Goldman push to repay $10bn

[G_j]

Source: Financial Times

Goldman push to repay $10bn

By Greg Farrell and Francesco Guerrera in New York
Published: April 13 2009 23:39 | Last updated: April 13 2009 23:39

Goldman Sachs signalled its determination to be the first major bank to emerge from the financial crisis, revealing plans late on Monday to raise $5bn to pay back government funds and reporting stronger-than-expected first-quarter earnings of $1.81bn.

The bank said that, pending government approval, it would use the $5bn raised through the sale of common stock to help pay back the $10bn allocated to it last year as part of the Troubled Asset Relief Programme.


If it succeeds, Goldman would be the first major US bank to pay back Tarp funds and would free itself from restraints on compensation and business activities imposed by regulators.

The early repayment would also raise the stakes for other big US banks, which would find themselves torn between the need to maintain strong capital levels and the desire not to be seen as “weaker” than Goldman

Read more: http://www.ft.com/cms/s/0/d7674864-287a-11de-8dbf-00144feabdc0.html?ftcamp=rss

[PSPS]

1. Are these funds going to come from Obama's mark-to-fraud scheme?

I'm wondering how 'real' this is.

Their worthless 'assets' can be assigned a made-up 'value' and then sold to a 'private' investor (usually a hastily-created subsidiary of the same bank) for 15% of the made-up 'value.' Later, when it is 'discovered' that the worthless asset is, in fact, worthless, the taxpayer, via the FDIC, makes up the 85% shortfall.

The result: More thievery of the treasury, but the bank's books show a 'profit.'

[w4rma]

14. That's exactly their plan. (nt)

[DJ13]

2. See, if executive pay had been tied to bailout $'s from the start

....there wouldnt have been any bailouts needed.

These assclowns are so transparent, its not even funny.

[soryang]

3. GS profits came from the taxpayer AIG bailout

...used to pay off GS credit default swaps. Imho a fraud and taxpayer ripoff from start to finish.

[xchrom]

4. i'm confused -- i thought they were in big trouble?

now all of a sudden they're not?

i know they got bail-out money -- but now suddenly 'it's all good'?

[G_j]

5. I don't get it either

I'm beginning to doubt if we ever will.

[Lucky Luciano]

7. GS was really only in trouble for about a couple weeks.

They, like other leveraged investment banks were heavily dependent on short term funding to operate - it is like blood to them. After LEH went belly up the short term funding market died, which would have shut down GS very quickly had the government not stepped in. Also, the Fed started purchasing commercial paper (short term funding) which was huge. So GS can sell their CP to the Fed and pay back the Fed with interest, and then issue more CP, etc. The TARP money also helped, but was no longer necessary now that the markets volatility has moderated A LOT and GS could rake in huge profits again - actually, they are making a lot of money with so many other large players out of the market causing bid-offer spreads to widen a lot - especially in the fixed income markets.

GS made a ton in mortgages on the way up and got heavily short on the way down, so toxic mortgages are not a huge problem for them - a bit of commercial mortgages are on their books, but it is not so bad all things considered. They had correct bets vs AIG and AIG did pay them via the lifeline thrown to AIG. Had AIG welched on their bets, then that would have been very bad for GS of course.

They really don't need the TARP money so much and they are best in class. The FASB rules changing accounting standards may have helped too, but not that much since they are not heavily exposed to mortgages. They do have private equity on their books, which is very hard to mark properly and some leveraged loans, but overall, I doubt the FASB rules helped all that much to the bottom line.

[ShockediSay]

11. Change in FASB rule change helps everyone in that business of collecting bonuses

IMHO:

The change allows any financial/commercial/banker to value toilet paper as gold certificates.

See http://finance.yahoo.com/tech-ticker/article/230240/Suckers-Rally-or-Real-Deal%3F-Bank-Earnings-Key-to-Markets-Fate
especially the video.

"more nitty-gritty questions ...


* Will Goldman Sachs announce a secondary offering this week, and how will the market react to new supply of stock?
* Are Wells Fargo and other banks producing better numbers because the business is really better, or because the government has given banks mark-to-market relief.
* What, if anything, will GE say this week about bad loans inside GE Capital, which FrontPoint Partner's Steve Eisman says are a ticking time bomb"

I see GS's public offering a prime candidate for the game of "pump and dump" they play on the street.

Read anything written by Geraint Anedrson {a London Financial insider turned author}.

[Lucky Luciano]

13. I don't think GS benefited too much from M2M.

They picked up a huge part of their profits from the bid-offer spread in fixed income products their sell side desks were trading. Bid offers used to be about 5-10 bps and now they average 19 bps - that is huge.

[MasonJar]

6. They can pay the taxpayers back with taxpayer money given them by AIG.

[spotbird]

8. And pigs fly. nt

[CountAllVotes]

9. they must move quickly

this will certainly shift any inquiry of accounting practices to some other financial firm. If they move fast enough no one will check their damned books; debt paid in full we'll be hearing next! :mad:

[Lucky Luciano]

12. Their books are being looked at right now for the stress tests.

There is a chance the treasury does not let them pay back the TARP based on those tests. Besides, we want them to pay back the TARP, right?

[Bandit]

10. What about the tax payer funds from AIG?

The insurance money given to them by AIG was tax payer money and I am quite sure we will never see one penny of that money..