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The new Vanity Fair article comparing Goldman Sachs Group to the New York Yankees – the winning team that everyone loves to hate–has Deal Journal wondering: Goldman dominates the public's ire, but what about the rest of Wall Street?
Why, for instance, does J.P. Morgan Chase essentially get a pass?
Look at them side by side. Goldman is vilified for taking advantage of the financial crisis to generate record profits. J.P. Morgan is praised for “rescuing” such troubled firms as Washington Mutual and Bear Stearns.
But consider that government-brokered sale of WaMu. J.P. Morgan received $118 billion in deposits, 2,329 branches and 43,198 employees, all for $1.9 billion. The sale allowed J.P. Morgan to expand its commercial-banking empire, while Wamu bondholders and shareholders were wiped out. However, J.P. Morgan did have to write down WaMu’s toxic mortgage assets by $31 billion and reserve against future losses.
While the deal may have helped prevent the collapse of the financial system, it was also a good financial deal for J.P. Morgan.
Goldman also has gained advantages from government assistance, such as the billions of dollars doled out in the unwinding of American International Group -backed insurance contracts. But Goldman has been blasted for soaking taxpayers.
Goldman was one of the first recipients to pay back its $10 billion Troubled Asset Relief Program funds and negotiated a price for the government warrants. J.P. Morgan has paid back its $25 billion in TARP funds, but has held off on settling the warrants until the government holds an auction to set a market price.
To be sure, taxpayers could end up getting a higher return from an auction than if JP Morgan negotiated privately with the government. And Elizabeth Warren, the TARP watchdog, has said an auction is the fairest and most transparent process.
Then, there is J.P. Morgan Chief Executive James Dimon. The CEO has publicly criticized the Obama administration’s proposal for a consumer protection agency, saying it will generate added costs for the banks that would be passed along to consumers. Still, Dimon has been mentioned (in the New York Post) as a candidate for the next Treasury Secretary and his face graces the recent cover of Forbes under the headline: “Master Banker.” Meantime, protestors rallied recently outside Goldman CEO Lloyd Blankfein's Manhattan home.
One reason Goldman might be a more convenient target for the public's angst may have to do with compensation. Because Goldman is a pure investment firm–comprised of traders and bankers–and its average per-employee compensation is a jaw-dropping $743,000, according to a Wall Street Journal analysis. Meantime, J.P. Morgan, which as the nation's largest bank, includes investment bankers, traders and, say, tellers at local branches, sports an average payout of $134,000. But at the highest levels, many top J.P. Morgan bankers and traders earn just as much as their Goldman peers.
In 2008, J.P. Morgan's four highest earners were paid $75 million in bonuses, while Goldman's four top earners, received a combined $45.9 million, according to a report this summer by New York Attorney General Andrew Cuomo. Yet, Deal Journal heard nary a peep about J.P. Morgan's bonuses.
Maybe J.P. Morgan is just lucky in avoiding the spotlight. Or perhaps the firm has been helped by admitting early on that made some mistakes during the housing and credit boom and pushing for financial reform. Goldman, on the other hand, has been criticized for showing a lack of humility. Perhaps Goldman should borrow a page out of the J.P. Morgan PR playbook.
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Goldman got bailed out indirectly via AIG, but their pay structure indicates that they don’t think so. It is beyond discussion that GS would have been like another Lehman if AIG were not bailed out. Or at least suffered the kind of real heavy loss like morgan stanley did if their positions against AIG were settled at market value. Those are facts beyond dispute. Goldman is a whore like those walking the streets, but it claims that it is a fair lady. That’s where the anger comes from.
Why does Goldman get the publics attention…….I think you hit the nail on the head when you state “Because Goldman is a pure investment firm….”; and not a bank. Even though, I don’t buy the reasons given for any of the bank bailouts, the only reason I can see for a bailout of Goldman was to save all the elitist wealth….both Democrat and Republican.
jamie dimon stole wamu and had been provided the tools and inside info that was confidential and it was horriblly abused with bondholders of wamu being destroyed and there was much more panic an fear. the lawsuits will go on for years and dimon will be deposed and another sad chapter of american history w.ill be exposed. he sat on the ny fed while trying to buy wamu and thewn took it in my opinion illegally with the help og sheila bear–and left wamu bare.
As part of the report, Mr. Kotz said his office has concluded its well-publicized investigation into whether the S.E.C.'s enforcement director, Linda Chatman Thomsen, inappropriately provided inside information to her former boss, Stephen Cutler, now the general counsel of JPMorgan Chase, amid the bank's negotiations to buy Bear Stearns in March 2008.
http://dealbook.blogs.nytimes.com/2009/12/01/sec-watchdog-outlines-internal-investigations/
It looks like Goldman is not isolated in buying off the Government.
As part of the report, Mr. Kotz said his office has concluded its well-publicized investigation into whether the S.E.C.'s enforcement director, Linda Chatman Thomsen, inappropriately provided inside information to her former boss, Stephen Cutler, now the general counsel of JPMorgan Chase, amid the bank's negotiations to buy Bear Stearns in March 2008.
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