Conspiracy Alert? Chatting with John Carney About Goldman Sachs Profit

So! Maybe you’ve been seeing the stories on the front page of the New York Times this week heralding the news that just ten months after the economy fell out from underneath us, thanks in part to the unchecked greed of Wall Street, Goldman Sachs made a huge profit last quarter. A profit so big that its employees are getting million dollar bonuses! (That part is explained here). I’ve made no secret in the past that numbers are not my strong point, and as such have turned, as I have also done in the past, to Clusterstock’s John Carney to help explain what was going on. Here’s a portion of our chat:

Me: I want someone (you) to explain to me why Goldman Sachs was able to make so much money. Is it Taibbi’s conspiracy theory at work?

John: No. Except kind of.
It’s easy.
Goldman can borrow at very low cost thanks to government.
That means they can make money off of trades other people can’t.

Me: But if Goldman can trade at low costs because of the government how come others can’t?

John: Well, some others can too.
Morgan Stanley, for instance
But Citi and BofA have much bigger mortgage linked balance sheets.

Me: So the fact that Goldman Sachs made all this money is a sign that TARP worked?
Or a sign that Wall St is as corrupt as ever?

John: Both?
Well, I mean, it’s a sign that the game is rigged, and Goldman is really good at winning rigged games.

Me: That does not make me feel better.
But is this a sign that the economy is getting better? Or business as usual?

John: Not a sign the economy is getting better, that’s for sure. If you can borrow at artificially low rates, all sorts of things become profitable that wouldn’t have been before.
So Goldman can make money even if the opportunities are thin b/c the economy sucks.

*

Feel better now? Me neither. However if one of the reasons the economy tanked last year is that the public had no idea what was going on than at least we can assist with that end of things, in so far as providing you with further links to read!

Matt Taibbi vs. the Giant Vampire Squid

Okay, This Time Matt Taibbi Nails Goldman And The Bailout

Congrats Goldman Sachs! You’re the New Symbol of Banker Greed

The Great American Bubble Machine