I’m sure i’m going to regret throwing in another 2c but maybe, technically, GS wasn’t bailed out but the AIG bailout made in good part necessary by GS and engineered by GS alumni sure profited GS. Give GS’ history of financial skulduggery, one instance being the gas bubble deplored above by the OPer himself, it certainly would be reasonable to think that one way or another, Gs has positioned itself for a good chunk of the unaccounted for billions.
As to LHD’s position at Morgan … gotta be a lawyer.
I don’t totally disagree with this although statements from Goldman say that they would have profited more if AIG had not essentially failed. This is because they were forced to unwind and/or hedge exposure at an expense.
I’m not saying that Goldman hasn’t benefited from the government’s actions. I’m just saying that they weren’t bailed out. To me, being bailed out comes with a significantly different stigma than Goldman deserves. I think they are a manipulator of markets and have contributed to bubbles. I think they have an unhealthy relationship with the government. I don’t think that the government saved them from failure. They weren’t an insolvent company that needed the government to come in and rescue them.
Well, if you think that “what” we know and “when” we know via mass media is what & when “they” knew, then yeah, it is illogical.
However, I think you should review the timeline of this crisis, specifically two events - when Bernanke announced that “subprime mess is contained” (Q2-07) and when TAF, the first support program by Feds started (Q3-07). Or, when the ABS paper market froze.
Even myself, who is on the periphery of risk analysis knew that the sh** has hit the fan. Then, I’d conclude that executives at GS essentially entertained any idea that would have them survive from the very early on; even though, they might as well collapsed just like Bear Stearns or Lehman. I also happen to think that it is naive to suggest that GS converted to holding bank for anything but survival.
On the opposite side of the coin, I just don’t see how differently GS would structure the deals to avoid failure; in other words, their investment model based on structured finance is the reason they needed a bailout (via cascade effect).
And a note - let’s be a little bit careful about collateral because in structured finance world, a collateral derives itself from the deal structure and since each deal has a different structure without details t is very difficult to discuss viability of the collateral.
They were very close. Actually, when the credit market froze, the only way to raise capital was from Feds. Since they were investment bank that door was closed. What to do? Well, apply to become a holding bank. Then, get the capital. Saved from insolvency. Bailed out by Feds. By US taxpayer.
Once again, I believe that Goldman has borrowed funds under the TALF program. I believe that they bought ABS using funds borrowed under TALF. I believe that these funds were borrowed under favorable terms. However, I do not believe that this constitutes a bailout; if you want to attach some sort of critical word to Goldman for these actions, then I believe subsidy is more appropriate.
I also believe that Goldman has also taken advantage of TLGP as has effectively every financial institution in some form or fashion. Again, I think this is a sweetheart deal for Goldman and could in some ways be called a subsidy. However, I do not think it qualifies as a bailout as Goldman has clearly demonstrated the capability to access the capital markets before and after TARP was initiated. Further, they pay a fee to participate in the program.
There are likely other government programs that Goldman has participated in. They likely benefited by participating in these programs. Until someone provides evidence to the contrary, I’ll continue to believe that none of the funds bailed out Goldman as nothing in their public filings indicates that they need to be bailed out. They have exceptional capital ratios and have not shown any difficulty in maintaining adequate liquidity. I think there is a world of difference between profiting from participating in a government program and being bailed out by the government.
I think that it is clear that the banks had no idea what they were being called for during the 10/13/08 meeting when they were told that they would be participating in the newly created and yet to be announced CPP program.
I never suggested that they didn’t convert to a bank holding company to help insure their survival. What I am saying is that they did not convert to a bank holding company so that they could participate in the CPP. I think they converted to a bank holding company so that they could have access to more stable funding sources than would be available to an investment bank. This is clearly not a bailout to me because it was available to any qualifying financial institution (and Goldman would have qualified under nearly any circumstances) at any time. If they converted in 2004 would you have called it a bailout? To me it is analogous to going public. They went public in order to access additional capital. This required approval from federal authorities. Were they bailed out in 1999?
Let me get this straight, are you saying that Goldman Sachs had no way of raising capital following the freezing of the credit markets and before the infusion of funds from the CPP? Is that the window of time that you are talking about when you say the only way to do so was through the Fed? That seems oddly in violation of the actual facts since Goldman raised $5 billion in an equity raise and another $5 billion in preferred stock from Warren Buffett just a few weeks prior to the initial TARP CPP meeting. Further, the stock offering was over-subscribed. Not to be out done, Morgan Stanley and JPMorgan also raised funds within a two week period. Care to explain this inconsistency?