July 12, 2009

We're really in deep state

From the NYT:
Goldman Sachs Likely to Post Huge Profits, Analysts Say

Most of Wall Street, and America, is still waiting for an economic recovery. Then there is Goldman Sachs.

Up and down Wall Street, analysts and traders are buzzing that Goldman, which only recently paid back its government bailout money, will report blowout profits from trading on Tuesday.

Analysts predict the bank earned a profit of more than $2 billion in the March-June period, because of its trading prowess across world markets. If they are right, the bank’s rivals will once again be left to wonder exactly how Goldman, long the envy of Wall Street, could have rebounded so drastically only months after the nation’s financial industry was shaken to its foundations.

The obsessive speculation has already begun, along with banter about how Goldman’s rapid return to minting money will be perceived by lawmakers and taxpayers who aided Goldman with a multibillion-dollar cushion last fall.

“They exist, and others don’t, and taxpayers made it possible,” said one industry consultant, who, like many people interviewed for this article, declined to be named for fear of jeopardizing business relationships.

Startling, too, is how much of its revenue Goldman is expected to share with its employees. Analysts estimate that the bank will set aside enough money to pay a total of $18 billion in compensation and benefits this year to its 28,000 employees, or more than $600,000 an employee. Top producers stand to earn millions.

On The American Conservative's blog, Dennis Dale noted this last week:
From Bloomberg, Johnathan Weil reports a US prosecutor says a stolen Goldman Sachs computer program capable of manipulating global markets may fall into the wrong hands (wrong being other than the world’s most powerful investment bank). About the first of this month Goldman notified authorities that former employee Sergey Aleynikov, not content with post-its and paper clips, ripped off the program in his last week working for the company. He was arrested getting off a plane in Newark on July 3.

My published articles are archived at iSteve.com -- Steve Sailer


Anonymous said...

Uh... just so you know, the Presiden't Financial Working Group, established by Ronald Reagan after the mini stock crash in the eighties, sends all their orders via Goldman Sachs. The "Group" was established to head off any meltdowns by instructing the Federal Reserve to "print" money electronically, which then goes towards futures positions in the S&P, and other index funds. Reagan's people figured (correctly) that leveraging futures would comfort the longs, and scare the shorts, thereby undermining a stock free fall day after day. Goldman gets commissions for processing these MASSIVE orders. The government identification number of those orders are, of course, known to GS.
Essentially, GS is the stock broker for the US Government, but they don't get paid government wages, they get regualr market wages.
This is insider trading. It's against the law, last time I checked.
Also, Reagan established the Group to get together every 6 months or so. Now they meet about every week, according to reports, and they also confer with GS on issues that are not known, because when they were subpeaned for the minutes taken at their meeting, they said they keep no minutes.
Obama has stated flatly that he will do whatever it takes to stave off an economic crash. This must include working with the tools he inherited. It's probably not the best time to start shaking down GS, if we want to avoid another overnight borrowing freeze between banks.
BTW, the Chinese can easily stop this economy dead. All they have to do is stop buying treasuries, and start flooding the market with treasuries. The effect would be the same as if someone dropped an atomic bomb on Wall Steet.
I seem nobody knows how deep we're in it. Thanks to Clinton, economic diversity has certainly created a vibrant economy, if you consider foreigner's holding an economic gun to your head "vibrant."

Anonymous said...

Just to give you an idea of where we're at related to Obama pumping the money supply, here's a chart that records the monetary base of the Federal Reserve. That is, how much money the Fed has printed up on a year to year basis:


I always tell people that you can look at any chart, and if their is a spike that relates a disproportionate percentage gain, it means get ready. All hell's about to break loose.
The tech boom had it. The housing boom had it. Now our dollar has it.
We are in historically deep shit.

TCO said...

Did they pay back the AIG money (at least what was funnelled to them, better yet the entire amount since the inefficient funnelling was just to cover them anyhow without admitting it)? If not, they don't deserve to lose restrictions.

Anonymous said...

More on Goldman Sachs:

They pay hardly any taxes.

Rumor about Goldman Sachs tapping into computer systems so that they know about transactions before they happen. This may explain their recent good luck in trading.

It must be sweet to be Goldman Sachs.

TCO said...

You know, given efficient market theory, a trader who makes huge amounts of money is likely taking on huge amounts of risk. I think what we have with GS is a subsiudizied form of go for broke. The down side is covered by US taxpoayers and the upside is still allowed. This is a formula for very wild trading. See the same thing happen internally to trading firms with incentives and such.

lonely wall st. gentile said...

BTW, the President's Financial Working Group is colloquially known as the Plunge Protection Team:


Anonymous said...

Anyone know what fraction of wealth in NYC is related to GS?

gay bowel syndrome said...

"...Sergey Aleynikov, not content with post-its and paper clips, ripped off the program..."

Even The American Conservative uses this outdated ghetto street term. The 70s are over!

Steve Sailer said...

Hopefully the 70s (and early 80s) will never be over for Dennis before we get a book out of him about growing up in SoCal: I envision something like if F. Scott Fitzgerald wrote "Repo Man."

headache said...

We are in historically deep shit.


hcl said...

Once again, I do a broadcast ad:




Lucius Vorenus said...

Fanny, Freddie, and Obama
By The Prowler
on 9.8.08 @ 12:08AM

When President George W. Bush nominated Henry Paulson to serve as Treasury Secretary, Republicans raised a red flag that Paulson, who, along with his wife, has strong ties to the Democrat party, would not be an honest broker with Republicans.

That seems to have been borne out, with sources inside of Treasury reporting that Paulson briefed Sen. Barack Obama and his campaign advisers on the Fannie Mae and Freddie Mac bailout plan before offering such a briefing to the McCain campaign...

Paulson and Obama
By The Prowler
on 9.26.08 @ 9:49AM

When Sen. Barack Obama was given the floor to speak during White House negotiations, according to White House aides, he did so raising concerns about a House Republican alternative to the Paulson/Bernanke $700 billion bailout. But those concerns weren't necessarily his, as he was not aware of the GOP plan before reviewing notes provided him by Paulson loyalists in Treasury prior to entering the meeting.

According to an Obama campaign source, the notes were passed to Obama via senior aides traveling with him, who had been emailed the document via a current Goldman Sachs employee and Wall Street fundraiser for the Obama campaign. "It was made clear that the memo was from 'friends' and was reliable," says the campaign source...

beowulf said...

Otto believed in the green light, the orgastic future that year by year recedes before us. It eluded us then, but that’s no matter-- tomorrow we will run faster, stretch out our arms farther...

Anonymous said...

the Presiden't Financial Working Group, established by Ronald Reagan after the mini stock crash in the eighties, sends all their orders via Goldman Sachs.

Got a link to that?

Eric said...

To make that kind of money in this political environment is, quite frankly, stupid. They would have been much better off in the long run scraping about 90% of that cash into a big pile in the parking lot and burning it.

heller said...

More evidence of the "deep state":


But how is this any different from what's been going on for decades?

The big Wall St. banks and law firms have been sending their guys to Washington for major gov't positions for decades now.

Dutch Boy said...

GS's competitors were "allowed to fail" whereas GS got the bailout dough. Who couldn't enjoy record profits with the fix in!

Anonymous said...

POSTED July 16, 2009
Goldman Sachs in Talks to Acquire Treasury Department
Sister Entities to Share Employees, Money

In what some on Wall Street are calling the biggest blockbuster deal in the history of the financial sector, Goldman Sachs confirmed today that it was in talks to acquire the U.S. Department of the Treasury.

According to Goldman spokesperson Jonathan Hestron, the merger between Goldman and the Treasury Department is "a good fit" because "they're in the business of printing money and so are we."

The Goldman spokesman said that the merger would create efficiencies for both entities: "We already have so many employees and so much money flowing back and forth, this would just streamline things."

Mr. Hestron said the only challenge facing Goldman in completing the merger "is trying to figure out which parts of the Treasury Dept. we don't already own."

Goldman recently celebrated record earnings by roasting a suckling pig over a bonfire of hundred-dollar bills.