Ok, I get it. People are angry at Goldman Sachs. Not just annoyed, but really really angry. Here are some of the things people hate about Goldman:
- They got 100 cents on the dollar on their $13bb CDS contracts with AIG when AIG got bailed out. In other words, they behaved as they were supposed to do, within the interests of their shareholders (which includes most of Main Street through 401k plans) and their tens of thousands of employees.
- They paid themselves huge bonuses with the money that was earmarked for the AIG bailout that then was used to pay AIG's largest creditor, Goldman Sachs. All of this while ex-Goldman employees were among the government officials making decisions.
- They survived with their business model largely intact and their stock price now significantly higher than it was last year. Shame!
In another article one person in the comments even suggested that all the Goldman money was "being sent to Israel" and when I suggested in a reply that the facts don't back that up another commenter wrote, "its true" without putting in any specifics. Many people are only happy when they are hating something mysterious, ugly, and an easy target.
Let's look at the groups or people that perhaps deserve your anger more.
A) Former Clinton HUD secretary Andrew Cuomo who set an unrealistic goal of 70% of the US owning homes (up from 60%, which was far more realistic). More on this in a Village Voice article from 2008. Of course, should we blame Cuomo or Cuomo's boss Bill Clinton?
B) Barney Frank, who passed laws forcing Fannie Mae to start reducing its lending standards into the subprime arena. He also repeatedly voted against the idea of appointing any overseers to regulate Fannie Mae and Freddie Mac despite the fact that they guaranteed over half the mortgages in the US. More on this here.
C) Fannie Mae and Freddie Mac that used the implicit moral backing of the US government to get cheap financing while practicing every fraud in the book.
D) AIG which manages to still survive as a public company despite being on the hook for over $200bb to the American taxpayer. AIG's special products division should've been separated out from the company, declared bankruptcy and then negotiated with all of its creditors. Not sure why Geithner, Paulson, and even Bush and later Obama didn't force this issue.
E) FASB for putting mark-to-market in place right when the housing bubble was starting to crack. Banks (and AIG) forced to mark their CDS contracts to the illiquid (and probably hedge fund manipulated) ABX index immediately lost billions in value on their balance sheet and were forced into near insolvency.
F) The SEC for revoking the uptick rule at the peak of the market in 2007. Is it so bad for a shortseller to have to wait for an uptick before he can sell (with stock he doesn't own) a stock? We'll never know the extent to which "bear raids" caused the downfall of many banks in the summer and fall of 2008 but they certainly had an effect in increasing the panic Main Street felt In many short sales, no hard locate of shares are required. Removing the uptick rule allowed people to simply crush stocks in the middle of a panic and then cover days or even weeks (or in some cases months) later without ever having to locate the shares they sold.
The list goes on but, better yet, why be angry at all?
We had a crisis. Now the market is coming back (stocks are up and even housing prices are up 4 months in a row). Anger doesn't solve any problems at all and Main Street still equals Wall Street with most 401ks still heavily invested in the stock market. Anger is not going to bring the economy back. Nor will it help your wallet very much. And dwelling on it (particularly when its grossly misplaced) probably won't increase your joy of life. Instead, how about we focus on making some money? Let's buy some stocks and enjoy the holiday season.
Here are three stocks I'm thankful I've had the opportunity to buy in recent weeks thanks to artificially low prices. And here's an insurance company, I think could be the next Berkshire and here is some analysis of super-investor John Paulson's latest picks. At the end of the day people should be focused on their own wallets and not anyone else's.