Goldman Sachs Has Immense Profit From Selling US Debt

Unlike in the Crash of 1929 and the grinding collapse of credit creation that followed, we see little to no reforms this time around. Unlike in 1929, the Federal Reserve and the US government are both very reckless and are using all sorts of dangerous tricks to paper over one of the biggest credit collapses in the history of banking. Thanks to these ‘rescues’, we lost the last remnants of our auto industry and are far worse off than before in regards to public finances. But the gangs who created this credit bubble are doing just great, thanks to the heroic efforts of our besotted government! And so they are rewarding themselves with even bigger bonuses than ever before.

Goldman Sachs should have been forced into bankruptcy. Ditto, JP Morgan and the other top 5 derivative swap dealers. All of them were essentially bankrupted by the collapse of the AIG consortium. Instead of forcing these massive entities to vanish like all the many destructive ‘Trusts’ that vanished in 1929, instead of outlawing OTC markets and zeroing out the derivative swap markets, the US government took on over $13 trillion in potential future obligations in order to keep AIG, Goldman Sachs, JP Morgan, Citigroup, Bank of America, etc, afloat.


These parasitical operations exist for one reason only, the flood the world with excess credit while giving themselves a cut of the action. When given a choice between rescuing them and rescuing our auto industries, the answer should have been obvious: throw the piratical bankers overboard to be eaten by the sharks and save our domestic manufacturing base! Duh!


The reason why our government did the exact opposite is obvious: the gnomes who ran our entire planet’s financial system into a deep pit of darkness own our government via ‘election donation’ bribes while the US auto unions are decimated and weak and the working base has had its balls clipped and is no longer a wolf contending for power but rather, a lap dog that is easily whipped and sent away, tail between its legs.


Years and years of hatred of unions has been encouraged by our leaders, the media owners and our entire political system. This is why unionization has been on a steep downturn since its halcyon days of the 1950’s. So, let’s look at today’s news and see how the wretched crooks who wrecked everything are flourishing and how our auto industry is moving to China:

http://emsnews.wordpress.com/2009/06/21/goldman-sachs-has-immense-profit-from-selling-us-debt/

that was covertly funneled to Government Sachs.

Goldman will make profits, even if they have to burn down the world economy to get them.

http://www.alternet.org/workplace/140806/%22suck_on_our_yachts%22%3A_goldman_sachs_issues_non-apology_for_destroying_the_world_economy/?page=entire

This isn't really commerce, but much more like organized crime: it was a gigantic fraud perpetrated on the economy that wouldn't have been possible without accomplices in the ratings agencies and regulators willing to turn a blind eye. Imagine a meat company that bred ten billion rats, fattened them on trash and sewage, ground their bodies into chuck, and then sold it all as grade-A ground beef to McDonald's and Burger King, right under the noses of the USDA: this is exactly the same thing, only with debt instead of food. We're eating it, they're counting the money.
Any way you slice it, Goldman was responsible for putting tens of billions of toxic mortgages on the market, resulting in mass foreclosures, mass depletion of retirement funds, and a monstrously over-leveraged financial system that we will now all be bailing out for the next half-century or so. All of this so that Goldman could make a few billion bucks acting as the middleman in all of these deadly transactions.

Anyway, I was also struck by this phrase:

...we are proud of the way our firm managed the risk for our clients...

First of all, generally speaking, when one apologizes for having done a bad thing (like for instance destroying the world economy), it is good form to wait at least until the end of the sentence to start bragging again.

Second of all, what is particularly obnoxious about this phrase is that Goldman is bragging about the fact that it actually made money while it was pumping the economy full of explosive leverage. While companies like Lehman and Bear were dumb enough to actually eat their own rat meat, Goldman knew what it was doing and was careful to bet against the same stuff it was selling, which makes its behavior many times worse than that of other banks, not better. I get into this more in a Rolling Stone piece coming out next week, but Goldman's continual bragging about its mortgage hedges is one of the more obnoxious phenomena in the recent history of Wall Street, given that it was selling this shit by the ton during that same period.

Beyond that, Goldman's "risk management" also involved buying massive hedges on its mortgage exposure from...drum roll please... AIG. In fact Goldman was AIGFP's single largest customer; while the bank was busy flooding the world financial system with doomed mortgages, it was also busy piling bets on the back of the insurance behemoth -- $20 billion worth, to be exact. And AIG's death spiral was triggered not so much by its bets going sour, but by companies like Goldman that demanded that AIG put up cash to show its ability to pay. These collateral calls were what killed AIG last September, and Goldman was one of those creditors pulling the trigger: what makes this fact even more obnoxious is that ex-Goldmanite Henry Paulson then stepped in and green-lighted an $80 billion taxpayer bailout. Ultimately another ex-Goldmanite named Ed Liddy was put in charge of AIG, and Goldman ended up getting paid 100 cents on the dollar for its AIG debt.

June 22 (Bloomberg) -- The bond market is falling in love again with Goldman Sachs Group Inc. and Morgan Stanley and, for the first time in more than nine months, is giving these Wall Street icons a chance to close the gap with JPMorgan Chase & Co.

In the two days after Lehman Brothers Holdings Inc. went bankrupt last September, Goldman Sachs’s 5.95 percent bonds due January 2018 paid investors as much as 6.32 percentage points more than similar-maturing Treasuries, or double what they yielded a week earlier. Morgan Stanley’s bonds were even worse, widening to 800 basis points. The surge in credit costs, the most both companies have experienced, cast doubt on a business model that relied on debt-market funding.

Now, bondholders are accepting the smallest difference in yield for the New York-based banks’ bonds relative to Treasuries since before Lehman Brothers collapsed. Goldman Sachs and Morgan Stanley, which were among 10 banks that last week repaid loans from the U.S. Treasury, are emerging from the credit freeze with lower leverage and a stronger competitive position.

“They’re back on their feet,” said Joseph Balestrino, a fixed-income market strategist at Federated Investors Inc. in Pittsburgh, which manages $26 billion in debt assets and has an overweight position in Goldman Sachs and Morgan Stanley bonds relative to benchmark indexes. “We removed the excessively cheap valuations that we had in the marketplace. Things were really wide, pricing in Armageddon.”

Most Since Milken

After the Lehman Brothers bankruptcy on Sept. 15, the premium investors charged to buy the riskiest categories of corporate debt compared with Treasury bonds widened the most since Michael Milken created the market for low-rated, or “junk,” bonds in the 1980s, according to the Merrill Lynch U.S. High Yield Master II Index, which tracks data to 1986.

Morgan Stanley, which had more than $200 billion of bonds outstanding at the time, started fielding calls from investors who wanted to sell them back in the days after Lehman Brothers collapsed. Chief Financial Officer Colm Kelleher spoke almost hourly about the firm’s liquidity and funding with Group Treasurer David Wong, as well as with Tom Wipf, who runs secured financing, and Stephen O’Connor, head of collateral management, according to a person with knowledge of the situation.

The company repurchased $12.3 billion of its debt by the end of November in an effort to limit price declines, Kelleher told analysts on Dec. 17.

Perception Shift

Goldman Sachs CFO David Viniar, who was preparing to report his firm’s third-quarter earnings the day after Lehman went bankrupt, mobilized hundreds of employees around the world to comb through the firm’s funding and collateral agreements to ensure it would have enough cash available, according to a person familiar with the matter.

Spokesmen for both companies declined to comment.

A week after Lehman Brothers’s bankruptcy, Goldman Sachs and Morgan Stanley converted themselves from the biggest U.S. securities firms into banks and pledged to attract deposits, which were viewed as a cheaper and more reliable funding source than the bond market. They began relying on Federal Deposit Insurance Corp. guarantees in November to lure bondholders.

Goldman Sachs issued about $30 billion of government- guaranteed bonds from November to March, and Morgan Stanley sold about $25 billion, company reports show.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aAfpm.etB2wY