Goldman Sachs Tosses Back Bailout Money

What? A bank that can operate on its own? I didn't think we'd ever see the day.

Goldman Sachs's (NYSE: GS  ) CFO announced that the firm wants to repay all $10 billion of the TARP funds injected last October, saying that "Operating our business without the government capital would be an easier thing to do … We'd be under less scrutiny and under less pressure. "

Well, yeah. One thing's clear: Public anger is increasingly calling the shots at these big banks … as it probably should. Outrage erupted after Bank of America's (NYSE: BAC  ) Merrill Lynch rushed its bonuses out in December, Citigroup (NYSE: C  ) tried to push through a new private jet, and news leaked of a viva Las Vegas getaway for Wells Fargo (NYSE: WFC  ) . (The latter two plans were eventually scrapped.)

If Goldman doesn't need the money, why not pay it back? Holding bailout funds you don't need is like confessing to a crime you never committed. Goldman isn't completely innocent – the shareholders down 50% in the past year can attest to that -- but it's certainly in vastly better shape than its peers, as verified by Berkshire Hathaway's (NYSE: BRK-B  ) vote of confidence last fall.

It's nice to see at least one company acknowledging the downside of taxpayer aid. Bailouts shouldn't be a boon that relatively healthy companies eagerly exploit. They should be onerous and demanding, with every penny of expenses scrutinized while they're held.

One nugget from yesterday's executive compensation curbs riled me: Only firms granted "exceptional assistance" will be reined in. Shouldn't any government help qualify as exceptional assistance? We should all hope so.  

I'll be interested to see whether other less-than-bankrupt firms follow Goldman's lead. I'm not holding my breath, but who knows? Maybe this is a hopeful sign of things to come.

For related Foolishness:

Fool contributor Morgan Housel owns shares of Berkshire Hathaway. Bank of America is a former Motley Fool Income Investor recommendation. Berkshire Hathaway is a Motley Fool Inside Value selection, as well as a Motley Fool Stock Advisor pick. The Fool owns shares of Berkshire Hathaway. The Motley Fool is investors writing for investors.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 05, 2009, at 3:54 PM, bailoutbonds wrote:

    Good for Goldman -- they should give back the money to avoid the socialism coming-- Wells was forced to take the money --didn't want it and didn't need it and certainly wasn't using it to go to Vegas "on the taxpayer's dime" as one of our uninformed representatives said -- hopefully they will give it back too -- people are confused about why healthy banks were given the money -- but it was the government that needed them to take it and try to get it out into the economy -- now with the restrictions, what healthy bank is going to accept the funds and help get it into the economy? Besides -- the banks haven't come close to wasting the level of taxpayer money that Congress wastes every year --where is the outrage about that from members of Congress? And by the way -- isn't the discretionary spending Wells was going to do exactly what the economy needs? But our representatives don't understand that they should have encouraged this rather than condemned it. It is nothing more than the old mis-direction play -- "look over there Americans --those banks are wasting your money -- a million here and a million there" --while Congress gets ready to throw away billions of taxpayer dollars in their so called stimulus bill.

  • Report this Comment On February 05, 2009, at 4:18 PM, Larrymicke wrote:

    Note that GS WANTS to repay the money not that it is. Or, did I miss that.

    Part of the TARP agreement was that the receiving institutions could not repay the funds for a minimum of three years.

    And while GS is being commended now for wanting to give the money back Wells Fargo stated in the meeting that they did not want the money. Primarily for the very reasons GS is stating now.

  • Report this Comment On February 05, 2009, at 4:26 PM, barrysc wrote:

    Well stated Bailoutbonds......I am sick of all crap that is published in media, and passed along as fact.....It seems to me the Bush administration/Paulson pursaded the remaining large banks to take 'TARP' funding, after Paulson panicked and bumbled through last October and the Lehman failure. These banks are now paying the government interest on the TARP money (Wells first quarterly payment $371.5 million, US Bank $83.3 million). Wells also offered to buy the failing Wachovia (which it completed on 12/31), so the government would not have to bail out Wachovia in the Citi-Wachovia offer, which would have cost the treasury billions.

  • Report this Comment On February 05, 2009, at 4:29 PM, Earlysitter wrote:

    Or...is that GS does want to stop giving its fat cat execs their richly loved bonues?

  • Report this Comment On February 05, 2009, at 4:32 PM, Earlysitter wrote:

    or

  • Report this Comment On February 05, 2009, at 4:35 PM, Earlysitter wrote:

    Or...is it that GS does not want to stop giving its fat cat execs their richly loved bonues? Money repaid, and they cold reinstitute the bonsus incentives.

  • Report this Comment On February 05, 2009, at 5:31 PM, frauddetector wrote:

    Hey Barry, if what the media is publishing about a credit crisis is crap (you've got to love the alliteration), then why is it so difficult to get financing for anything. People can't buy cars, their credit card rates are going through the roof. It's not all crap, and the bottom line is the government handed out this money with the expectation that it would used to alleviate the credit crunch without the government being a direct lender to individual companies. But that's not what happened.

  • Report this Comment On February 05, 2009, at 6:32 PM, bailoutbonds wrote:

    hey frauddetector --maybe you should switch to Wells -- they approved my car loan --my credit card rates are not going through the roof -- of course you need to have good credit but they are lending money.

    Think about what the government is asking -- they are telling banks that a)we got you in trouble to start with by pushing you to lend to non-creditworthy borrowers (CRA) including threats to not allow new branches or acquisitions if we do not think you are doing enough volume of this type of loan. b) now you have a lot of bad loans on your books and it costs a lot of money to put up reserves and have capital to cover these bad loans. c) but we would like to give you some money so you can increase lending again to more people d) and if you do not grow loans just because people do not qualify we will criticize and punish you again. And the circle starts all over again.

    The government needs to stay out of the banking business and let the banks focus on quality loans so more of their profit goes to strengthening their balance sheet. Until that happens banks are not going to increase risk and loosen underwriting guidelines allowing more people to qualify no matter how much money the government pours into the system. TARP is just another example of why politicians are politicians and not running a business.

  • Report this Comment On February 05, 2009, at 7:38 PM, bkyoung2 wrote:

    I own Wells Fargo, PNC, JP Morgan and BB&T.

    Looks pretty good. OK

    Non need Tarp money. Tarp given but not requested by Wells and PNC. You can't tell them how much there Execs. can make or make them cut the Dividend.

    THEY DIDN'T ASK FOR THE MONEY.

    We drove the Economy into the ground by giving anerican citizens Credit when they didn't deserve it.

    So why do we have to take care of the little people when they are 50% of the problem?

    I could go on but will not.

    Brian Young

  • Report this Comment On February 05, 2009, at 7:54 PM, kamuirei wrote:

    "People can't buy cars, their credit card rates are going through the roof"

    Car loans: I wholeheartedly disagree. My sister (recent college grad) has NO credit history at all. When she first applied for a car loan these were the terms: 20k loan, 9k down, 20% interest. A few months ago she got the 20k loan at 4.5% with significantly less down.

    Credit limits: my fiance had a single credit card which she literally never used with $700 limit for years. (Which yes, helps build credit) At my insistence that she needed to build credit she applied for a new chase freedom card and received an 11k limit when her monthly income as a college student is under 600/month. During the same time frame my rates have consistently decreased and limits consistently increased.

  • Report this Comment On February 05, 2009, at 8:54 PM, arboretum wrote:

    WFC also published details of their lending out of the TARP money. They've been more than honest about everything they were forced to do. And their "Vegas Vacation" was a fairly low key (by bank standards anyway) way of rewarding the people who'd done the hard work making the loans they were supposed to make.

    I too think that credit is still too easy to get, it's just a bit harder now than it was for the last few years, where it was almost impossible to get a mortgage for a house you could afford without the broker and realtor trying to talk you into one you couldn't.

    In the interests of fairness, I own WFC. I also own BAC but wish I didn't.

  • Report this Comment On February 05, 2009, at 10:18 PM, peterjlist wrote:

    (Admiral Ackbar's voice)

    It's a TARP!

  • Report this Comment On February 05, 2009, at 11:21 PM, Stagewalker wrote:

    One of the things that gets lost in the hue and cry about the "Vegas parties" as that the convention support industry is in serious trouble and has been ever since Sorbone Oxley was passed. The consolidation to a few larger players has squeezed out hundreds of small businesses. The media focus on these meetings is creating a crisis unparalleled since the dot com bust. The people who will be hurt the most are the free lancers and minimum wage workers who must continually search for work each and every day just to feed themselves and their families.

    When the smoke clears, there will a half dozen convention support companies that control the whole industry and then watch the prices skyrocket. You think the Vegas, New York and Chicago unions are tough now, you haven't seen anything until you see what wholesale consolidation does.

  • Report this Comment On February 06, 2009, at 5:56 AM, Jakey2005 wrote:

    Good for GS for paying back the money and hopefully all banks will pay it back in the future......That being said I can't believe what I'm hearing from everyone. You all agree with more government control over these companies? Execs limits on pay? Isn't that why these companies have boards voting on that? I mean where will it end? The gov't is going to continue making up rules as it sees fit until the money is paid back and these companies will never be able to get ahead.

  • Report this Comment On February 06, 2009, at 9:20 AM, dockofthebay wrote:

    Goldman Sachs was a major player in running up the price of oil to over $145 per barrel. While millions of Americans struggled with the cost of gasoline, heating oil and virtually everything else connected to the price of oil, Goldman advised it's wealthy clients to invest (through Goldman of course) in oil futures, making life more difficult for all the rest of us and hurting the overall economy in the process.

    The law of supply and demand had nothing to do with the price rise, since supply was rising and demand was falling. Goldman is living proof that, indeed, "The enemy is us."

    There are many things good about capitalism, but Goldman is an example of capitalism at it's worst. They are basically traitors.

  • Report this Comment On February 06, 2009, at 10:58 AM, petratek wrote:

    I have been watching MS 6% Saturn Goldman Sachs Deb Bkd, street symbol DKP, for the last couple of days. It was very volatile yesterday morning where it shot up to over 17.20. However, it has been frozen at 16.12 bid, and 16.57 ask since yesterday afternoon - no activity !! Does anyone know why? Does have anything to do with what is going on?

  • Report this Comment On February 06, 2009, at 3:34 PM, dividendgrowth wrote:

    TARP's only purpose was to stop bank runs.

    If you can't see that point, you should not be dabbling in stocks at all!

  • Report this Comment On February 07, 2009, at 9:54 PM, ARJTurgot wrote:

    I think the idea was that GS was going to loan the money to businesses; plus, they are going to get government oversight, whether they pay back the money or not. Screw up western capitalism and you real should expect a few consequences.

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