We Should Worry About Goldman’s Comeback

Goldman Sachs has bounced back and posted record earnings after receiving federal bail out bucks months ago. Should we look at that as good news? Notedfa — Robert Reich explains:

…Goldman is still depending on $28 billion in outstanding debt issued cheaply with the backing of the Federal Deposit Insurance Corporation. Which means you and I are still indirectly funding Goldman’s high-risk operations.[…]

…Goldman is also skillful at playing politics — something its rivals aren’t nearly as good at. Recall that last fall, at a closed meeting between Treasury Secretary Hank Paulson (formerly Goldman’s CEO), Tim Geithner (then at the New York Fed), and a handful of others to decide on the fate of giant insurer AIG, Goldman’s cheif executive, Lloyd Blankfein, was at the table. The decision to bail out AIG resulted in a $13 billion giveaway to Goldman because Goldman was an AIG counterparty. Indeed, Goldman executives and alumni have played crucial roles in guiding the Wall Street bailout from the start.

So the fact that Goldman has reverted to its old ways in the market suggests it has every reason to believe it can revert to its old ways in politics, should its market strategies backfire once again — leaving the rest of us once again to pick up the pieces.

And, here’s yet another concern:

Another concern is that the blowout profits might encourage rivals to try to match Goldman in the markets so they, too, can return to paying hefty bonuses. Wall Street’s bonus culture is widely seen as having encouraged the excessive risk-taking that set off the financial crisis.

Meanwhile… Some think the recession is over. I’ll believe when I see it and I don’t see it yet.

Bookmark and Share

Bookmark the permalink.

Comments are closed.