Lloyd Blankfein: What's good for Goldman Sachs is good for America

As far as I'm concerned, they and similar firms can have all the high pay and bonuses they want, after they pay back the bailouts.

Hi Ffred. That's a good place to start but we should require more than just paying back bailout money before Wall Street pays out those huge bonuses.

Financial instruments are greatly opaque to the vast majority of the industry's customers, which creates the potential for enormous abuse in the absence of appropriate regulatory structures, which we don't currently have.

One of the root causes of the recent crisis is that the industry has been pretending there are markets where none truly existed. And bankers made enormous bonuses for, in part, playing in those "false" markets. And much of the burden of correcting that falsity is being shouldered by people who participated minimally, if at all, in the upside.

I'm not suggesting we cap bonuses or salaries. I'm suggesting that we create regulatory structures that align with our values -- e.g., rewarding true value creation -- so that when someone does receive a big pay package, it's justified and not just a gaming of the system.

I have to agree with Factseeker - paying back the bailouts isn't the issue. Remember, the big firms have already started to pay back the bailout funds out of their new profits, and as they become more liquid and stable this trend is going to accellerate.

If anything, we need to reverse that mindset. Financial firms can pay back bailout funds after they align their pay and profit structure to benefit the larger economy.

For the most part, bailout money is the only direct leverage the government has over these firms. I don't think we should let Goldman pay down all their IOU's until we have some guarantee that they've actually reformed their practices.

Ha! Welcome to The United States of Goldman Sachs! Which I thought was a pretty good article as well.

So, can we have AIG pay them a more reasonable sum for their cruddy CDS paper --say 10 cents on the dollar?

Oh wait, that would take $10 billion out of their profits. Can't have that.

You should watch the old movie they made out of L'il Abner: "What's good for General Bullmoose is good for the USA!"

It's less plausible now than then. At least GM made lots of American jobs that paid fairly well, instead of making a few people rich for looting the rest of the economy.

One could argue before the meltdown that the financial industry's prosperity was linked to the nation's, much as the original statement that "what's good for the business of GM is good for America" was true. But now? The country is in a mess, the jobless rates are ridiculous, and the good news is essentially that things aren't getting worse (or at least worse at a high rate). And still the banks and financial companies pay out huge amounts. This is the finest factual example one can imagine that the bonus / compensation structure in the financial industry is not related to the nation's prosperity and is actually unhinged from it.

And similarly, "what has been good for the financial industry" has so obviously made a mess of the nation that it brooks no serious opposition.

Blankfein's arguments would be more credible, sans the "minor" issue of being a contributor to the near-collapse of Western Civilization (literally) and a fear that almost failed without government action a year ago if:
1) ~85% of their profits weren't based on proprietary trading
- what value does that create for society
- it seems to be based on GS being a hedge fund in disguise which makes its money front-running clients by taking advantage of its managing their money

2) those "profits" weren't a reflection of aberrational circumstances created by public policy to save the financial system (that's demonstratable as well) and

3) the real underlying cause wasn't the growth of excess debt which drove profits and Wall St. compensation and were started post mid-80s de-regulation. In other words these guys created financial engineering that damaged the economy and society and extracted most of the value for their own bonuses.

Don't mean that to sound like aluminum foil hat time - the data is pretty clear and documentable if you go looking for it:
http://llinlithgow.com/bizzX/2009/10/bonus_fantasies_vs_political_r.html

You guys will not understand what is really going on here until you understand that the tarp loans to GS were just a red herring, a distraction. The real game is AIG, and all the money we pumped in that direction. Which then went to GS, and other firms. The PR people at GS tell us GS had the risk of AIG fallure hedged, but they should be made to prove that those counterparties would have paid 100 cents on the dollar. That is very doubtful, So the 12 or 13 billion GS got from AIG came directly from the taxpayers.

Second, GS has become a government sponsored entity, knowing they can walk into the financial casino, place their bets, and if they lose, the tax payer will cover them. How can the fail to make money?

Third, GS played a major role in creating the commodities supply panic of 2008, convincing everyone that they should pay $150 for oil today, so they don't have to pay $200 tomorrow.

But I doubt if anything will happen, because GS and the other Wall Street big financials are so tight with the financial press, there will never be good investigative journalism on this. Ask a financial reporter if he has any personal friends who work on Wall Street, and they will all say yes. Ask most New York and Washington based reporters in general if they have friends who work on Wall Street. Chuck Todd of NBC admitted as much several months ago, saying that "all of us have social friends on Wall Street, maybe if we all knew some autoworkers, we would look at each set of bailouts differently."

Then throw in the fact that Barney Frank is good friends with Henry Paulson....

Remember, Galleon is just the tip of the iceberg.

Justin, please find out where the AIG money went, and make them prove their other hedge counterparties could pay up. Because we also bailed them out.

You know, these guys would be living in a different universe if so many members of the financial press weren't wearing clown shoes.

I quote Justin's coworker, after describing how Andrew Hall has his unit rent a tanker and take delivery of 1 million barrels of oil because he thought the price was temporarily low.

"When the price of oil recovered Hall made as much as $40 million on that one trade alone. "

Excuse me, but he would have had to make over $42 per barrel to both cover his costs and make $40 per barrell. I find that very improbable.

Does this idiot reporter know this to be the case? If so, he doesn't provide any evidence. Instead, he gushes on:

"Hall has also reportedly been buying gold this year. Another good move...."

But not a particularly innovative one, particularly when you are playing risk-free with other people's money backed by the government.

I don't have any problem with the idea that individuals can be worth a lot of money. I can name three whose companies I have dealt with and where the company's success clearly bears their imprint:

1. Bill Gates
2. John Chambers
3. Steve Jobs

Maybe Andrew Hall is one of these folks. Or maybe he's just a guy who engages in highly leveraged, high risk transactions with other people's money. Who knows?

What I can tell you definitely is that nobody will be able to make that determination more accurately because they read this idiot article in time.

http://www.time.com/time/business/article/0,8599,1930732,00.html

Small wonder that America's discussion of this issue approaches the overtly moronic.

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