'World News' Charges Goldman Sachs with Making Too Much Profit
Plenty of people had plenty of misgivings back in late 2008 about the government involving itself in the private sector through the TARP program. Now some of them are coming true.
A July 13 ABC â€śWorld News with Charles Gibsonâ€ť segment was critical of the ability of investment banking giant Goldman Sachs (NYSE:GS) to adapt to market conditions, even though Goldman is thriving.
â€śThe big question tonight with Goldman Sachs expected to announce huge profits in this economy â€“ just how did they do it?â€ť ABC correspondent David Muir said.
Seamus McMahon of McMahon Advisory told ABC they made â€śbetsâ€ť that paid off. However, according to Muir, the notion that Goldman Sachs received TARP money and made money at the same time is something to question.
â€śBut many Americans might say we fueled those profits with taxpayer money,â€ť Muir said. â€śThe Treasury spent more than $200 billion to bail out financial institutions. Ten billion went to Goldman Sachs.â€ť
â€śWhy are they allowed to make this kind of money and are we the taxpayers going to see our money back,â€ť McMahon said.
Goldman repaid its portion of the TARP last month, after jumping through federal government hoops to do so. And there is even some question if the investment bank had been forced to take the money from the government. Still ABCâ€™s Muir second-guessed the concept that a private company should even be allowed to gamble.
â€śGoldman Sachs has paid that $10 billion back to the government and will now pay taxes on all of these new profits,â€ť Muir said. â€śBut even with that loaned money returned, the next question will be is it wise for any one bank to be taking such huge risks. After all, huge gambles are what pushed banks to the brink in the first place.â€ť
â€śItâ€™s a bit worrisome because in the marketplace, we realize that profits of that sort require large risks which have been taken,â€ť Geisst said.
But as Muir noted, Goldman had been profitable at other means of generating money as well.
â€śBut Goldman Sachs has long had a history of taking risks and is still profiting from that strategy, even in this recession through trading, high fees from selling stocks and bonds and buying selling volatile commodities like oil,â€ť Muir said. â€śOther banks including Citigroup and Bank of America are still struggling, which is why on the flipside many analysts say you canâ€™t frown too much on Goldmanâ€™s huge profits.â€ť