Gold/ man

Ok, so back to Goldman Sachs for a moment. It appears the firm using its new taxpayer-subsidized status to bring increased risk to the financial system, a group of House members charged Monday. Here is the letter:

"
Dear Chairman Bernanke,

In the fall, Goldman Sachs secured access to government funding by converting from an investment bank into an ordinary bank. Despite this shift, the CFO of the company, David Viniar, said last week that the company is continuing to operate as if it were still a high-risk investment bank: "Our model really never changed," he noted in a quote to Bloomberg. "We've said very consistently that our business model remained the same.
...
"

This statement appears accurate. Earlier this year, the Fed granted a temporary exemption to Goldman from standard bank holding company Market Risk Rules, allowing them to continue operating as an investment bank. Goldman and its employees have taken advantage of its new government subsidies, and the retained ability to bet big. In its most recent quarter, Goldman earned high profits of $2.7 billion on revenues of $13.7 billion, with 78% of this revenue derived from high-risk trading and principal investments. It paid out much of this revenue in compensation, setting aside a record $772,858 for each employee at an annualized rate. The company's own measurement of risk, its Value-at-Risk model, recently showed potential trading losses at $245 million a day, up from $184 million last May.

Bloomberg reports that despite Goldman's exemption from bank holding company regulations, thay have accessed taxpayer subsidies, including FDIC-backed bonds, TARP money (since repaid), counterparty payments funneled through AIG, and an implicit backstop from the taxpayer that allowed a public equity offering in a queasy market. The only difference between Goldman today and Goldman last year is that today, the company is officially gambling with government money. Ta da - "heads Goldman wins, tails I - the taxpayer - loses."

Photo of Goldman Tower in New Jersey from earthinpictures.com.