return to the People not only the bailout money, but ALL RELATED SPOILS.
Like the greedy individual who owned the goose that laid the golden eggs who thought that if he killed her, he would have all the eggs at once. Having killed her, he found that there were no eggs within. Having killed the United States and its people, where now are the Wall Street tycoons going to look for their bonuses? They have not yet realized where exactly they stand.
Rather than the "absolute value" of the money as a representation of an economic unit within the context of an economy atop an ecology, we have this fantasy money gumming up the works. There needs to be less play money, more real money. I'm cautiously optimistic, not irrationally exuberant.