I don't consider myself a Goldman Sachs
Goldman, you'd think, knows this, and would tread softly around its ties to Washington, avoiding a bigger PR nightmare than it already has on its hands.
But sometimes it feels like it's purposely launching fodder at the conspiracy theorists. Case in point: Word yesterday that it wants to buy tax credits from Fannie Mae
The deal would go something this like: Fannie Mae got its hands on a bunch of tax credits over the years. But since it's light years away from profitability, those tax credits, in Fannie's eyes, are useless. Goldman, on the other hand, is making money hand over fist. By buying the credits at a discount to face value, Goldman gets to offset its tax bill, while Fannie gets cash for an otherwise worthless asset. Fannie Mae benefits. Goldman benefits. Everyone's happy.
But whether or not this is a legitimate business transaction (and it is) means squat to the pitchfork-wielders who see the situation going down like this:
"Hey, Treasury."
"Yes, Goldman?"
"Look, we just made an ungodly amount of money thanks to all the help you've given us over the past year. That means big taxes. We get irritable when non-bonus money leaves our bank account, so we've got a plan.
"I'm listening."
"We'll owe you $1.5 billion in taxes next quarter. How about this: We'll buy $1 billion worth of tax credits from you for $500 million, and in turn, our tax bill gets cut down to $500 million. Oh, heck, that's confusing. Let's cut the middleman out: We rightly owe you $1.5 billion. How about we just send you a check for $1 billion, we'll all high-five each other, throw back some shots, and call it even. Capiche?"*
"Done deal."
*I'm making these numbers up. No one knows what the final tab, or the price paid for these credits, will be, although I'd say this is a reasonable guess.
A few weeks ago, I said the public feet-stomping surrounding Goldman's deal with now-bankrupt lender CIT
Not so today. The U.S. Treasury owns essentially all of Fannie Mae. The IRS is a division of the Treasury; the Treasury secretary who took over Fannie Mae was the former CEO of Goldman Sachs; Goldman is swimming in profits due almost entirely to policies implemented by the Treasury and Federal Reserve. It doesn't get any more incestuous than a three-way deal between Goldman, Fannie, and the Treasury. That's what makes people mad. Someone should buy these tax credits; it doesn't have to, and shouldn't, be Goldman.
There are things in life that might be beneficial for both parties, but make you look like such a jerk that it's not worth doing. Haggling with an eight-year-old girl over the price of Girl Scout cookies is one. This is another.