Goldman Sachs Says Sorry For The Housing and Credit Crisis
Yesterday, something remarkable happened. Someone on Wall Street apologized to everyone on Main Street.
Goldman Sachs CEO Lloyd Blankfein said he was sorry for the role Goldman Sachs played in the housing crisis:
"We participated in things that were clearly wrong and have reason to regret," Blankfein reportedly said, adding "we apologize."
Presumably, Blankfein is sorry for the role Goldman Sachs played in "cycling cheap credit." In 2006 and 2007, Goldman Sachs sold $40 billion in securities backed by 200,000 risky, exotic, and sub-prime mortgages. The company promoted the securities as triple-A rated investments - the safest kind of investing except for government bonds and T-Bills.
So, maybe Blankfein is sorry that his company is so good at wrapping up garbage and selling it as a birthday present.
Or, maybe he's sorry he didn't tell everyone (or even the company's clients) that while Goldman Sachs was selling $40 billion in securities backed by housing junk, the company secretly made a bet against the housing market. When the housing market started to collapse, Goldman Sachs' profits soared. The company managed to avoid a total meltdown with good timing and excellent salesmanship.
There are those who believe that if you're peddling junk you should buy some yourself. Of course, that isn't the way Wall Street thinks.
But I can tell you that on Main Street, the most successful small business owners would be dead in the water if they sold their customers burgers, but bought lunch for themselves at Chipotle down the street.
In other words, if you sell access to the trough for $40 billion, but don't drink from it because you think it's poison, some folks might call that fraud.
Meanwhile, Goldman Sachs is ready to kiss and make up. It's offered to put up a total $100 million per year over five years to help give small business owners better access to capital and business education. The company will contribute $200 million (over five years) for business and management education and $300 million (again, over five years) to provide loans and philanthropic support to increase access to capital for small business owners. Berkshire Hathaway CEO Warren Buffet will sit on the committee overseeing the disbursement of the cash.
That seems like a lot of money. For me, it would be more money that I'd need in several lifetimes. But for Goldman Sachs? According to the Financial Times, $100 million is the equivalent of the profits from one good trading day, and the company had 36 days in the third quarter of 2009 where it did better than that.
Not to be cynical, but you've got to wonder if this is just a cheap, easy way to get starving small business owners to submit long applications and five year business plans so Goldman Sachs can evaluate potential business opportunities.
Meanwhile, more people on Main Street are losing their jobs every day. Millions of Americans have seen their net worth annihilated. And Goldman Sachs continues to find ways to deflect the fact that this year's bonus pool might actually exceed $36 billion.
