‘The Goldman Gang Rides Again’ (Part One)
- Editorial Commentary -
September 17, 2009 (FinancialWire) (By Mark Faulk) — At a banking conference in Frankfort, Germany on Wednesday, Goldman Sachs (NYSE: GS) CEO Lloyd Blankfein took what Reuters’ writer Edward Taylor described as a “hard line on bankers’ compensation.” According to Blankfein, “Compensation continues to generate controversy and anger, and, in many respects, much of it is understandable and appropriate. There is little justification for the payment of outsized discretionary compensation when a financial institution lost money for the year. Therefore, I and all other Goldman executives have decided to return 90% of all compensation received over the last ten years, which will make many of us merely rich as opposed to obscenely rich.”
Okay, I made that last part up. Of course, the key phrase in Blankfein’s comments was “when a financial institution lost money,” which exempted Goldman Sachs and fellow mega-banks JPMorgan Chase (NYSE: JPM), Wells Fargo, Bank of America (NYSE: BAC), and Citigroup (NYSE: C), all of whom reported healthy profits in their most recent quarters. Of course, Citigroup and Bank of America made the loin’s share of their profit by selling off assets, but then, a profit is a profit.
In all fairness, Blankfein actually did forgo any bonuses for 2008, but still managed to pocket a healthy $42.9 million paycheck for the year, and was the highest paid executive on Wall Street. Not bad for the head of a company that was teetering on the verge of collapse only a year ago, begging for billions in handouts from tax money paid by Americans who earn an average of $35,000 per year, less than Blankfein takes home for two hours of work.
But now, it’s 2009, a new year, and Goldman Sachs is preparing to pay out record bonuses yet again. Estimated at $18 billion for the year, or around $600,000 per employee, they are making the obscene rich even richer while America is still adrift in the worst economy since the Great Depression. On Wall Street, it’s business as usual, and last year’s histrionics are nothing more than an overly dramatic blip on the radar. Thanks for the loan, America, and see you in the Hamptons.
Blankfein isn’t entirely insensitive to the plight of Main Street, through. According to an article last month in the New York Post, he warned employees not to spend their bonuses on “big lavish purchases, hoping the move would avoid the spotlight and any added potential negative attention.” Unfortunately, though, the memo apparently didn’t make it to some members of the Goldman Gang, including Blankfein’s own wife Laura, and Susan Friedman, wife of Goldman executive Richard Friedman, who reportedly were angry because they didn’t receive preferential treatment at a charitable designer clothing sale in the Hamptons. According to witnesses, Laura Blankfein said that she “wouldn’t stand in line with people who spend less than me,” and told the event’s organizer “You have lost so much money because of this…Why should we be treated like the $650 donors?”
Another person who must have been absent on the day Blankfein’s memo went out is partner and managing director Richard Kimball, Jr. Another Post article this week said that Kimball had been partying until all hours of the night at his Southampton summer rental property. Neighbors said that Kimball was that playing loud music, with “screaming and shouting and taxis coming in and out at all hours.” Another neighbor reported seeing tow or three guys hanging out at Kimball’s pool with “a lot of topless girls.”
And this was less than two months after the wife of former Goldman hedge fund trader Ray Iwanowski was arrested for drunk driving when she drove her BMW into a tree near their home in East Hampton.
So much for low profiles.
The questionable public displays seem symptomatic of the Goldman Gang’s sense of entitlement, and stand in sharp contrast to Blankfein’s comments at the Frankfort banking conference that corporate bonuses are important in attracting and retaining top talent, but that “misapplied, they can also encourage excess.” The Goldman executives and their families seem to have a collective attitude that is closer to that of celebrities in the world of entertainment than it is to white-collar businessmen, with bank accounts to match.
Not only is Blankfein’s sincerity about reining in executive excess suspect, so is Goldman’s seemingly remarkable turnaround. Their profits were aided by over $60 billion in taxpayer subsidies. While they (and the Obama administration) trumpet Goldman’s plan to pay back $10 billion in federal TARP funds, there is little mention of the $13 billion they received from the AIG bailout to cover every penny of their losses in that company, or the $28 billion in low interest loans issued with the backing of the FDIC.
Look for the concluding Part Two of Mark Faulk’s “The Goldman Gang Rides Again”, coming soon via FinancialWire(tm). Readers are also invited to follow “The Faulking Truth Blog” at Investrend Weblogs (http://www.investrendweblogs.net) and to visit the original Faulking Truth web site (http://www.thefaulkingtruth.com).
Mark Faulk, author of “The Naked Truth: Investing in the Stock Play of a Lifetime”, (http://www.thenakedtruthbook.com) has written over 150 articles on the topic of financial reform and naked short selling since 2004, and has logged hundreds of hours in radio and television interviews. For over five years, he and a small group of dedicated activists have been educating America about the imminent danger of allowing rampant fraud to continue. In his very first article on The Faulking Truth website on March 19, 2004, he coined the phrase “financial terrorism”, which has come to epitomize the culture of greed that dominates Wall Street. His articles have been reprinted or excerpted in numerous major publications, including The Huffington Post and Financial Wire(tm), as well as financial journals such as the prestigious Capco Journal of Financial Transformation. In the fall of 2009, he will complete work on a major documentary about financial fraud, due to be released in December, 2009.
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