Goldman Sachs to Employees: Pretend This Hurts

A good portion of the world hates Goldman Sachs (NYSE: GS  ) . For this, an easy solution has been found.

After making boatloads of money this year, and setting aside enough to be on track to pay employees the largest bonuses ever, CEO Lloyd Blankfein politely asked Goldman staff to stop living like modern-day pharaohs, reining in conspicuous consumption as the White House seeks to overhaul compensation.

"This is a sensitive time for us, and [Blankfein] wants to make sure that we're not being seen living high on the hog," said a Goldman executive.

This seems obvious. Almost a year after the $700 billion bailout know as TARP, Goldman can't take a breath without ridicule for its swift return to huge profits and huger bonuses. As author Michael Lewis writes, tongue-in-cheek:

Today, the sheer volume of irresponsible media commentary has forced us to reconsider our public-relations strategy. With every uptick in our share price it's grown clearer that we who are inside Goldman Sachs must open a dialogue with you who are not. Not for our benefit, but for yours.

America stands at a crossroads, and Goldman Sachs now owns both of them. In choosing which road to take, ordinary Americans must not be distracted by unproductive resentment toward the toll-takers.

Brilliant, and fair. There's no doubt Goldman holds a level of power and dominance that deserves to be poked at.

But two points here need to be addressed:

  • For what it's worth, Goldman repaid every dime of TARP funds, with interest and a slug of warrants. A Goldman press release notes the TARP investment yielded an "an annualized return of 23 percent for U.S. taxpayers." Goldman is rolling in profits largely because it avoided the insane practices of the boom years, and its competitors are either extinct or on life support. If this were Citigroup (NYSE: C  ) , Bank of America (NYSE: BAC  ) , or AIG (NYSE: AIG  ) -- still suckling away on taxpayers -- criticism would be much more deserving.
  • Goldman's quarterly and annual reports clearly state the total amount spent on compensation along with the total number of employees, making it easy for anyone to figure out how much the average Goldmanite makes. These numbers are no secret. Hiding how employees blow their bonuses isn't the point; that they're making so much money to begin with is what causes the PR problem.  

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Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. The Fool has a disclosure policy.


Read/Post Comments (34) | Recommend This Article (49)

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  • Report this Comment On August 05, 2009, at 11:39 AM, generatech wrote:

    Hmmm....

    Kinda pretending the Rolling Stone article about Goldman Sachs does count, eh?

    www.rollingstone.com/politics/story/28816321/the_great_ameri...

    Btw, my financial wiz friend likes to point out that the Rolling Stone article about GS doesn't really cover new ground but is very well written. He tells me efficientfrontier.com revealed the same long before.

  • Report this Comment On August 05, 2009, at 12:04 PM, sharkdb2 wrote:

    "Today, the sheer volume of irresponsible media commentary has forced us to reconsider our public-relations strategy. With every uptick in our share price it's grown clearer that we who are inside Goldman Sachs must open a dialogue with you who are not. Not for our benefit, but for yours."

    You arrogant SOBs! My hatred grows every day for this company, culture, and parasites who work there. If it wasn't for that "irresponsible media" GS would have spent only $500 mil to the govt for those warrants, instead they had to pay a more reasonable amount of $1.1 billion. The $13 billion laundered through AIG was extortion at the highest level. All the bonuses GS is getting this year is subsidized by the tax payer. Socialism for the rich. We work hard, we EARN it. Give me a break, you earn nothing! You steal from the productive sector every day.

  • Report this Comment On August 05, 2009, at 12:10 PM, sharkdb2 wrote:

    Yes, yes, I know Michael Lewis wrote that, but it sure sounds like something they would say.

  • Report this Comment On August 05, 2009, at 12:23 PM, gkdowntown wrote:

    Is anyone else upset that this means the GS employees will be contributing less of their earnings to the national GDP? We WANT the high income earners to spend as much as possible so that the multiplier effect brings the money down into the trenches.

    I will not gain if they keep their money in their bank accounts. I can potentially gain if they decide to redo their bathrooms and purchase various amounts of designer clothing at their local mall. If anything, GS should encourage their employees to spend and purchase American made goods and services.

  • Report this Comment On August 05, 2009, at 1:30 PM, jeffe65 wrote:

    I agree with gkdowntown; let them buy and spend all they want to; the more money in circulation the better.

    And why would we begrudge them of their earnings? Is this any worse than the automotive "bailout", only to have the bulk of the money go to the UAW??? No, let the high-earners earn and spend; that's capitalism.

  • Report this Comment On August 05, 2009, at 3:00 PM, cjb44 wrote:

    BY hiding their earnings and not spendings isn't that a bad thing? Reality check, when the rich aren't spending, everyone is hurt. Espically in New York, where resturuants are struggling because don't want to be seen at an expensive place. If I was in Goldman's shoes, I'd be flaunting the money EARNED.

    It's says, I beat the recession and if you listened to me, you could have as well.

    So go spend, live your life. If you spend your time worried about public opinion, you'll never be happy because there will always be someone jealous of you because you are sucessful.

    Of course if you are sitting on cash out of fear of the upcoming Obama tax increases...that's different.

  • Report this Comment On August 05, 2009, at 3:21 PM, brwn8484 wrote:

    What amazes me most is the continuing support of Goldman Sucks by the editors and bloggers of Motley Fool... After being thoroughly hosed financially by our political leaders, we are now again forced to accept criminal behavior as acceptable. How can anyone justify funneling over 13 billion of illegal payola to your friends and political allies while the US and most of the free world burns and smolders in financial ruin. When will we learn that the sheer weight of greed, ignorance and immoral behavior is just a tip of the ice berg and we (US) and rest of world are about to be swallowed into another financial abyss.

    The only thing that will wake up the world to the arrogant, audacious and criminal activity that is prevalent throughout our society, will be a complete financial collapse of the entire world.

  • Report this Comment On August 05, 2009, at 3:34 PM, DBrown7 wrote:

    If Goldman really wants to improve its public image, how about funneling that AIG money back to the taxpayers and I don't mean a little at a time via the taxes paid on those big bonuses.

  • Report this Comment On August 05, 2009, at 3:49 PM, TMFHousel wrote:

    DBrown7,

    I understand your argument, but maybe you can help me answer this: Why is it that so many people get fired up over Goldman getting $12.9 billion funneled in from AIG, but no one seems to care, or even know, that other banks received another $100 billion?

    Why is Goldman's acceptance of $12.9 billion "criminal," but Societe Generale's acceptance of $11.8 billion not even newsworthy? Deutsche Bank received $11.7 billion. Barclays got almost $9 billion ... why doesn't anyone scold them? Is it because there's an overall, kind of pointless, hatred toward Goldman?

  • Report this Comment On August 05, 2009, at 3:51 PM, BMFPitt wrote:

    Maybe if our last two illustrious Secretaries of the Treasury (you know, the guys who invented TARP) weren't considered to be wholly owned subsidiaries of Goldman, I might give them ore credit for repaying the TARP.

  • Report this Comment On August 05, 2009, at 3:54 PM, BMFPitt wrote:

    TMFHousel,

    I scold all of those other people from taking thier AIG bailouts, but I scold Goldman extra because the line between Goldman management and the Treasury seems suspiciously blurry.

  • Report this Comment On August 05, 2009, at 4:00 PM, NoMoeMoney wrote:

    Was that movie, The International, based on Goldman Sachs? Just asking....

  • Report this Comment On August 05, 2009, at 4:06 PM, timt100 wrote:

    How cares what they pay their employees. More importantly can we believe what they're reporting. I seem to remember Lehman, AIG, Merrill and a lot of other companies reporting all is well before we found out all was not well. I know we need these companies and they're not all going away, but these businesses and balance sheets seem way too complicated to me to confidently invest in them. I'll still to ETFs to play this group.

  • Report this Comment On August 05, 2009, at 4:36 PM, x1x2x3x4444 wrote:

    This is what I do: to deal with gasoline @ $4 a gallon, I owned stock in oil companies (XOM, PCZ).

    Prior to the Obamination, I owned health-care stocks because it was the only way I could think of to win the game of ever-increasing health care costs.

    It is the same with Goldman Sachs and the rest of the investment banksters (what they called bankers in the 1930s... bankers+gansters=banksters): the only way to win is by investing with them. Feel as if everyone is getting bailed out but you? Well, prices for many bank stocks have and are rebounding. Jim Cramer yesterday that says Bank of America will probably one day be a financial juggernaut again - not a very difficult call to make - and today the stock is up 6 or 7%.

    You might not make the world a better place and you might have to hold your nose, but at least you'll make back some of what we all lost in the (take your pick) banking/real estate/stock market/employment etc. crash.

  • Report this Comment On August 05, 2009, at 5:03 PM, plange01 wrote:

    6 months ago goldman was near bankruptcy from its high risk trading.they were saved by the US government and turned into a bank.they have not followed the rules applied to banks and went right back to the same risks as before.goldman is not to big to fail. let it fall back into trouble and let the markets deal with it not american taxpayers...the immense greed of the people behind goldman will seal its fate soon enough..taking immense risk in a depression!

  • Report this Comment On August 05, 2009, at 5:07 PM, artstuff wrote:

    As for "iresponsible media", how about TMF paying for the istockphoto.com image on the homepage so it doesn't have to display the watermark. It would only cost a couple bucks.

  • Report this Comment On August 05, 2009, at 5:28 PM, brwn8484 wrote:

    TMF housel

    I am fired up about all the other money. I have been calling my congressional reps for months to no avail. We the people are being ignored by Congress. No one has taken steps to punish the real criminals in this mess... other than a few minor players who were not protected by the political pay for play schemes and pump and dump schemes.

    But I am also fired up about goldman sucks and all the associated corruption. But they are only the tip of the iceberg... so to speak. We are seeing the results of massive levels of corruption. This is not going to go away overnight and we cannot bury our heads in the sand on this one.

  • Report this Comment On August 05, 2009, at 5:43 PM, TMFdfitz wrote:

    artstuff,

    The photo on our homepage has indeed been paid for. It's displaying an attribute that we placed on the image to give iStockphoto its due. To see what the watermarked version of the same photo looks like before it's paid for, check out this link http://www.istockphoto.com/stock-photo-728905-agony.php

    Fool on!

    TMFdfitz

  • Report this Comment On August 05, 2009, at 6:30 PM, nuf2bdangrus wrote:

    Oh, you forgot to mention the free 13 BILLION they should never have received from AIG courtesy US taxpayers. No, Goldman deserved to fail, and smaller more risk diversified firms could have taken its place. We are all losers for this outcome

  • Report this Comment On August 05, 2009, at 7:08 PM, Fliujniligui wrote:

    How fun it is for me to own Deutsche Bank shares. Its market cap is still lower than shareholders' equity. The bank, while everyone blasts and criticize GS, is just going under the radar on the profit and bonus side, because they did just fix inconsistencies at the beginning of the crisis. Ackermann just axed his wage and shown all the finance the path to take. The bank is also developing a leadership and expertise in climatic change and environmental project financial business. Finally, it did do a profit in Q1 and Q2. While GS and company are just going back to what worked well : day mass speculation, DB is just adjusting the business model and derisking the thing, at the expense of Q2-Q3 less stellar results, but at the benefit of long term sustainability and global presence.

    This is a joke, GS takes just too much place in the medias and everywhere. Let's exploit such inefficiency.

  • Report this Comment On August 05, 2009, at 7:50 PM, nulemek wrote:

    How much taxes does GS pay to the US gov?

  • Report this Comment On August 05, 2009, at 8:06 PM, babypoop wrote:

    TMFHousel,

    Goldman made sure that AIG did not go under. Had AIG been allowed to fail, we wouldn't be hearing those all important words "systemic risk." The continued existence of AIG guarantees

    systemic risk.

  • Report this Comment On August 05, 2009, at 9:00 PM, standridge wrote:

    Its funny how Paulson was running Goldman when the fairy tale investments were made, sold, and made again. Then he was appointed treas sec so he could use our money to try and clean it all up. It all still stinks to me.

  • Report this Comment On August 06, 2009, at 5:23 AM, plange01 wrote:

    to show profits the size of goldmans that have to be taking risks even bigger than before.this companys enormous greed will cause them to make mistakes again. most likely as this huge false rally falls apart in early fall.this time taxpayer will not be giving this company money.goldman is not to big to fail......

  • Report this Comment On August 06, 2009, at 9:43 AM, Keeg013 wrote:

    For what it's worth, Goldman repaid every dime of TARP funds, with interest and a slug of warrants. A Goldman press release notes the TARP investment yielded an "an annualized return of 23 percent for U.S. taxpayers." Goldman is rolling in profits largely because it avoided the insane practices of the boom years, and its competitors are either extinct or on life support. If this were Citigroup (NYSE: C), Bank of America (NYSE: BAC), or AIG (NYSE: AIG) -- still suckling away on taxpayers -- criticism would be much more deserving.

    ________________________________________

    Correct me if I am wrong but GS received money from AiG, quite a large sum of money. Also, attention has been drawn to how the software GS has developed is used to gain an unfair advantage in the markets - to the point that it is a detriment. And they just managed to skip Dec in their reporting period by restructuring their reporting periods.

    Quite simple GS has stolen everything we allowed them to steal and now it is time for them to pay the piper.

  • Report this Comment On August 06, 2009, at 10:34 PM, dockofthebay wrote:

    Not anyone mentioned the GS role in running up the price of oil while demand waned around the world and supplies were bulging. Never mind that this price spike crippled many consumers in a multitude of ways, helped to sink retailers and pushed airlines into huge losses. Maybe we were headed into a recession anyway, but the specualtive oil spike pushed the country into an even deeper one.

    Goldman Sachs could not have cared less about those consequnces, because Goldman was making far too much money pumping clients money (not to mention it's proprietary position) into oil.

  • Report this Comment On August 07, 2009, at 8:49 AM, multi007 wrote:

    Since the industrial revolution, the "have nots" have ALWAYS looked at the "haves" with contempt and jealousy. This is just magnified 100 fold now that 10% (and more in many geographic locations) are unemployed. The fact that GS is trying to be politically correct in that they are asking their employees not to throw ther money around as if there is no recession is not at all inappropriate. (as long as it's a request and not an order). I know two employees at GS and their opinion of this is "its not a bad idea. There are some employees who will go out and buy the hotest greatest Corvette / (insert high priced item here). But now is not the time to make flashy purchases". They are both very very humble to 1) have a job. They appreciate that fact regularly and in 99% of the time, pay the lunch or dinner bill when we all go out (since some of us in the party are unemployed). They too have increased their "emergency savings account" because frankly, you never know when your time will come.

    Its time we stop lambasting the employees (the front line grunts) of corporations for the woes of the executives. Besides, if you really REALLY want to go after anyone, start with Citigroup. The government still owns 35% of the company. GS has been fiscally responsible throughout this entire recession. Dont blame them that they took adventage of a interest free gov. loan. After all, people on welfare take advantage of free gov. money - and never pay it back. I dont blame the takers. I blame the givers.

  • Report this Comment On August 07, 2009, at 11:08 AM, grendeth wrote:

    Come on, everyone is upset that Goldman Sachs accepted money along with all the other banks (including some foreign banks) from AIG?. Hang on, AIG insured those worthless CDS & they had to pay up because they speculated.

    They were entitled to that funding. By the way, GS was not anywhere near bankrupt last November, they were forced to take TARP money. You are are mistaking companies like Freddie Mac, AIG, BAC and C with Goldman Sachs.

    Everyone should look at AIG & how they have sucked up about $80 Billion is government money and how they plan to pay us back. Why the heck we continue to support AIG is beyond me. If AIG was in bankruptcy court, no one would have been able to get any of their bets covered.

    GS paid the government back in full with 23% interest.

  • Report this Comment On August 07, 2009, at 2:02 PM, plange01 wrote:

    my best pick this year is up over 900% and is no where near its top. take a look at (car) i left a $50,000 job with the company in june that i had for 11 months and have made $950,000 on its stock in 10 months!thats more than its ceo gets paid!!you dont make money by working!

  • Report this Comment On August 07, 2009, at 2:44 PM, gochargers wrote:

    I read that article in Rolling Stone ... I believe Goldman Sachs has been manipulating the stock market ... that Russian programmer caught with the Goldman Sachs program admittedly was using it to manipulate the market ...

    http://www.businessinsider.com/quant-trader-arrested-for-all...

    "What's more, the theft coincides with a breath-taking decline in the automated "program" trading activities of Goldman. In recent months, program trading--batches of trades of multiple stocks initiated by computer programs--on the NYSE has been dominated by Goldman Sachs. Just three weeks ago, the NYSE reported that program trades Goldman made for its own account represented 60% of all program trading. The following week, Goldman didn't even show up on the list of program traders."

  • Report this Comment On August 08, 2009, at 8:54 AM, MTheory wrote:

    Paulson's claim that he "did not understand the retail market" of subprime while he was running Goldman is absurd if GS was making any significant money from those deals during his tenure. As CEO of Goldman, he had at his disposal the "best and brightest" to explain how loans were being constructed like grinding up a little prime-rib with a ton of dog-food to make sausages, then paying inspectors to stamp them as "prime-rib sausages" and selling them that way (see - I just explained it).

    The circumstances of AIG's bailout, whereby Goldman was the only bank represented in the room with Paulson during the discussions, would appear to be highly unusual. And why did all those banks get 100 cents on the dollar? No negotiation?

    But the more important question is the fundamental model going forward, now that GS converted to a "staid" bank, getting low-cost money from the Fed. Why are they allowed to use that "privilege" (or is it a right for them?) and continue to take high-risk gambles? Is there something economically and fundamentally wrong with that model when it has been proven that we are their guarantors?

  • Report this Comment On August 11, 2009, at 1:31 PM, Vailfool wrote:

    I really enjoyed the Rolling Stone article. Interesting take on the proposed Cap and Trade. I'm all for helping on the green movement but trading carbon credits makes no sense...unless someone wants to invent a new investment vehicle.

  • Report this Comment On August 12, 2009, at 5:31 PM, venturen wrote:

    Goldman didn't avoid the insane practices they just suckered others. Think AIG derivatives and the Subprime CMO they shorted for which they were the creators. Not many CEO had Paulson calling them asking what he should do. They are prime broker of US issues yet they can then turn around and trade the hell out of it. They are gaming the system like no other...the last 2 out of 3 tresaury secartaries have been Goldman employees and now the head of the New York Fed. They are ripping everyone off...They along with the other stupid banks should have failed...then the good banks could have taken over...there is a reason all the Investment banks were going to fail. Well we still are going to get a second shot at depression pretty soon.

  • Report this Comment On August 19, 2009, at 8:36 PM, YingandYang wrote:

    President Jefferson , said America will never need

    to "FEAR" foreign Armies ; But the Banksters ,

    The Hall of SHAME :Goldman's acceptance of $12.9

    billion "criminal," but Societe Generale's acceptance

    of $11.8 billion not even newsworthy? Deutsche

    Bank received $11.7 billion. Barclays got almost $9

    billion -Birds of a Feather -Steal togerther

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