Wednesday, Jul 22, 2009
Vampire Squid responds to criticism - does the right thing
Bloomberg: Goldman Sachs Payments to U.S. Give 23% Return to Taxpayers
Unlike JP Morgan, Goldman Sachs agreed to pay the full amount sought by the US Treasury for its warrants, generating a 23 percent annualized return for U.S. taxpayers
Posted by mountain goat @ 11:01 PM (470 views) Add Comment
4 Comments
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1. little professor said...
Meanwhile the share price has risen by 42% - if Hank Paulson had taken ordinary shares instead of these crappy warrant the taxpayer would have gotten double the return.
And why should Goldman be able to pay back on its own terms? Why can't the taxpayer hold on to the warrants and keep squeezing Goldman for a few more years? Warren Buffet's stake has a penalty clause if Goldman tries to pay off the deal before 2013.
2. little professor said...
Meanwhile the share price has risen by 42% - if Hank Paulson had taken ordinary shares instead of these crappy warrant the taxpayer would have gotten double the return.
And why should Goldman be able to pay back on its own terms? Why can't the taxpayer hold on to the warrants and keep squeezing Goldman for a few more years? Warren Buffet's stake has a penalty clause if Goldman tries to pay off the deal before 2013.
3. stillthinking said...
But the argument against Goldman is that they only made the profits because of the money the US government piled in -elsewhere-, and that money isn't coming back. They are beneficiaries of their -counterparties- being supported by real taxpayer losses. Absolutely not the case that they only received a loan which they paid back. If the US financial system had been allowed to follow its natural course GS are dramatically busted.
To say that because they as an individual company can pay back their loans ignores the -indirect- funding they have received. That is the scam. You can't consider GS in isolation. Not just GS, any company involved in any way with selling default insurance benefits because suddenly taxpayer pays up for all defaults. A private company selling insurance for an event already covered by the public purse.
4. mountain goat said...
All government subsidies are unfair to the competition that receive no subsidies. If all Wall Street Banks had been allowed to go bust this would have been a wonderful opportuity for new business' to step in. But imagine the Armageddon we would be in right now! So yes they got their bailout and used it to make sickening profits. But arguably this is better then getting their bailout and making a loss. They paid their money back and the warrants. Maybe the warrants weren't punitive enough but still the US Treasury made a profit and the debt is paid off. As the article describes, GS could have done what JP Morgan is doing which seems like a slap in the face. So I think they deserve some credit.