Legal Commentary

Goldman Makes Bucketfuls

By Big Tent Democrat

Goldman Sachs announced its quarterly earnings after the close of the market, apparently the news was very good for Goldman (1.8B and $3.39/diluted share and will raise $5 billion in a private offering) and will be giving back the TARP money it took (apparently $10B) as soon as possible (How does tomorrow sound to you Goldman?). No word on whether the backdoor bailouts given to Goldman via AIG would be returned . . .

How much of that profit comes from AIG counterparty positions? More . . .

Goldman is being criticized for giving the TARP money back:

Richard X. Bove, a bank analyst with Rochdale Research, believes that it would be a “horrible mistake” for Goldman to pay back the TARP, according to a note he sent to investors Monday morning. “I have continually believed that extreme measures are being taken in this current financial crisis because hysteria has replaced sound thinking,” Mr. Bove wrote. “If Goldman Sachs makes the decision to bend to this hysteria by selling 80 million shares of stock it would be a black mark against management.”

To Mr. Bove, swapping the cheap government equity by diluting current shareholders makes little sense and challenges the notion that the money is placing an undue burden on the investment firm. “The fear of excessive regulation exists today, not as the result of actions taken by regulators, but due to the constant flow of intemperate statements by Congress and the new Treasury,” he said. “It is totally unlikely that any of these statements will ever become law.”

There are two things worth noting in this critique. First, the obvious, it is ridiculous for Goldman to give back the cheap money the government has shoveled at them. I say this from the perspective of the well being of the Goldman shareholder, who is about to find his holdings diluted.

Second, these folks really freaking believe this Masters of the Universe nonsense. Bove's entire critique is that compensation regulation will NOT be imposed on TARP fund receiving entities so do not worry about it. My critique is do you REALLY think the folks who would leave are worth sacrificing this cheap money for? Really?

Full post as published by TalkLeft on April 13, 2009 (boomark / email).