It seems that at Foremain, we have gone against what we promised but, with what is going on in the World, we cannot help it. Once again, Goldman Sachs is back in the news. Once again, it is all about the bonuses paid to bankers. It does not take a rocket scientist to ask the question why people who have caused such catastrophic problems be paid huge bonuses. The lack of consideration for others on the part of the bankers has not helped either. To many it seems to be business as usual for these people.
For those of you who have been following the story will know that the Rolling Stone Magazine described Goldman as a “giant vampire squid”. For the staff of the “giant vampire squid”, there is great excitement as members of the 31,700 staff stand to receive from $700,000 to $32m, yes, fantastic if you can receive that kind of money in these difficult times. The pool of money we are looking at is in the region of $16 billion. This comes on the announcement of a $3.19 billion profits for the third quarter of this year. Nevertheless, mere mortals are left to ponder on increased taxes and unemployment.
Politicians from both sides of the Atlantic (US, UK) have been quick to condemn Goldman’s action. President Obama’s top aide in financial matters has made a few comments but the others were blunter. Vince Cable, the UK Liberal Democrat Party Treasury spokesperson, said, “People will be rightly furious to see Goldman Sachs paying out bumper bonuses just 12 months after it was bailed out by the American government. It is farcical that so soon after the greed of bankers brought the world economy to its knees, we are seeing a return to business as usual.” Perhaps most surprising was that even inside the City (London’s financial district), many battle hardened investment bankers found the bonuses distasteful.
Considering all going on now, how has Goldman made such enormous profits and huge bonuses? These profits and bonuses are attributed to a few factors. With the credit crunch biting just about every financial institution, Goldman morphed into a traditional bank holding company. This transition allowed Goldman access to cheap funding from the US Federal Reserve. The government propped up Goldman by a direct injection of cash – which Goldman has paid back. However, Goldman received money indirectly from the taxpayer in another rescue.
A little known organisation – American International Group (AIG) came onto the scene. It also emerged that Goldman held contracts in this company. AIG was bailed out to the tune of $85 billion of which some of it went to Goldman. People like Gerald Celente point out that 13 of those billions went into Goldman’s coffers due to the obligations owed to it by AIG. We must also not forget the disappearance of some its (Goldman) nearest and dearest rivals like Lehman Brothers. This allowed surviving banks like Goldman to raise fees and make even more money.
As the Sunday Times of South Africa put it in its October 25th edition –
“The masters of the universe at Goldman seized the chance to bet on recovery – and bet big. While it can claim to have avoided some of the disasters other banks steered themselves into, Goldman has profited from the socialising of losses. As Professor Stefano Harney from Queen Mary School of Business Management said: There is a question of whether these results are enhanced by the taxpayer. The taxpayer ultimately is the investor who ought to be reaping the results and getting the bonuses this year.”
There is really no point to draw any conclusions on this matter but to quote Gerald Celente once again who said - “Give me $13 billion dollars and I will show you a profit.”
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