Goldman Sucks

Some of you may have noticed the story last week about Goldman Sachs. Rather than scaling back and hiding in the shadows whilst their profession goes down the toilet, Goldman has chosen direct a large turd in the face of the public that has subsidised the banking system. The reappearance of huge profits for the world’s number one rated investment bank is not all that surprising considering the strength of its Fixed Income and Commodities businesses. No, rather, what might come as more of a surprise is the sudden reappearance of huge bonuses to their bankers. Sure, they’ve done well in the “current climate” to make such profits but that’s just it: the “current climate” should really have signalled to them that it’s really not the employees that deserve the pay-off.

The fixed income and commodities sectors are historically the most competitive markets in banking. Those of you with a basic understanding of economics will realise that this is somewhat of a contradiction in terms; rarely will you see very competitive market and huge profits allied closely. The old adage is that high competition will compete away any economic rents there for the taking and everyone will make enough to “get by”. Now, whilst GS and all the other banks have done more than merely “get by” in those markets, of late, GS’s competitors are being flushed away into our proverbial toilet of a financial system thus allowing GS to charge higher margins on

A GS banker might say: why should we have any moral or social obligation to the state? We weren’t bailed out by the government and we’re doing just splendidly thank you very much! Well, that’s not the point morons. Did you happen to see GS’s share price before the massive injections into the other banks?

That nice little section with a heavily negative gradient, was going nowhere but south until the government was forced (in part, by GS’s actions) to step in and bailout GS’s competitors.

In any case, I think it’s a bit rich that GS is continuing to “dole out” (no irony intended) these huge packages to the very people that contributed to the very fragile financial market in the first place. I’m just saying a little tact might have been best.