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Government Sachs: TARP Funds Just The Tip Of The Iceberg For Goldman

Goldman Sachs is planning to give back the TARP money it got last fall, "ideally in the next month," reports the New York Times.

The firm is saying it just can't handle the level of government oversight that comes along with the funds, especially amid the outrage over AIG bonuses. "It's just impossible to run our business in this environment," one exec told the Times' Andrew Ross Sorkin.

Sounds great.

But before we hail Goldman as the embodiment of rugged American individualism, it's worth remembering that, as Slate's Dan Gross has shown, the $10 billion it got from TARP was just the tip of the iceberg in terms of federal assistance it's received since the financial crisis began last fall.

In fact, just to refresh everyone's memory, here's a rundown of the various forms of government largesse that Goldman -- which last September was forced to turn itself into a bank-holding company so that it could take deposits, in order to survive the financial crisis -- has taken advantage of lately.

TARP funds: $10 billion plus
AIG securities lending unit: $4.6 billion
Maiden Lane III: $5.8 billion
AIG collateral: $2.5 billion

Total: $22.9 billion plus

Let's break down each of those items...

- Last October, Goldman received $10 billion in TARP funds, through a Treasury Department purchase of preferred stock. That's what they're now saying they intend to soon repay. (Also, Goldman got a much sweeter deal on those loans from Treasury than it did when it raised capital from Warren Buffett a month earlier. The more generous terms are worth an additional $500 million a year to Goldman, according to Gross. But that's another story.)

But Goldman was also a major counter-party to AIG's disastrous credit default swaps. As a result, Goldman has been the biggest American beneficiary of the various government bailouts of the collapsed insurance giant (which itself is almost 80 percent owned by the federal government):

- Goldman got $4.8 billion from AIG's securities lending unit.

- It got $5.6 billion, almost twice as much as any other American bank, from Maiden Lane III, the Fed's "special purpose vehicle" that it created to unwind AIG's credit default swaps;

- And AIG posted $2.5 billion in collateral to Goldman last fall, which came directly from its government bailout, according to AIG's own list of what it did with its bailout money.

Just for good measure, it's also worth noting that Goldman is getting an additional several hundred million dollars per year in interest savings, according to Gross, thanks to an FDIC program that guarantees bonds issued by banks. Under the program, which is designed to make it easier for banks to raise capital, Goldman has sold $21 billion in bonds since November.

None of this is to argue that the government support was necessarily ill-advised. But it's worth keeping this reality in mind the next time you see Goldman boasting about their ability to weather the crisis without taxpayer help -- or media reports that buy into that line.


23 Comments

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But the money Goldman received from AIG was because it bought and paid for credit default swaps - that is, they bought insurance for their derivatives. Yeah, if AIG had gone under, they wouldn't have received most of that money but I don't see that as a government largesse. (Just like if should die and AIG pays my wife through the life insurance policy I have with it, I don't see her as having benefitted from government largesse). If Goldman repays the TARP money, it will be free of the TARP restraints and we'll see what happens next.

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"Yeah, if AIG had gone under, they wouldn't have received most of that money but I don't see that as a government largesse." ...

If AIG had gone under they would have lost nearly all of their CDS "insurance" money. How exactly is the money that government-propped-up-and-owned AIG paid to Goldman NOT government largesse?

More importantly, how is it that Goldman, which we now know as the largest beneficiary of the AIG collapse/bailout, was able to negotiate a $10B bailout of their own while denying that they had a direct stake in what happens to AIG?

This is called fraud.

...Just like the guy who goes door to door selling life insurance from a fly-by-night company ("You signed a contract ma'am. Maybe you missed that part. See, its here in the fine print. I know its mighty small, but you signed it. See, here's your signature..." Good luck getting paid.


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Correct. Paying somebody else's debts is a gift to both creditor and debtor.

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Is this just a mechanism to avoid the next batch of "stress tests" which they might fail, or am I just being overly cynical. . . .

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Hank Paulson has his bag of money from Goldman Sachs and is headed for the border..this is just another ploy..another way that Wall Street will try to use some sort of leverage (threatening total financial collapse, or something) to Congress, to remove any regulations and just get the money, no questions asked..Nationalize the bastards (especially the private banks of the FED) and fire all the EXECUTIVES... stop passing out bonuses and dividend checks to the "Board"

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The halcyon days of Wall Steets unfettered greed and outright stupidity are hopefully over. So Goldman, et al will be properly regulated, audited and constrained on the type of crap they bet on. Gone too are the unnatural(hyped) profits and unseemly bonuses. I just hope customers remember what companies acted responsibly before and during this crisis, and let their money gravitate toward responsible investments.

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what makes you think those days are over?

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'"It's just impossible to run our business in this environment,""

Memo to Goldman: if you could run your business in a normal environment, you wouldn't be taking 23 billion in goverment largesse to keep your sorry asses afloat.

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How sad. After forcibly raping and robbing the U.S. tax payers to float their bad business schemes they get upset when we ask how the ill gotten money will be spent, plus mention the fact they were crap at the rape to boot. Now they don't want to keep but half the money they stole and may not even want to rape us again? Well maybe just a little rape over on the pile of toxic assets in the alley behind the building. Just for old time sakes. So sad...

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So they use the AIG money to pay back the TARP money, essentially?

But RichardF, it certainly is government largesse. Also, many of the investors who bought credit default derivatives did it not to hedge other investments they owned, but just to bet on the housing bubble popping.

They were right, but they shouldn't get all of the gain from their bets when the house casino (AIG) is insolvent. Taxpayers are being royally rooked here.

The conclusion of the story is sound: Goldman Sachs profited handsomely from the government.

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So they use the AIG money to pay back the TARP money, essentially?

Yup. What do you think the AIG bailout was for?

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But so did everyone who bought a policy from AIG. If there had been no bailout of AIG, it would have gone into bk and policy holders would have been paid pennies on the dollar (including my wife when I die and property owners who bought casualty insurance through AIG). The whole point of the AIG bailout was to prevent that from happening (and the wide scale panic that could conceivably have created). The whole point of the AIG bailout was to allow it to pay policyholders including companies like Goldman who paid considerable amounts of money for the credit swap insurance.

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What if AIG were run like a casino, would it make any difference?

Cause usually, when the gamblers break the house, the house and gamblers don't call on the government to make them whole.

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So now that the treasury has double or triple funded them, and they've willfully accepted those funds, through the front door, the back door, the side door, and the secret tunnel door, they don't want to be caught with the taxpayers, who happen to be standing on the trap door?

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Goldman Sachs has too much influence in Treasury.
The latest is Gary Gensler who spent 18 years at Goldman Sachs;

Senator Bernie Sanders (and one other unknown/unnamed Senator) has placed a hold on the nomination of Gary Gensler to chair the Commodities Futures Trading Commission.

From Sanders' website:


Market Regulation Sanders has raised objections to the nomination of a former Treasury Department official, Gary Gensler, the chair the Commodities Futures Trading Commission. "While Mr. Gensler clearly is an intelligent and knowledgeable person, I cannot support his nomination," Sanders said. "Mr. Gensler worked with Senators Phil Gramm and Alan Greenspan to exempt credit default swaps from regulation, which led to the collapse of A.I.G. and has resulted in the largest taxpayer bailout in U.S. history. He supported Gramm-Leach-Bliley, which allowed banks like Citigroup to become 'too big to fail.' He worked to deregulate electronic energy trading, which led to the downfall of Enron and the spike in energy prices. At this moment in our history, we need an independent leader who will help create a new culture in the financial marketplace and move us away from the greed, recklessness and illegal behavior which has caused so much harm to our economy."


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My immediate reaction is, "What do they have to hide?" I cannot think of any other reason why it would be impossible to run their business under stricter oversight except that there is something they are hiding. I do believe that may qualify as fraud.

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When a business is failing and needs a loan...the lender usually does not allow them to pay off the creditors to be paid back 100% on the dollar!

AIG made CITI/ Goldman/ JPMorgan were all made 'whole' by the funds in the BAILOUT! dollar for dollar---usually they negoiate...but were paid without any discount!!!

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You forgot the $20b+ Goldman raised by using the new FDIC Temporary Liquidity Guarantee Program. Without the FDIC giveaway, Goldman would have had a heck of a time raising cash. The notion that Goldman is standing on it's own once it pays back the TARP funds is a joke.

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Only makes me suspicious: why do they want to duck out from under regulation -- rule of law?

Might it be that they are habitual criminals?

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Its really starting to look like some of this, or a lot of it, or maybe all of it was a big scam. I know it sounds funny that Bush and company would start this BEFORE the elections, but they may have gotten scammed as well. Its looking like for the Bankers it was all fun and games until someone got hurt: AIG Bonus recipients. Now people are starting to take a harder look a executive compensation in general and that getting a little close to home for these guys. Could this be the biggest heist ever conceived?

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Given that GS's plan is hoard the money and ride out the depression, they better make sure they're inconspicuous. A lot of people are going to remember that GS got theirs while the getting was good.

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Gee wilikers --
Anybody remember who Obama's top campaign contributors were?

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