SubscribeWell, let’s see. It paid back all the government money it got last fall, and became a bank holding company. Warren Buffett put in $6 billion during the crisis, and he’s already made $2 billion. The stock has tripled from its November low.
Only months after the Great Crisis, Goldman has had the most profitable six months in the frim’s history. It has set aside $11.36 billion in compensation and benefits for its 29,400 employees, and we know that last year, the great Crash year, it paid 953 employees at least $1 million, and 78 got more than $
5 million.
That’s enough to make everybody else hate you.
Lehman is gone, Merrill is a shrunken division of Bank of America, only traces of Bear Stearns are left, and there’s Goldman, called by Rolling Stone “a great vampire squid wrapped around the face of humanity”. Now, “great vampire squid,” applied to a venerable Wall Street house, is gonzo writing, a nice job of it, you look to it to enjoy its daring and excess. You do not expect to find some nuance, some new truth that helps you frame recent history. “Retire, go do some public service,” used to be considered a good thing. Now, to critics, it looks like seeding the government with pals who can help you make even more money.
http://www.rollingstone.com/politics/story/28816321/inside_the_great_american_bubble_machine
Certainly some of the ill will can be traced to the previous Secretary of the Treasury, Hank Paulson, who had been the CEO of Goldman Sachs. 
Why did Paulson - and Ben Bernanke - let Lehman Bros fail, and then step in to save AIG? It was said that Goldman held AIG liabilities that would have badly crippled it. The current CEO of Goldman, Lloyd Blankfein, says, “If AIG had defaulted, guess what? We would have kept the collateral from AIG and the banks we’d bought protection from. The government’s decision to bail out AIG was about the risks to the system. It wasn’t about Goldman Sachs”. But AIG was so intertwined with the whole financial system, Goldman would have suffered along with everybody else. However, you could say that if Goldman had been truly Goldman, it might have figured out some nimble way to make a profit in the disaster.
In the era leading up to the Crash of 2008, Goldman, like others, had sold toxic, leveraged mortgage backed securities. But Goldman left the party early, in 2006. Ripeness is all, said Shakespeare. Then Goldman shorted various mortgage securities indexes, betting that prices would fall, at a time when other firms were still reaping profits from selling the junk rated AA by the corrupt or inept ratings agencies.
Something feels unfinished about this whole story. In America, where comic book heroes are iconic, we want the evildoers punished, and the good celebrated. We want Batman triumphant. What would it look like if The Joker reigned supreme?
In the 1920’s, Goldman Sachs had a leveraged fund which went broke in the slide into depression. The radio comedian Eddie Cantor was among those stung, and he used Goldman Sachs as a trigger for anti Wall Street jokes. That made everybody feel better.
Now we have come through the crisis. But, we still have a mountain of debt, a threat to the dollar, and a perilous journey ahead - and yet we have not really had an outlet for the rumbling populism you can feel like a thunderstorm over the horizon. Goldman has the right CEO for a Lenten atmosphere, not the All American lineman, like Hank Paulson, but Lloyd Blankfein, who was born in the South Bronx, grew up in a housing project in Brooklyn, and went to the predominantly black Jefferson High School. His father sorted mail at night in the post office, his mother worked as a receptionist at a burglar alarm company, “one of the few growth industries in my neighborhood”, Blankfein says. Scholarships and financial aid took Blankfein to Harvard, where he was a classmate of Ben Bernanke, and then to Harvard Law School. On the way to Goldman, he left the law for a job selling gold at J. Aron & Co. Blankfein had a good sense of when to push traders to take more risk. He told FORTUNE, ” the best traders are not right more than they are wrong, they are quick adjusters, better at getting right when they are wrong.”
So far, the populist rumblings have been seen in the “town meetings” about health care, and in Obama’s falling ratings. Obama was once thought to be out ahead of the populist surge, not behind it. Blankfein has a chance to present a self deprecating, soft spoken Wall Street.
Given its history, and its diminished competition, Goldman could make money in jagged and down markets, as well as in its traditional ways.
That’s not going to make the rest of us feel better, especially when we read about rising unemployment or commercial real estate heading south, or whatever negative news is being broadcast. Whatever Goldman is going to do, we might do ourselves, if we only knew what it will be, but we don’t.
(see video elsewhere in this blog) believe that once the current stimulus has come to an end, the economy will tip back into recession. Or stands a good chance of doing so. That is because their numbers tell them the normal engine of the US economy, the consumer, is still tapped out, still in debt, still struggling. Industry is not likely to spend a lot on expansion with demand under par and more than enough capacity everywhere. So they were urging the Obama team to ready a second stimulus. 
Obama team, which controlled the language so well in the 2008 election, hasn’t maintained that control. The health care reform discussion has been complex and wonkish, leaving the field open to the “million billion trillion” voices that say, we have to stop spending so much money. Nevermind that, in the credit contraction, that money evaporated out of the private sector and had to be replaced by public spending. The appetite for such action comes from language, not computer models, and it won’t be there.
Take a look at the chart to the left, which comes courtesy of the Federal Reserve. It makes the point that private label mortgages, which are mortgages securitized by Wall Street firms, mainly investment banks, are responsible for most of the mortgage mess we are in as a nation. These are the white sections in these two related graphs. There is a lot to understand here and it is particularly damning if examined closely because it shows Wall Street to be at best incompetent and at worst criminal.
About 2.15 percent of mortgages are expected to go bad, represented by the white space on the left of the curve. Some of the government-backed and bank/thrift mortgages were a little better and some were a little worse, but they are all clustered not too far from that 2.15 percent number, which is as it should be. And remember this is during an unprecedented world financial melt-down.
The Obama Administration will tomorrow unveil its plans for a new regulatory agency with sweeping powers over mortgage and other lenders, yet the only real question is how will the banks game this system, too?
