naked capitalism

From Marshall Auerback, a fund manager and investment analyst who writes for New Deal 2.0:

As reported by Bloomberg:

Goldman Sachs Group Inc., one of the first banks to receive cash injections from the U.S. Treasury during last year’s crisis, doesn’t have an implicit guarantee from the government, Chief Financial Officer David Viniar said today.

“We operate as an independent financial institution that stands on our own two feet,” Viniar, 54, said in a conference call with reporters today after the New York-based firm posted higher third-quarter profit. “We don’t think we have a guarantee.”

That’s the quote from today.

Then see an excerpt from their last 10Q issued less than three months ago.

Note the footnote (3) that $20 billion was guaranteed via the FDIC (click to view full image).

Now tell me something, what if you have received FDIC guarantees in the middle of the crisis and had been able to borrow three year money at 100bp over 3 year notes or a whopping 1.5% interest cost.

Might you have taken up the opportunity?

Would that be an implicit guarantee or perhaps more than just implicit?

It is an outright lie to say that they “operate as an independent financial…..”

They should be held accountable for lying to their shareholders.

Where is the outrage in Congress and in the Obama administration?

FDR and Jesse Jones never ever would have tolerated this behavior just 8 months after the bank closings.

You need to look beyond the forest of debits and credits.

This goes to the very heart and soul of the democracy and what we have written about the corruption in the American polity.

Yves here. Ahem, and how pray tell does Goldman rationalize that it was allowed to become a bank in the crisis, which gives it direct access to the Fed? And the government has a clear “no more Lehmans” policy, with Goldman as a larger and therefore treated as an even more important to preserve player.

Another doozy from the conference call was that Goldman CFO David Viniar justified Goldman’s high profits by claiming it was justified by the valuable social role the firm was performing.

Organizations that perform valuable social functions are generally controlled by the state (police) or utilities and subject to heavy government oversight to keep them from abusing their crucial role. But Goldman, along with the rest of the financial services industry, has managed to get itself in the “heads I win, tails you lose” position of privatized gains and socialized losses. And then they have the temerity to act as if we don’t see the result, which is looting.