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Goldman: Recession? What recession?

Robert Peston | 14:33 UK time, Tuesday, 14 July 2009

I'm in a horrible rush, so have to keep my remarks on Goldman Sachs' second quarter results brief.

I could say "crikey" and leave it at that.

mersey house

But I will translate. Just a few months after Wall Street and the City of London were in meltdown, Goldman has reported record net revenues for a three-month period of $13.8bn, which is a breathtaking 47% higher than those generated in the preceding three months and in the equivalent period of last year.

It's boom time again, especially in the trading of credit and currencies.

And oh how Goldman's 29,400 staff have been rewarded. Compensation for the three months was a handsome $6.65bn or $226,000 per employee.

That brings remuneration per employee for the first half of the year to a none-too-cheap $384,000.

And we're only halfway through the year.

The media and political reaction to Goldman's bounceback will be fascinating to observe.

It's true that the investment bank has consistently performed better than most of its rivals.

But when that cataclysmic storm broke over the financial system last autumn, Goldman - like the rest - had to turn to taxpayers for a crutch in the form of guarantees for its debt, access to central-bank liquidity and capital.

It has recently declared that it can stand on its own feet again without taxpayers to lean on.

But some may well ask whether taxpayers shouldn't have demanded a bit more for their succour, given that Goldman is once again the world's pre-eminent money-making machine.

Comments

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  • Comment number 1.

    $226,000 per employee! Where can I get an application form? Just how has this happened is a more appropriate question than "how have they done it?" What value has been created and has any wealth been injured in the process?

  • Comment number 2.

    Ha Ha Ha!!!

    FILL YOUR Boots folks, everyone else is !!!

  • Comment number 3.

    Unbelievable! This may give false optimism to many companies that still in an awful mess. Worse still, people may actually believe Brown had something to do with it!

  • Comment number 4.

    One has to ask how have they made this profit? What tangible fact has created it. I bet they won't say - I bet they don't know!

  • Comment number 5.

    Hmmm, but at the expense of which other banks. Our part nationalised banks have just made large writedowns on bad loans. If one party does exceptionally well out of a deal, it stands to reason that the other party has fared less well.

    What is disturbing about GS, is the large number of ex staffers working in highly placed position in central banks, regulator offices and Government Treasury departments in all sorts of countries around the world. I am not suggesting for one moment that they are retaining allegiances to their former employer, but ....

  • Comment number 6.

    It's main competitors have 'left' the playing field. The Accounting Board in the US has weakened regulation and recommends banks can mark toxic debt to the banks own models and interest rates are low thanks to government intervention so trading opportunities are greater than ever before. Also, they will not lend at rates any where near base rate so the profits are being made from businesses and individuals. How lovely for them and how disgusting. The company will abuse the system for as long as they are allowed.
    Do not be surprised by the profit. If it can't do it now it never could. Problem is the bonuses whilst the taxpayer sees job losses rise. Moral hazard as a term is out of favour but it just may return now.
    Shame on them and the Obama administration for caring more about banks than small and medium business and savers. Don't forget the people who need a loan to get by who can't get one without paying huge interest rates.

  • Comment number 7.

    Perhaps Gordon can now borrow from Goldman

  • Comment number 8.

    Surely we need to realise that Bankers can never trusted to self control greed.

    Are these bankers any better than those who brought down the world economy or are they just lucky enough to be being renumerated during a different time.

    Bring in strict regulation now.

    p.s. where are the prosecutions against the wrong doers who created the crisis we are still in and as taxpayers we will still be paying off the debt their actions caused for decades



  • Comment number 9.

    It will keep happening as in reality these bankers don't take any risk (as they know govs will back them) and just take the rewards.

    Any other sector and these bankers would be unemployed (eg. MG rover, Woolworths)

    I say 80% tax on pay and profits of all bankers/banks that get state guarantees - if they don't want to pay the tax they can take the risk and know that they will not be backed by gov if they get into trouble. Do you think they'd have many customers and such big profits w/o gov guarantees? - I doubt it!

  • Comment number 10.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 11.

    Heard a rumour that repackaging of CDO's enabled the company to make an "instant profit" , how relaible are these numbers ? , are the auditors up to the task , fully understand the technicalities of the business ?

  • Comment number 12.

    It is outragous they get a bail out when they are in trouble then a year later earn these sort of sums. There is only upside for them and only downside for the taxpayer. The world is going mad. Break up these organisations and protect only the banking arms. The investment banks can sink if they fail and the bankers can survive on their bonuses for the rest of their lives.

    Im no socialist, but a year after going bust it is simply not right

  • Comment number 13.

    No amount of planning beats dumb luck. Last man standing, although proped up by taxpayers. It is about attitude and responsibility. When the servant rescues the master, the servant anticipates reward and the master praises himself for making such good hiring decisions. Both are disaapointed in the end. A part of the process leading to the financial crisis was the reestablishment of the ruling class and those pervasive attitudes....divine right and all that. Marx was wrong about socialism and probably right about captialism.

  • Comment number 14.

    Anyone calling for 'strong regulation' now would have screamed blue murder had Gordon Brown introduced such a thing at the time he made his 'light touch regulation' boast a few year years ago.

    And anyone who denies this is a liar.

  • Comment number 15.

  • Comment number 16.

    Ever get the feeling you're being cheated?

  • Comment number 17.

    If this report is correct then Goldman employees will be receiving the equivalent of the collective salaries of 325,000 people - earning $20,000/year. Quite apart from the moral implications of concentrating such a lot of money in the pockets of so few this will do nothing to offer the stimulation to the manufacturing and service industries that we are told is essential if the wounds, that banks (like Goldmans) inflicted on the economy, are ever to heal.
    In terms of long-term recovery of the Global Economy as a whole Goldman Sachs would have done better to open their windows and throw $6.6bn into the streets below. In fact fiscally this would be the more responsible response to such unprecedented profit.
    Instead, as we see reported daily, the salaries and pensions of the many are under greater and greater threat. Millions worldwide will be 'downsized' out of work altogether.
    In any context these bonuses are obscene. In the current context it is borderline criminal.

  • Comment number 18.

    I'm assuming these profits were made in trading of commodities, equities, currencies etc in which case good luck to them. I heard someone on this morning's Today programme commenting that GS have very good risk analyses in which case they are making fairly safe bets and winning.

    I wish I had their skill! Having lost money on equities in the past I now stick to cash although I did sell my house towards the top of the market, correctly realising that the boom could not continue indefinitely. Still I will never be in their league. Money is made when prices go up and down so it's in traders interests that prices fluctuate. In order to be on the winning side you have to know what you're doing. This is where I fall down!

    I don't think we'd all mind so much if having made oodles of cash people stopped being greedy and left the city so someone else can have a go. As my old dad used to say: "Enough is as good as a feast".

  • Comment number 19.

    Is this any huge surprise? GS has always out performed their peers, due to a variety of factors (mainly, the fact that they still operate in large part like the trust they use to be and their great remuneration and graduate recruitment programs).

    GS is uniquely well suited to surviving this crisis frankly...and the fact that they can afford to hire the best of the best plays a huge part in that. They're notorious for firing whoever slacks, but that also means they tend to work incredibly hard and be hugely clever.

    People love to complain about bankers making money, the facts are the GS is incredibly good at making cash.

  • Comment number 20.

    Wow what a surprise? Did they perhaps over-provision in the preceding periods? No auditor or reviewer is going to say that by writing off 100% of the value of an investment that they are being overly prudent with the climate at the time - now are they just reversing some of those provisions (eg having written down a perfectly good mortgage to zero value and then saying, oh look - they are still paying - well that is pure profit/revenue now...)

  • Comment number 21.

    The missing piece of the puzzle. As we all know individuals lost 20-30% of value from individual retirement accounts. No one has suggested that maybe some of these "profits" should go back to the individuals who their current or previous employees betrayed. It seems that efforts to make the system whole again does not include the individuals. I would think that somewhere in this process someone may want to look out for the average guy. Quaint idea and of course not chartable on the economist calculations, but maybe something that would resonate with the people....you remember the people...the ones that the bills will be forwarded to.

  • Comment number 22.

    Also, for more information, check out this article. It explains where the cash came from, and it's good news all around :
    http://www.cnbc.com/id/31894821

  • Comment number 23.

    re 14.

    I deny it.

    I am no liar.

    What I MAY rail against is the law put in place, but that is the same stance now as I would have had then.

  • Comment number 24.

    they were basically bankrolled by the US taxpayer...so when bust the taxpayer pays when they make a profit they keep it.... no moral hazard. why didnt the US government (and in similar circumstances the UK government) demand that in order to receive taxpayer funds you dont just pay it back but you pay 50% of future profits....forever......!

  • Comment number 25.

    I would have at least liked to be kissed..........

  • Comment number 26.

    Easy to make profits when you are a quasi branch of the US government. That was the whole reason for AIG bailout - to support Goldman - a present from the former head of Goldman..........Hank Paulson.

    The pillage of the serfs continues.

  • Comment number 27.

    It seems that far too many debts have been labeled wrongly as toxic. Lets just wait a little longer. There may be far more sheep than goats!

  • Comment number 28.

    Brown of course will do nothing - except of course accept the PAYE and spend it instantly to try to ingratiate himself with voters to attempt to stay in power - pathetic; not one wise man amongst them. We are of course heading for a depression. As one of the above has already said there is no value creation here just gambling. We are at the whim of the banks and that is that

  • Comment number 29.

    Of all I hear- this surprises me little. Goldman are simply a money making machine- their ability to screw pounds from pennies knows no bounds.

    It wouldn't surprise me if they're offering new insruance products, collateral guarantees, currency portfolio share swapping instruments and collateral credit obligations to all and sundry. And then re-insuring their profit against 'loss' just for good measure.

    You have to admire their gall, all at a time when unemployment is rising, the housing market is stagnant, we have record low interest rates, an energy crisis is brewing and there is a risk of a deflationary environment developing.

    If we've learnt nothing then we should know this. It is all a pack of cards which can fall as quickly as can be (re) built. Poor old Lehman Bro's- if only...

  • Comment number 30.

    Is it worth asking how much of this is made from trades with AIG, i.e., how much of these profits are funded by the US taxpayer?

  • Comment number 31.

    Interesting reading:
    Inside The Great American Bubble Machine
    Matt Taibbi on Goldman Sachs

    Try searching for this article could explain a few things.

  • Comment number 32.

    Golly, good old Goldman's grabbed the gold.
    It won't last.
    Any profits bagged will lose value unles they are made to work, and they can't be made to work unless money is being churned through the system and re-distributed; and THAT will only continue to happen as long as there continue to be ups and downs, and small differentials in price worth exploiting.
    Personally, I think that everything will dip uniformly, and the only way out of the dip will be via good old graft and hard work inventing and making stuff - something these Goldman types will know nothing about.


  • Comment number 33.

    I don't think they "had to" turn to the US government - they were ordered to take TARP money along with all the other top US banks so that there would not be a sitgma attached to receiving it.

    And AFAIK they have had no support from UK Taxpayers at all.

  • Comment number 34.

    Oh great! - Suddenly all 'Bankers' are dogs dirt again. - Trouble is, this tars everyone who works in a 'Bank', including Doris who works as a part time cashier in your local Retail Bank and who would love to see a £500 bonus for reasonably meeting/exceeding her targets.
    Bonuses where merited are appropriate as they can incentivise good performance. But they should be fair, commensurate and have a ceiling - As a retail 'Banker' myself I agree that these proposed bonuses at face value are obscene and expect the backlash to (unfairly) be felt by anyone working in a Bank.
    I appreciate that profits/bonuses are taxed - so to that extent the Government gets a cut. But I would prefer to see a system where bonuses, where paid, are more tapered and then only paid in share options which can be realised over the space of 3 years, subject to a clawback provision. (Actually, similar to how my more meagre 2008 bonus will be paid).
    There is also a case dare I say it for a windfall tax!

  • Comment number 35.

    With the collapse of Lehmans, Bear Stearns and the rescue of Merrill Lynch amongst others last autumn the number of banks able to put big deals together shrunk considerably. It also led to a move to quality that often happens during periods of uncertainty.

    This allowed those left with a strong balance sheet able to

    1) Pick up more business and clients.

    2) Be able to charge those clients more as there is less competition.

    To be honest if they hadn't made shed loads of money most people would be surprised. The market has moved from a competitive market to an effective complicit Oligopoly that has pushed up prices and commissions.

    Its basic economics.

  • Comment number 36.

    I drafted this for the previous post but kind of missed the boat the way blogs work but still relevent.

    The city as an entity is not capable of learning anything at all ever, it has not the capacity for judgement or reason, it is a machine. It is not the fault of the machine Robert, how can it be?

    It is a machine that was historically a great servant to society (in the round), a melting pot for investment and re-investment to generate wealth and innovative new technologies to free us from endless hours of mundane toil in the fields or factories just to meet our basic needs.

    That same entity is now becoming a parasite run by shysters with no greater purpose in mind than self enrichment, enrichment not through the innovative development of mechanised efficient products and services to improve our lives but enrichment by manipulation of atomic level indentations on computer hard drives in such a way that they end up with more indentations on their hard drives than others, often without a product being invented or a service being provided or a commodity being delivered to the docks.

    It has become that way because we have reached a tipping point in our development where the benefits from technology and mechanisation are now so great that it is no longer a matter of developing more of it, it is a matter of sharing it more fairly and managing what we have got to be more in harmony with our resources and our beautiful home (the Earth).

    The dividend to humanity of technology, mechanisation and efficiency in food and energy production has not been felt by most people in the world, instead the huge dividend has been converted into atomic level indentations on computer hard drives and used to generate unbelievable wealth for a very few to shuffle between them upon the roulette table of global finance. The gap between rich and poor has never been greater.

    The strange thing is those select few in the ranks of the super rich never seem to be particularly happy souls to me, I see far more happiness and contentment amongst the ranks of the modest and largely silent majority. So why do they do it to themselves and why do they do it to us and why do we let them?

    I dont know the answers but I am interested in at least asking the right questions which along with others at the lobbygroup.org we hope to at least have a go at solving it.

    Join the debate.

    Jericoa

  • Comment number 37.

    Hopefully these increasing signs of recovery can mean an end to elevated stress levels and an increasing sense of optimism for the future. If nothing else because our correspondent will have less to talk about...

  • Comment number 38.

    Er......am I missing something? What's all the fuss about successful banking and bankers who know what they are doing? It wasn't GS who caused the crunch. And as for whopping "average" bonuses - how pointless an amateurish is it to talk about an "average" figure. It is clearly going to be several millions of dollars for the top execs and a few grand for those down the pecking order.

    Well done GS. Keep up the BRILLIANT work!

  • Comment number 39.


    Its not surprising they are making money out of debt, stock offerings and spreads on loans.

    Governments are issuing a lot of bonds and central banks are buying a lot of old bonds using printed money. If you are a bond trader and one arm of government creates debt and sells it to you while another arm buys debt from you then you would need to be stupid not to make money. Question: why dont the central banks just buy the bonds straight from the treasury? Answer: because they want the banks to get rich so they look less stupid for bailing them out and the banks can save some capital. Side effect is that the banks take half the profit and pay it out as bonuses.

    Also half the corporate world are having trouble rolling over their loans so naturally a lot of companies are trying to issue new bonds or do stock offerings. There are fewer banks doing this work so the banks that are still standing can really milk these real economy comnpanies and siphon off an even larger share of the overall wealth.

    Finally, the big banks get to borrow money at near 0% from the central banks and lend it at much higher rates. So naturally they make a lot of money on the spread. Of course lending in a recession is dangerous and they might not get paid back but who cares because govt will just bail them out again if that happens and the bonuses will already be pocketed.

    Government and central bank policy is for banks to make money so they can strengthen their balance sheets and start lending again. What actually happens is that the bankers take the profit handed to them and pay it out as bonuses because they are so clever. They are not that clever but the rest of us are really stupid to let them get away with it.

  • Comment number 40.

    Who's conning who?

  • Comment number 41.

    Goldman - like the other financial institutions that accepted TARP payments - had no choice in the matter. The US Fed insisted that all institutions sign up to the program in order to promote confidence and stability in the system.

    GS (along with JPM and MS) reportedly insisted they did not require the TARP money. The Fed urged them to take it to prevent runs occurring on those firms that did take the money.

    In repaying their TARP loan, GS took a hefty hit of $425m for 6 months of unnecessary finance. This cash represents a great return to the US taxpayer on their initial investment.

    I can understand why these profits have generated such commotion as they came during a period when GS were borrowing from the US taxpayer. However, it should be taken into context that it was not a required loan and that GS were never 'on their knees'.

    The 'scandalous' aspect will sell newspapers though, much more than the reality (which will sell copies of The Economist etc.)

  • Comment number 42.

    They made a profit = good (as they will pay large amounts of taxes, and will mean at least one bank is solvant)

    They pay their employees lots = good (they pay large amounts of taxes, and will spend large amounts of money - they employees of Jaguar need people to buy their cars not just rely on the govt to bail them out)

    Lets hope all the banks release equally good figures, that will be good for the economy. (their net interest margin is so high it will be hard not to have massive operating profits)

  • Comment number 43.

    You can't help but think this is Alice through the looking glass....

  • Comment number 44.

    Instead of letting banks go into administration so that debts to the likes of Goldman Sachs would not be paid, governments transferred the debts to the taxpayer's account. No surprisingly this enabled them to make massive profits.

  • Comment number 45.

    #38 Disnaymatter

    'It wasn't GS who caused the crunch.'

    Hmmm... not so sure about that. Goldman Sachs had significant sub-prime exposure and was heavily into CDOs. Two big causes of the crunch. While it managed to hedge its exposure better than some banks, many argue with sound logic that it was more by luck than judgement that GS avoided the fate of some of the other big Wall Street names. It certainly played a role in creating the crunch and the bubble that preceded it.

    GS should have been smarter. The fact that GS and other investment banks are profiting now doesn't necessarily make them especially smart either (though they're clearly not stupid). Recessions are often fertile times for banks especially investment banks. And now there are fewer of them we can expect some impressive figures from GS et al.

    If I were running a country I'd be putting a windfall tax on such profits and bonuses. The banks will squeal but they can hardly sustain any complaint. Without the public bailout they would clearly be in a big mess.

  • Comment number 46.

    Well, guys, it's going to be a tad easier for a camel to squeeze through the eye of a needle than rich guys to have much of a future after death.

    So - make hay, guys, while the sun shines.

    Because.....

    In the end.....

  • Comment number 47.

    Come on, Robert. You should know that GS did not ask for, or need, any taxpayer support in the US (and certainly not here in the UK). They were forced to take TARP funds from the Treasury in the US along with all large institutions for fear that, if only those needing support received TARP, it would mark out too clearly those Banks which were in trouble and would, in turn, lead to their coming under greater pressure.

    GS repaid the TARP at the earliest opportunity (along with nearly $500m of dividends - so a return to the taxpayer of about 7.5% annualised).

    It's not their fault they the credit crunch occured any more than it's the BBCs. And it's not there fault they're bloody good at their business. In fact, wouldn't we all have been rather better off if all Bankers had been as clever and successful as GS? Then I wouldn't be a part owner of a couple of pathetic British Banks, and the children of our country wouldn't be facing huge tax bills for the next 20 years.

    One final point - they don't pay out those bonuses through the year, so no-one's received the amounts "calculated" above. One or two bad quarters and the amounts can change substantially, and the "average" number is ridiculously misleading. Top boys get $hundreds if millions, others get $tens of millions, most get normal Bankers pay.

    And I'd rather all Banks were making profits and paying taxes than making losses and absorbing taxpayers cash thank you very much.

    Go GS!

  • Comment number 48.

    Goldman Sachs is s major shareholder of one of the biggest financial entities in the USA namely the privately owned Federal Reserve so go figure.

  • Comment number 49.

    I listened to a broker (from Hargreaves Lansdowne) on Radio 4 this morning saying pretty much the same as the guy from Smith Asset Management (quoted in Robert's piece) - that is, that Goldman should not be demonised - the guy from Hargreaves going so far as to say that Goldman had always been recognised for their ability to "get it right". They got it so right that they needed a $10bn bail out from the taxpayers - without which they would have probably been flushed away like so many other companies. The bubble that has so recently burst in such a spectacular fashion was blown up by over inflated egos as well as over inflated asset prices - and it looks like that bandwagon is starting to roll all over again. Have we learned nothing? If Goldman can turn their fortunes around that quickly, then I am inclined to think that the American taxpayer has been short changed. Buddy, can you spare a few billion...I just need it to tide me over the year end? Perhaps someone should also lend them a copy of the book just released by HSBC's Chief Exec (Stephen Green)..."Good Value: Reflections on Money, Morality and an Uncertain World",

  • Comment number 50.

    ah they must be italian then :).
    well there is always one.

  • Comment number 51.

    High risk - high return ... and makes great sense if someone else will cover the downside risk without charging you a realistic market rate.

    I said at the time, governments having much better credit ratings than banks at the time could've charged pretty much what they wanted for the debt bail outs.
    The banks could've raised the cash, by liquidating assets, at a cost - they weren't insolvent.

    But governments fell for it - avoiding the political repercussions of high repossessions, and even greater hits on house prices - and providing cheap funds to those who took the high risks, people who now profit from hose risks as the panic stops.

    The removal of bail outs except at extremely high rates and removing limited liability from banking would do much to remove excessive risk taking.

    Regulation to stop people doing something just encourages them to look for loopholes, making the price they pay if they take risks and things go wrong extremely high for them personally and their organisation would provide a less legislative more market based way to discourage such stupidity.

    But when the entire economy was based on the financial services sector and the Emperor's new clothes speculative property bubble what do you expect.
    House prices are still to high - but as they represent much of the personal wealth in the country,political expedience means realistic corrections are to be resisted.

  • Comment number 52.

    We need to be a bit careful hear as we should look at how much of this has come from placing the enormous amounts of government paper in the market. Interesting that old Warren Buffet got it right again. The other small matter is of course that GS employ on the whole very able people- not like the second raters in many of the other banks- none of whom have the embedded core values of GS. Let's hope those profits lead to big tax payments in the UK as well as the US.

  • Comment number 53.

    There's no denying that Goldman's are smart and much smarter than the average (dumb) investment banker of yesteryear.

    I have admired their ability to keep churning out the cash but there is something at the back of my mind that doesn't settle easy. Maybe its some of the rumours and conspiracy theories doing the rounds as some have alluded to here?

    A big question is that given the various bailouts to a number of counter-parties where we do know GS had positions would GS have survived without them. This is a very interesting question given the GS alumni connection that was at the top of the US administration.

    If GS have played it right and their risk analysis showed that a scenario of bank bailouts would be the case as some players in the amrket acknowledged - then its quite possible that this has been one of the greatest wealth transfers from taxpayers to a private company in history.

    I maybe wrong to surmise the above but I would like to know how these profits have been made and what contribution has come from the $1 trillion dollars that the US has recently borrowed (not forgetting the UK's debt rescue mountain).............no smoke without fire they say.......

  • Comment number 54.

    Hmm... their trading volume is immense with penny profits made on each trade. I don't know the actual figure but one trillion electronic trades per hour surely gives them an unrivalled ability to control the market - thus screwing both investors and taxpayers all at once.

    But, they wouldn't do that.

    Right?

  • Comment number 55.

    Profits, What Profits? These crooks are at it again. What they do is Declare Would be Projected Future earnings from Dodgy Investments/Loans as Profits now, Collect their Bonuses and by the time anyone realises there is no Profits, these crooks have moved on. Oh! and they have just been told they cannot be held accountable for any fraud they commit now because they are a Bank and too big to fail. Heads they win, Tails, the tax payer loses.

  • Comment number 56.

    So perhaps they dont care about reputation? They are making this kind of money at other's expense at a time of greatest weakness. Be ethical and stop doing business with them.

  • Comment number 57.

    So does this mean that Warren Buffet has made $1.5 billion?! Why isn't he running the country?

  • Comment number 58.

    Oh what joy Goldman has made money, so all is well with the world.

    Do not forget they employ some of the smartest people in the world. Please instantly forget that Enron used to have their PR machine make the same boast. Enron, who? - never heard of em.

    Who could ever remember that through a complex series of machinations they recovered more than 100 cents on the $ of their exposure to AIG. Who would care that this was made possible by the US taxpayer, 10% of whome now receive food stamps.

    Who is the US Comptroller of the Currency? Who cares, because that office is saying that Goldman has exposure to credit derivatives equal to 1,048% of its capital base. But there are no worries there because the accounting rules were changed so that there is no longer a need to value this stuff at its market value. A bit like if someone dies - just rip up the death certificate and wait for them to come back to life. Works every time!!

    What is low latency trading? Who cares? Well Goldman cares so it must be very important. Goldman cares so much that it spent money developing source code and software to give it an edge in the low latency trading business. Someone is alleged to have stolen this source code and Goldman has run to the Feds with a terrible tale of woe. Apparently this source code could be used "to manipulate markets." In other words it could be used to facilitate criminal activity. What then are Goldman doing with such stuff? No-one knows, but most certainly they would never use it to "manipulate markets" and so the world can rest easy.

    How do we know this? Because this is what Goldman has said in a New York court of law. Just to head of any communist conspiracy theories Goldman had their PR machine start to indicate that their lawyer was quite young (34 if you are interested) and may have become overcome with the exuberance of youth and over egged the pudding, so to speak. PR does not count for much in a court of law, sworn depositions have a slightly different impact.

    Why doesn´t the BBC report any of this?

  • Comment number 59.

    Goldman had mastered the art of skimming massive mounds of cash well before the credit crisis from every corner of the financial markets- oil, fees, stocks, currencies. The crisis was just a blip because it threatened their business for a few months but they were allowed to take taxpayers money to stay alive and are now back to business as usual.

    The difference now is that they have picked up the remains of Bear, Lehman etc. so their cut is even bigger.

    Unfortunately we've cultivated and supported an environment where bankers are known as masters of the universe and deserve to earn multi-million dollar salaries from private-profit activities and any losses will be taken by the lowly taxpayer, whom they probably laugh and sneer at as they buy new holiday homes and maseratis.

    Goldman pays a pittance in tax because the majority of their holdings are offshore so their business produces no good to the overall economy or to main street.

    The ironic part is that Goldmans profit rises and then the entire stock market rallies.

    This is not a green shoot. It's another yellow weed in the one-sided and rotten financial and social system.

  • Comment number 60.

    "It has recently declared that it can stand on its own feet again without taxpayers to lean on."

    As you moved swiftly on, let me repeat the last link.

    These people are incorrigible. They truly consider themselves 'The Masters of The Universe' (#5) (and others not), and unless one fully understands what sort of behaviours this entails, one haven't begun to grasp the nature of this problem, as reasoning with such people in terms of what's decent behaviour really doesn't make sense to those without conscience or empathy, and that's precisely what being good in these jobs requires, i.e. the absence of such restraining qualities.

  • Comment number 61.

    If one thinks of the earnings structure we have a pyramid.

    Hard graft proletariat at the bottom and languid aristocracy at the top. In htis case our rulers of the universe at the top of the pyramid will claim they work hard. This means about 12 to 15 hours work a day for a matter of 5-10 years after whcih their bonuses and bank balance lessen the motivation for getting out of bed every morning.

    Meanwhile our proletariat continue their miserable existence earning pennies a day for the duration of their working lives living in abject misery.

    What do our purveyors at the peak of the pyramid produce?

    They get excited shuffling numbers around computer screens in climate controled offices while their counterparts on the streets or inthe fields sweat and freeze with the seasons.

    The expecvtation in December with the crash was that the floor of the pyramid would implode. That this has not happened yet is a mere delay against the ultiomate fall of this parasittical 'profession'.

  • Comment number 62.

    Just some more evidence to back up the questions I raised in #53. I forgot about the lead story today in the FT http://news.id.msn.com/business/article.aspx?cp-documentid=3454462 (reported on a number of media sites though FT is restricted access!).

    The story about executives sellin gbig time once after the Lehman collapse and a second time after GS reported their first ever quarterly loss in December 2008.

    These executive actions don't quite chime with the expectation of making a big profit in 2009 do they, rather the reverse - so what's changed?........mmmmmmmm

  • Comment number 63.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 64.

    Well,let them have their last meal.

    It is not boom time Mr Peston, it is bang time. Not one single indicator supports the ridiculous optimism of this very silly bank. Those whom the Gods wish to destroy, they first of all make mad.

    I will bet you fifty pounds of our increasingly worthless currency that the FTSE slumps to 3500 by year end. Those who were www.notbornyesterday.org already know this.

  • Comment number 65.

    Comment #7 is bang on by allowing banksnot to mark to market they can sit on absolute garbage and pretend it is still an asset priced at par.
    Government has gifted them near zero interst rate sand they have maxed out on margins everywhere.
    This is not good new for the USA and Goldman is certainly no example to suggest all is over. With the Ex senior partner having protected them so well it wont be long till we see him return there.
    President Obama should be ashamed that he has shown such ignorance and cost the US public so dearly and he hasn't even started yet.
    Its not so much God Bless the United States of America now its God help the US Taxpayer.
    And before Crash Brown thinks he's off the hook let us remember what a disaster he has truly shown to be. Undeniably he will go down as teh worst Prime Minister in living memory and of all time.

  • Comment number 66.

    #45

    Actually GS sold off much of their sub prime holdings profitably, ie they called the market correctly.

  • Comment number 67.

    The American public and the British public have one thing in common......they're complete mugs.
    The American government and the British government have one thing in common.....they're complete mugs.
    If oil companies turned their billions of profit into vast bonuses for staff, there would be riots.
    If energy companies turned their billions of profit into vast bonuses for staff.....there would be riots.
    So what's the difference with banks?
    Just where do the public think that bank profits ultimately come from?
    If you're one of the vast majority of "peasants", you now face a future of austerity and denial of access to wealth.
    If you work in the City, your future is rosy, despite the Citys' abysmal recent record.
    Fair? Justice? Or chronic, politically dangerous elitism?

  • Comment number 68.

    This is absolutely disgusting. Yet another fine social and economic injustice our dishonest government has engineered. Shocking.

    Perhaps we should not criticise this government though, because all governments would do the same - create fake money and look to be prosperous from it. It just seems a little early for Goldman Sachs to announce fictitious (arbitrary) profits in the face of such pessimism. I can only guess that those greedy bankers are already missing their bonuses. Big shame for our country that such corruption can exist and remain completely unchecked. This kind of thing makes me feel ashamed to be British.

    Time to emigrate I think. Have these people no shame?!?!

  • Comment number 69.

    Simply proves the small investor view - when the market is good the banks get the lions share and the small investor gets a very small bit of the success (much less than the market tells you you get), when the markets are bad the banks do well and the small investor makes the losses, and when the markets are really bad the banks get bailed out and small investor gets the tax bill. Heads they win, tails they win, bankers are just risk takers with other peoples money - never their own. This is clearly an industry that needs to have salary caps applied and/or be taxed much heavier than others - as success is clearly far too easily attainable and generously rewarded for a lucky few.

  • Comment number 70.

    It's just so sad to read all these comments - just pure stupid socialism. "greed", "dishonest", "parasite".

    Government. Government and central banks are the only to blame for this crisis, and most of crises in the past.
    Read at least this recent article - http://www.timesonline.co.uk/tol/comment/columnists/guest_contributors/article6619963.ece
    Or better "Meltdown" by Thomas Woods.

    Time to emigrate? Right, try China then.

  • Comment number 71.

    Also interesting will be the 'stance' taken by the newspapers
    http://moralorder.mediumisthemess.com/blog suggests this will be an issue
    Especially of interest will be the views of the more business orientated ones

  • Comment number 72.

    Nice to see socialism working.

    Pity they can't do it for the rest of us.

  • Comment number 73.

    Feutche wrote ..It's just so sad to read all these comments - just pure stupid socialism. "greed", "dishonest", "parasite".

    Give me stupid socialism over the unfair corrupt Capitalist world we currently share. Better still, give me a Socialism that works for the people, that rewards hard work but does not lead to this obscene imbalance between rich & poor .

    What is really sad is millions of people starving in the world whilst these exploiters make their millions!

  • Comment number 74.

    [70. At 7:54pm on 14 Jul 2009, feutche wrote:

    It's just so sad to read all these comments - just pure stupid socialism. "greed", "dishonest", "parasite".]

    I think you're looking from extremes of socialism/capitalism etc. The real extreme you're missing in this article is the extreme greed involved. This half-year bonus is ten times what the average person earns in a year. If someone has the cheek to try and justify this when there are (poorly paid) people working hard to keep our society going, then I think we should laugh them out of here. Quite frankly, trying to justify this is like trying to prove that lead does not sink. Ridiculous.

  • Comment number 75.

    $3.44bn in 90 days!
    What a remarkable resurection? $3.44bn in just three months, only some months after they had to be bailed out by the tax payer. But then they had not only received cash but grandiose monetary instruments that allowed them to re-valuate rubbish and garbage.

    Not only are they making serious profits; they have also repaid the $10bn of tax payers' money already: good boys!

    Incidentally the same good boys, Goldman managers, sold $691m of their own shares between 09/2008 and 04/2009 - into a falling market. Compare this to $435 being sold by Goldman managers between 09/2007 and 04/2008, when shares were almost three times higher... which makes it a +300% increase in volume; so does that mean they do not believe in the generous offer of balance sheet cosmetics, ultra low interest rates and cash floods being sustainable and sufficiant to make holding on to Goldman shares worthwhile?

    I believe they are right!

    Carpe diem!

  • Comment number 76.

    The reason that their recent profit stinks is this: In September Goldman was on the verge of going bust - this is not rumour but fact. They, like Barclays amongst others, were saved by the Goldman alumni in the administration saving AIG and using it as a conduit to channel huge sums of money into these banks. As is now common record Goldman was a huge beneficiary. 100% pay off on their CDO contracts with AIG while making similar sums through their hedges. Ie they were paid out twice!

    Was this done to save the system? Sure it was and it worked but like so many things was done in completely the wrong way, rewarding those that did not deserve it.

    On the premise that Goldman was worth saving, which it was on the basis of its position as a/the major primary dealer in the bond market alone (with all the issuance that is now taking place), the administration could and should have insisted on an (majority) equity stake. Goldman at that juncture would have had no option but to accept. The result would be a large and ongoing revenue stream for the taxpayer and much smaller bonuses.

    However, somewhere in the negotiations Goldman managed to persuade alot of ex-Goldman officials that the present structure was best.

    I thought the recent comment from a former federal reserve member summed it up perfectly. When asked who Tim Geithner worked for he said "Goldman Sachs".

  • Comment number 77.

    murraythemug (#68) "Have these people no shame?!?!"

    No. Not the psychopaths amongst them. That's the whole point of #60. It's precisely what they're so good at. That sort of response gets in the way of their being good at what they do, so only those without shame/conscience get on. Seriously.

  • Comment number 78.

    The improved results of q2 show that nearly all the revenue gains have come in the FICC segment (Fixed Income, Currencies & commodities) & the rest from equities trading & investment in ICBC (Industrial & Commercial Bank of China).
    In the FICC segment, GS states that "credit products" have showed record growth. A detailed break-up of FICC earnings, when published, will produce a clearer picture. However, if one looks at the spiraling prices of oil in the last quarter, in spite of no dramatic demand-supply mismatch; one can hazard a guess that GS is playing the role of an unregulated index speculator again (as explained by Matt Taibbi in the Rolling Stone while referring to 2008 oil price crisis)in commodities.
    World over, speculation in the commodity markets is driving the hapless consumer nuts as prices of basic commodities , such as oil, spiral upwards in a short span of time thereby heating the economy even when the physical demand-supply balance is unchanged.
    Its always the pennies from the pockets of millions of such helpless consumers that determine the billions in bonuses of "smart executives" of manipulative investment banks like Goldman.
    There's nothing else to do than to watch this happen quarter after quarter.

  • Comment number 79.

    Hmmm,

    Not Convinced, I wonder if this has anything to do with that program a Russian was arrested for on July 4th. The DJ has been acting very strangely of late.

  • Comment number 80.

    [78. At 8:53pm on 14 Jul 2009, saltydistressed wrote:

    The improved results of q2 show that nearly all the revenue gains have come in the FICC segment (Fixed Income, Currencies & commodities) & the rest from equities trading & investment in ICBC (Industrial & Commercial Bank of China). ]

    Thank you for such a good explanation. Post is spot on.

  • Comment number 81.

    > 73. At 8:13pm on 14 Jul 2009, AnneElk wrote: give me a Socialism that works
    Sorry, there's no such thing. It just doesn't, and it's proven in theory and practice.

  • Comment number 82.

    Please stop using this ridiculously sensationalist and misleading "Average Compensation" figure!! I work at GS and I and a huge number of others there get paid nothing like that sort of money... You're surely clever enough to know that the huge amounts of money partners and top dogs of the firm receive make averages like this completely meaningless, it basically just stirring up feelings of anger when the reality couldn't be further from the truth.....Disappointing and amateur reporting from someone in your position to say the least.

  • Comment number 83.

    and this is just the money the banking mafia reports. come eer, back in the ally...got some toxic assets....you intrest-id..just let the ink dry........bada-bing...

  • Comment number 84.

    I think we're missing a word throughout this: UNDESERVED

  • Comment number 85.

    I think it is important to get one thing straight. GS was not "bailed out" by the taxpayer. They made a profit every year - last year was bad but they did not need, nor want government help. They were asked to take that money by the treasury to ensure investors and other banks and repaid the debt as soon as they were allowed. It was a confidence insurance by the US treasury. Not saying everything is perfect there...but no serious commentator would ever say GS was "bailed out" by the government. I know it makes good reading but the "average compensation" is so misleading for the average employee at GS....but I understand why it is reportred that way.

  • Comment number 86.

    Yes, that "average compensation", that doesn't make any sense at all.

    But that's the only thing people see. They don't question anything, blaming "greed" and capitalism.

    Look outside - it's not a capitalism. There's no free market. It's government and regulations.

    If it was real capitalism, real money, no regulations, but no backup from central bank, no help from taxpayers and government, if you lost - we're sorry - do you think there would be same figures?

  • Comment number 87.

    RE Comment # 24

    So you think that those who got taxpayer help should pay back 50% of profits forever? Isn't that about what everyone pays to the government anyway, whether or not they were bailed out by the taxpayer?

    New York City is almost totally dependent on Wall Street profits to pay for schools, medical care and social benefits for the poor. So any good socialist should be cheering on Goldman Sachs! Nobody in the entire company even comes close to getting as much money from Goldman as the IRS does, or the State of New York does, or the City of New York does. In fact, I'll bet no employee even comes close to what London gets or Great Britain gets.

  • Comment number 88.

    feutche (#86) "They don't question anything, blaming "greed" and capitalism. Look outside - it's not a capitalism. There's no free market. It's government and regulations. If it was real capitalism, real money, no regulations, but no backup from central bank, no help from taxpayers and government, if you lost - we're sorry - do you think there would be same figures?"

    Ach so...Are you related to LibertarianKurt of The Austrian School ;-)

  • Comment number 89.

    It is frightening how soon the lessons are forgotten
    Why are governments not forcing major changes in the way that banks and financial institutions operate? - we need an entirely new way of looking at investements including investment in public services aka JK Galbraith - Younis
    The bonus levels are obscene and entirely undeserved - these people are already extremely well paid and there are millions of people working just as hard if not harder with equally high levels of stress for a fraction of the money these people take home. Worldwide millions are starving, homeless or without even basic commodities such as water
    I cannot find words adequate to express my disgust

  • Comment number 90.

    It's not Socialism we need but, by now it must surely be obvious that it's NOT Capitalism we "need" either? (So I may not be able to own a new car every 2-3 years without Capitalism, well big deal, so what!!??)

    As many posters here argue, what Goldmans have achieved is just solid proof that our so-called leaders have failed dismally to achieve anything worthwhile for society in the last 12 months, (when they had the opportunity to so.)

    What Goldmans have done is the next best thing to an oil company polluting a vast highly sensitive environmental situation, so big they could not clean it up on their own, so got the taxpayer to pay for the clean up. And then having done that the Government weakly says, "carry on as you were, but try not to do it again." Pathetic, and you vote for useless numpties like this!

    Maybe people should just appreciate there is no nice choice on the table about how we proceed from here on in?

    If you've got any sense you will simply not borrow in the way you used to, at the max, pumped up house prices on the back of this action and in the end let it get so out of control all you could do was hope you could continue to "cover it."

    The "Machine" has started to whisper, "an end to recession, consumers spending, house prices bottomed, etc." All the usual sort of stuff to encourage "credit stupidity" in......well, the stupid really. To make you take risks that are way beyond your ability to manage. (Even so-called clever institutions like Goldman's, funnily enough, struggle to control these, so what chance do you have?) Risks so great that The "Machine" has to try and make you want to pull the wool over, showing you nice adverts on telly about foreign holidays or even foreign house buying, trying to make you dream, to make you want to live the dream. To the extent that it becomes an obsession, which you can no longer control and then Goldman's have "gotcha!" You borrow, you borrow way too much, you become a slave to debt for 25 years or more. It's fine for the first year, but then it starts to gnaw. "It" being the feeling we know all to well of being trapped. Trapped, like a slave, shackled by debt.

    Like I said Capitalism, who needs it?

    (Reality is sometimes not all that great either, I hear you say. Sure, but at least your "dream" won't turn into the inevitable nightmare and best of all you're still in control.)

  • Comment number 91.

    I echo those bloggers here who point out that the US Government 'forced' some banks to take funds even though they did not need them e.g. GS and JPMC, so as to take the 'stigma' away from those mismanaged US banks that certainly did require a bail-out.

    Whatever, I am sure that the public perception of these latest GS results will be that greed is good ... again.

    If it helps to nuture some green shoots in the public conciousness then that would be useful but I suspect it is a false dawn.

  • Comment number 92.

    Without the $13 billion that was funnelled into their coffers via AIG they would have been toast.

    Now if being paid 100% for worthless or near worthless CDO's is not your idea of a bailout.......then that's your call.

    The funds were used to stabilise and recapitalise the bank. That capital has been employed admittedly very successfully and yielded huge profits, but it came from the taxpayer and provided the platform to generate the profits that are paying these bonuses.

  • Comment number 93.

    The article 'The Great American Bubble Machine' tells the story how Goldman Sachs' leadership and partners recklessly enrich themselves and empoverish tax payers. It is a well researched article and helps to explain many of the reasons why there is so little appetite in Washington to close down tax havens. Rep Lloyd Doggett, a Democrat from Texas who serves on the House Ways and Means Committee, sums up the behaviour of Goldman Sachs: "With the right hand out begging for bailout money," he said, "the left is hiding it offshore." You can find the article here:

    http://www.rollingstone.com/politics/story/29127316/the_great_american_bubble_machine/print

  • Comment number 94.

    > 90. At 10:32pm on 14 Jul 2009, spareusthelies wrote: You borrow, you borrow way too much, .... Like I said Capitalism, who needs it?

    That's not a capitalism. Not at all. That's credit bubble inflated by government regulations (cheap credit and fractional-reserve banking system)

    > 88. At 10:04pm on 14 Jul 2009, JadedJean wrote:
    Ach so...Are you related to LibertarianKurt of The Austrian School ;-)

    well looks like it's obvious :)

  • Comment number 95.

    Look on the bright side; the US tax authorities will be getting their hands on a whole lot of cash from Goldman Sachs and its staff from now on. No doubt others will follow generating yet more cash for their government with it.

    This is in stark contrast to the UK where wealth in the form of individuals and corporations are upping sticks thanks to a looming 50% tax rate.

  • Comment number 96.

    THE BUBBLE RE-FORMS!!!

    Goldman-Sachs can't "make" money, it creates no wealth. Every dollar of its profit is a dollar less in someone elses account.

    Here we go again then....

  • Comment number 97.

    re: #95

    Sadly you are wrong. Goldman Sachs paid only 14 million US Dollars in taxes in 2008, but paid 10 billion US Dollars in bonuses for themselves in 2008, according to the article 'The Great American Bubble Machine' (see my comment #93 )
    How is this possible you may ask? Good question, it seems like a foolish tax system to me.

  • Comment number 98.

    What did we expect. The public were fooled by these crimminals. The banks have made huge amounts profiteering from zero or near zero cost money. It would have been astonishing if they hadn't made money.

    All of this of course fits into the crimminal mandate of both the UK and US governments whose plan it is to use the banking system to impoverish and control the very people who have been foolish enough to place them in power.

    The people should have been bailed out, not accessories to crimmal activity.

    So what happens next. Thet's get this clear, thet's not mis-lead people. The economic situation will get much much worse then it did before. (no i'm not being a harbinger of doom). The facts will speak for themselves. When the banks ask for more again, which they will; the government should consider those that put them there instead of discrimminatory crimminal networks that it is so determined to support.

  • Comment number 99.

    #93 invisiblehandadvisor, JJ et al

    Re. The article 'The Great American Bubble Machine'

    This story (all but) aligns itself (dontcha just love that phrase!) to the glossary of the 'Protocols of Zion' document...oh well! somebody had to mention the 'unmentionable' at some point in this discussion.

    Like I have commented previously, maybe Bernie Ecclestone (et al) have a point, albeit made in a rather ham-fisted way...there just can't be any other explanation....can there?

    Please note: I do not expound the anhilation of the 'cognitivists', just a better understanding of their behaviour and the impact that they have on society at large.

  • Comment number 100.

    Why does any of the G8 nations not employ the same people that populate GS? They could do well to recruit that type of clearly spectacular financial skills! A company on crutches a few months ago with a prominently displayed disability badge doesn't seem right now walking taller than anyone else and no longer needing the special parking bays .......

 

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