goldman vs taxpayers (bankruptcy, loan, insurance, small business)

[floridasandy]

if cit group fails, goldman gets 1 billion dollars and the taxpayers lose 2.3 billion dollars, as written into the bailout agreement. of note, cit group was the largest minority small business lender in the country.
FT.com / Companies / Financial Services - Goldman to be paid $1bn if CIT fails

taxpayers have been fleeced and continue to be fleeced.

[tallrick]

The only way to stop the losses would be to eliminate Goldman Sachs. That is about as likely as getting control of or government back.

[floridasandy]

i guess this explains why the obama administration was not willing to bail out cit group, like all the other companies that were bailed out.

[floridasandy]

people need to ask themselves why are these deals structured so it has wall street and the taxpayers pitted against each other, with taxpayers always on the losing end......

just remember this when you are thinking about things:
when we were told that the planet would explode if we didn’t fork over a gazillion dollars to Wall Street immediately, the entire rationale not only for TARP but for the whole galaxy of lesser-known state crutches and safety nets quietly ushered in later on was that Wall Street, once rescued, would pump money back into the economy, create jobs, and initiate a widespread recovery. This, we were told, was the reason we needed to pilfer massive amounts of middle-class tax revenue and hand it over to the same guys who had just blown up the financial world. We’d save their asses, they’d save ours. That was the deal.

It turned out not to happen that way. We constructed this massive bailout infrastructure, and instead of pumping that free money back into the economy, the banks instead simply hoarded it and ate it on the spot, converting it into bonuses. So what does this Goldman profit number mean? This is the final evidence that the bailouts were a political decision to use the power of the state to redirect society’s resources upward, on a grand scale. It was a selective rescue of a small group of chortling jerks who must be laughing all the way to the Hamptons every weekend about how they fleeced all of us at the very moment the game should have been up for all of them.

Now, the counter to this charge is, well, hey, they made that money fair and square, legally, how can you blame them? They’re just really smart! (trueslant)

[Traderx]

If you sign up and read the whole article you'll discover that the FT used a little trickery in their headline. As it turns out it appears according to the story GS will get back 1 of the 3 billion they loaned CIT, so I presume that means they actually lose 2 billion.

Personally I couldn't care less whether GS makes or loses money, but lets at least keep the conversation honest. It helps to not believe everything you read either.

[floridasandy]

incorrect presumption:
Goldman would be owed the payment under the $3 billion rescue finance structure that the bank assigned to CIT in June 6, 2008, before the Treasury bought $2.33 billion of the lender’s referred shares in December.
According to the FT, if CIT defaults or goes bankrupt “it would be required to pay [GS] a MAKE WHOLE amount that totals $1 billion” under that structure. Goldman would also — always assuming here a bankruptcy filing by the commercial lender takes place — receive payment from credit insurance it holds.

the taxpayers lose the 2.33 billion.

[Traderx]

From what I've read, I don't think the 2.33 billion the taxpayers are losing has anything to do with the 3 billion Goldman loaned. Maybe I'm missing something but I don't see what the big deal is here. At best it seems Goldman was smart enough to buy credit insurance and the gov't wasn't.

Goldman’s Profit on CIT Could Rouse Critics - DealBook Blog - NYTimes.com

"This time, none of the money for Goldman will come from a government bailout. Instead, its dealings appear limited to the terms of its $3 billion loan to CIT. The loan is both secured against assets — meaning Goldman should get much, if not all, of its principal back — and hedged in the credit-default swaps market."

"But it is unlikely that all of the $1 billion would actually be paid."

[floridasandy]

this is a crooked agreement, written by a crooked administration and endorsed by another crooked administration. from the article you cited:

Part of Goldman’s potential windfall looks a bit odd, according to Breakingviews. Much of it results from what’s known as a make-whole clause that was included in the 20-year financing package Goldman put in place for CIT in June 2008. This stipulates that CIT must pay Goldman the present value of all future interest payments if the financing is terminated early.

Such clauses are featured in some debt markets, but the idea is usually to make a borrower pay for the privilege of repaying a loan early. What makes the Goldman-CIT arrangement look out of whack is that it would kick in if CIT filed for bankruptcy protection, Breakingviews says.

CIT would not be "repaying the loan early", then would be declaring "bankruptcy!"

[Traderx]

Just because in your warped mind no one on Wall Street should make money that doesn't mean this is a "crooked deal". Also the deal has nothing to do with the gov't and it was done months before the gov't got involved with CIT.

Again, this is a non event. CIT needed money badly and had to make a deal with the devil. Happens all the time. But it has nothing whatsoever to do with taxpayers getting the shaft which was your original claim. Nor does this have anything to do with the gov't bailout of CIT also a claim you've made.

[floridasandy]

so you are fine with the government picking and choosing who gets to get bailed out by the government? all of these actions have unintended consequences, which we will see.