May 25

Good News from Goldman Sachs?

Wind PowerGoldman Sachs, a financial behemoth once famously referred to as a giant “vampire squid” by Matt Taibbi of Rolling Stone, has long been accused, and rightfully so, of providing no real value to society generally and existing only to maximize profits by extracting wealth from the economy, oftentimes at its own clients’ expense. While Goldman certainly has no plans to alter the way in which it does business, it recently announced plans to make an investment that flies in the face of conventional conservative wisdom. The company plans to invest at least $40 billion into the alternative energy market over the next ten years, even in the face of expiring tax credits and incentives. The company exists, and will always exist, to make money. Truckloads of cold hard cash and huge numbers of gigabytes of 1′s and 0′s. So, why is Goldman Sachs investing so much into a sector that nearly each end every Republican views as expensive and impractical? Recent statistical evidence suggests that certain alternative energy sources are closing the cost gap with traditional coal and natural gas electricity generators, and it appears that Goldman, as Taibbi argued, isn’t all that interested in politics, instead it only seeks out new sources of profit. Goldman evidently wants to be out front and entrench itself as a major player in the energy sources of the 21st century.

President Obama, for all of his flaws, has consistently been a supporter of alternative energy. He has pushed for significant commercial and residential tax credits and has made use of government funds to make low-interest loans and grants to producers and researchers of green technology and power generation. However, may of the tax credits and investment programs aimed at bolstering the infant green energy sector are set to expire at the end of 2012. It is increasingly unlikely that the programs will be renewed by a Republican controlled House of Representatives. The recent up-tick in more cheaply–and dangerously–extracted natural gas has also forced serious debate of the need for renewable and alternative energy sources onto the back burner. So, while little doubt exists as to Obama’s cozy relationship with Wall Street and the financial sector, he fearlessly remains at odds with many in his own party, as well as Republicans, who are loathed to support green technology under threats of reprisal from the immensely powerful oil and natural gas lobbies. Continue reading

Apr 09

Republican Spenders

Goldman SachsFrom the not so historically ironic yet perceptually ironic department, the great Vampire Squid itself, Goldman Sachs, is predicting that status-quo control of the Presidency, the Senate and House come November 6, 2012 would result in the most fiscally conservative federal policies in 2013 and beyond. In a recent  research report titles “US Daily : The Election and the “Fiscal Cliff,”" Goldman Sachs predicts that an Obama victory and no change in power in the Congress would likely lead to the scheduled defense and discretionary spending cuts that were negotiated last year as part of the debt ceiling agreement taking effect. They also predict that in the case that Republicans win the White House or the Senate that they would likely attempt to delay or modify the scheduled deficit reducing cuts. Moreover, Republicans would likely hold off until 2013 before they enact further tax cuts or co-called conservative fiscal policies. If Obama retains control, he will likely demand changes at high income levels prior to agreeing to any tax cut extension.

By contrast, a status-quo election (i.e., President Obama is reelected with continued Democratic control of the Senate and Republican control of the House) would imply a higher likelihood that an agreement would be reached this year, before the various policies are set to phase in or phase out. However, since the two parties currently hold very different views whether tax increases should play a role in deficit reduction, even under this scenario an extension would be difficult to negotiate before year end. While a permanent extension of the middle-income rates is possible (perhaps with a higher threshold than the President proposes) this seems less likely than a shorter-term extension lasting one year or less, as discussed below.

It won’t shock an interested observer, but it is a rather profound revelation that Goldman Sachs readily admits that if President Obama is reelected, fiscal restraint and deficit reduction is more likely than under Republican control. The reasons are fairly straightforward. It will be difficult if not impossible to negotiate a deal with Democrats to delay the scheduled defense and domestic spending cuts in the sequester if Republicans hold firm to their ridiculous position that only domestic spending should be cut while the defense budget remain untouched. It is also less likely that a long-term extension of the Bush tax cuts will be passed into law because Democrats will require some modification of tax rates for high wage earners in return. It will also be extraordinarily unlikely that Republicans will agree to any new stimulus spending.

So, if the deficit is an important issue for voters this fall, only a fool would believe that electing a Republican President would lead to that end. It must be true because Goldman Sachs says so.

Mar 14

Screw You . . .

. . . is precisely what the executives at Goldman Sachs screamed loudly and directly at anyone and everyone in response to Greg Smith’s scathing resignation-termination op-ed in the NY Times today. While a refreshing read, it is of no significance to the “culture” at Goldman Sachs. The company has operated in much the same fashion for decades and has no intention nor foresees any regulatory impediment in continuing to do so. It will continue to set the needs of its customers tangential to firm profits and infiltrate the highest positions of government to ensure things stay that way. It has profited in good times and bad, often from crises of its own making.

The reason that Goldman Sachs can continue to operate this business model is simple–there is no reason not to. It remains one of the most attractive investment firms for the world’s wealthy to park their money, and it ostensibly writes its own regulations. Whether it cares for its customers is not material–it makes them money even as it reaps larger profits for its shareholders and executives.

Perhaps Mr. Smith’s recent bonus failed to meet his expectations. Perhaps he was on the cusp of being let go for some as of yet undisclosed reason. Whatever the case, Goldman Sach’s reputation had been well documented the first day he stepped foot in its intern’s break-room and was cemented by the time he first held the hot towel handed to him by some untouchable in the executive washroom. His op-ed is not news or even newsworthy. It is an entertaining read at best.

I do know what would be newsworthy however: an executive at Goldman Sachs being indicted for fraud or securities crimes before I’m dead and buried. So, raise a glass tonight with the executives at Goldman Sachs and join them in shouting a loud fuck you to anyone who will listen, because they hold no solicitude toward Greg Smith or anyone else.