May 8, 2009 – 5:15 pm

2009-05-07 Stress Release:

Goldman Sachs passed the FED’s stress test to see if it was adequately capitalized, with no need to raise any more cash. You have to wonder what kind of test it was when all 19 insolvent banks passed it, some even needing more capital. We will see what happens, but that’s the offical word.


2009-06-17 Goldman buys back TARP:

Goldman Sachs said it repaid the $10 billion of government money it recieved under TARP. Goldman Sach did not say it would not impinge on the taxpayer to bail it out of future wreckless miss-adventures it gets into and apparently no one in the corporate controlled financial media bothered to ask.

The Goldman Sachs Group, Inc. (NYSE: GS) today announced that it has repurchased from the United States Department of the Treasury the 10,000,000 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series H, that were issued to the Treasury pursuant to the U.S. Treasury’s TARP Capital Purchase Program. The aggregate
purchase price paid by Goldman Sachs to the U.S. Treasury for the Preferred Stock (including accrued dividends) was approximately $10.04 billion. The repurchase includes a one-time preferred dividend of approximately $425 million which will be reflected in our second quarter results. This is expected to reduce reported diluted EPS for the quarter
by approximately $0.77 per share.

2009-04-14 / Q1 Earnings:

Goldman Sachs tried to fool the market by  posting a $2 billion gain on its fiscal Q1 earnings. But  when the bloggers and financial media were done stripping the report to bare bones they found only a siphon, a conduit and orphaned offspring of various losses as the only hook on which Goldman could hang its meat:

Goldman took write-downs of $1 billion on junk assets and another $625 million on commercial real estate in its fixed income, currencies, and commodities (FICC) unit according to page 10 of the earnings report. They also report losses of $1.3 billion before taxes, $800 million after the tax benefit,

We will be conservative and give them the tax break, but we will not pretend December didn’t happen, so Goldman took write-downs for the quarter of $1.625B and lost another $800M.

The conduit referred to above is AIG. We low-balled the benefit that Goldman got from the bail out of AIG as $3B, but we now add $10B to it as we find that a total of $13B flowed throught the AIG pipeline to GSax.

Additional cash-raising involves the $28B the bank raised by issuing its own debt — taxpayer protected of course.

Goldman Sachs is preparing to return $10 billion in taxpayer funds as fast as the ink can dry on the check. But the bank, and a number of others, is quietly holding on to other forms of public support that come with virtually no strings attached.

The program has allowed Goldman to issue $28 billion in debt over the last six months.

The banksters have successfully nixed the SFAS 157 fair value of junk assets or level 3 accounting.  For now we will use the last recorded level 3 number as an estimate. With that said lets add up:

  1. Write-Downs/Charge-Offs: $8.775B + $1.625B +$0.8B = $11.2
  2. Cash Raised: $13.75B +$28.0B = $41.75B (from AIG rescue+bond sale)
  3. TARP: $10B
  4. Level III assets: $66B
  5. Loan Loss Reserves: $0.0

We now sum all the distresses to get Goldman’s current Pain Factor of  $128.95B

2009-03-25 / Cash Raising Again:

Goldman Sachs is at it again, raising cash in its own unique way, moving in and out of the shadows funnelling public money to its coffers through conduits, willing or otherwise.

2008-12-02 / Q4 Earnings:

It looks like someone over at Goldman Sachs figured out that posting a profit while taking $10 billion from the peons would not look good for the bleachers, so the company bit the bullet and cooked the books to show a fourth-quarter loss.  But the Golden gangster is still too vain to admit to a yearly loss.

The good folks over there said in their financials that they want us to use the level 3 count from their third-quarter 2008 10 Q as an estimate of this quarter’s level 3.  Okay but note that their  level 3 tide is rising fast so it’s probably a low ball estimate.

Here’s the tally thus far:

  1. Write-Downs/Charge-Offs: $7.275B + $1.5 B = $8.775B
  2. Cash Raised: $3.0B +$5.75B + $5b=$13.75B (from AIG rescue+stock sale+Buffett)
  3. TARP: $10B
  4. Level III assets: $66B
  5. Loan Loss Reserves: $0.0

We now sum all the distresses to get Goldman’s current Misery Index of  $98.525B

2008-12-02 / Con-man:

Goldman Sachs has stayed hard at it,: reapin huge rewards by  rippin off it’s own clients. This time every taxpayer in the state of California donated to the Golden billionaire boyz club, from teacher and rail road worker to movie star, one and all. Except for the movie star Govonator, who may have had a bit role in the production.

2008-10-02 / Rescue:

Warren Buffett to the rescue of Glodman Sachs, sounds weird, to be true, but it is.

Warren Buffett agreed today to invest $5 billion in Glodman Sachs via a purchase of preferred stock.

Berkshire also will get warrants to buy up to $5 billion of Goldman common shares.

2008-09-29 / Stock Sale:

Goldman Sachs followed through on it’s announced stock sale for $5B.

Goldman Sachs  on Wednesday priced a $5 billion public offering, doubling the amount of common shares it said it would sell the night before. The firm plans to sell 40.65 million common shares at $123.00 per share.

2008-09-25 / Resurrection:

As we wrote last week, the bell rings for Goldman Sachs too. This time it may have chimed for the very last time for Goldman Sachs as an investment bank. After years of burning the leverage candle at both ends the white hot profits of the investment doom have been pushed to the scrap heap of history and the new king of the mountain is deposit-banking. It is in the image of this new king that Goldman Sachs has been resurrected. <>

2008-09-17 / Q3 Earnings:

Here’s the new tally far:

  1. Write-Downs/Charge-Offs: $6.175B + $1.1 B = $7.275B
  2. Cash Raised: $0.0
  3. Level III assets: $68B
  4. Loan Loss Reserves: $0.0

We now sum all the distresses to get Goldman’s current Misery Index of  $75.275

2008-08-25 / Robin-Hooded:

Goldman Sachs has been forced to cough up cash to repurchase some of its own junk, specifically auction rate securities. Goldman was stung by a $22.5M fine and must buy back about $1.5B in auction rate notes.

2008-06-17 / Q2 Earnings:

Goldman Sachs reported credit-related write-downs of less than a billion dollars as they once again low balled estimates and then easily beat them. The write-downs that Goldman reported were $775M and hedging and other losses. They did not raise capital or even put a cent into provisions for loan losses, according to their financial statement. But the illiquid Level 3 toxins are seeping through the bank to the tune of $78B. Watch:

Goldman Sachs appears serenely above the fray, but don’t forget that at May this year its “Level 3” assets were $78 billion, more than twice its capital.

Here’s the tally thus far:

  1. Write-Downs/Charge-Offs: $5.4B + $775M = $6.175B
  2. Cash Raised: $0.0
  3. Level III assets: $78B
  4. Loan Loss Reserves: $0.0

We now sum all the distresses to get Goldman’s current Misery Index of $81.175B.

2008-06-13 / Touchable:

There are some preliminary write-down estimates coming out for the big brokers for fiscal second quarter 2008, and Goldman Sachs is in the $3B to $6B range.

2008-05-22 / Write Downs Count of a Different Sort:

We have been keeping a running tally of write-downs and other credit-related distress taken by the major banks since 2007. But here comes a write-down count of a different sort: how much in write-downs and credit losses firms have written off per wholesale banking employee.

Goldman Sachs – $4.1B in write-downs, 30,000 employees, $133,667 per employee

2008-05-14 / Sisyphus and Leveraged Loans:

In the hey day of the credit bubble and the carry trade, Goldman Sachs, Morgan Stanley, Merrill Lynch and Lehman Brothers took in mountains of money making loans for leveraged buy outs. Banks make money by lending money so fewer loans usually translates to less profits. But in the topsy turvey aftermath of the credit bubble all loans are suspect and leverage loans among the most toxic, which is why the WSJ is reporting that, banks are trying to rein in their balance sheets:

…, Lehman Brothers and Goldman Sachs are the most exposed to higher-yielding, and riskier, loans as of the first quarter: Over one-third of Lehman’s loan book is in high-yield. Goldman’s book is about half high-yield. Lehman leads the pack among its rivals with $28.7 billion of exposure to leveraged loans as of the first quarter. Goldman chopped its exposure to $27 billion from $43 billion last quarter.

2008-05-08 – Sleight of 2008-05-08 – Not Quite “On The Level”:

Minyanville reports that Goldman’s level three assets have reached 191.56% of shareholder equity. For those that have bought into the current financials rally, are you feeling better about your Goldman purchase yet?

2008-04-14 / Goldman Sachs Gives Deep Discount to Relieve Debt:

And now even Goldman Sachs is running out of steam, running out of options, and just plain trapped by the credit crisis. So, with its veneer of invincibility wearing thin, Goldman is giving deep discounts on its debt saying ”take it, just make it go away.”

2008-04-09 / Goldman Sachs Level 3 Assets Surge:

What does Goldman Sachs do when it wants to beat the street by a penny, nickel or a billion dollars? They use the magic of level 3.

2008-04-07 / Goldman’s leverage ratio continues to go up:

With the financial industry scrambling to de-leverage their entanglement with debt securities, mostly held with borrowed money, Goldman Sachs is going the other way with its leverage ratios. Defiant or desperate, we will have to wait to see.


Mish points out something provocative about Goldman’s earnings:

“… commercial real estate loans that were moved from Level 2, where assets are valued in part using market prices, to Level 3.”

Goldman has $873 billion in assets. That means Goldman moved $8.73 billion in commercial real estate loans from Level 2 “Mark To Model” to Level 3 “Mark To Fantasy”. Something tells me Goldman did not like the answer their model was giving them.

That’s one bullet temporarily dodged with the usual disingenuous legerdemain. You can run but you can’t hide, boyz.


Goldman Sachs low-balled its earnings estimate, then reported that its income was halved from the year before. The hits included subprime mortgage related losses to the tune of $2B:

The bank made a net loss of $1bn on residential mortgage loans, a result of the ongoing sub-prime mortgage crisis. It also made a loss of another $1bn on some low-grade investments.

Immediately after that, the Golden one got (are you sitting down?) handed an upgrade from analyst Alexander Protsenko of Wachovia Securities. You can forgive for asking what Alex was paid for it, but that’s normal business procedure Wall Street:

…the company has a superior capital position among its peers and its AUM business is well positioned for either risk markets or liquidity. The exclusion of Bear Stearns from the competitive marketplace is expected to benefit Goldman Sachs going forward, the analyst adds.

No one knows anyone’s capital position. That was part of the original scam, Alex. And the take down of Bear Stearns, rather than aiding Goldman Sachs, portends the fate of it.


And the bell tolls too for Goldman Sachs. Today the planet’s greatest two-timing inside trading financial powerhouse just saw the monster of its making (and others) get $3B closer.

The bank’s $3bn write­down will be based partly on the declining value of its 4.9 per cent stake in Industrial & Commercial Bank of China (ICBC), which is held separately on Goldman’s balance sheet.

The $3B will almost certainly be followed by bigger and better write-downs. Whether or not it was supposed to, the steroid-injected investment house is slowing down, like an open field sprinter running out of gas. The weight of a $3B write-down doesn’t imply that the credit crisis will take down the bank, but the pack is catching up, and if they can catch Goldman Sachs who can they not catch?

The $3B in new write-downs updates the running total to $5.4B.


For Goldman Sachs, the downgrades keep coming. Last month it seemed that it would take a specialized volatile investment vehicle or a VIE to take down the Golden Godfather, but now it looks like the usual suspects will make a good showing for themselves:

The firm expects Goldman to report inventory mark downs totaling almost $5B in in the 1st half, including $3.5 billion in Q1, due to leverage loans, CMBS, and principal investments, including ICBC and SMFG and other equity investments.

What we are really interested to see is the exposure Goldman has due to the leverage on its own balance sheet. Is it reasonable or does it more closely resemble the 40 to 1 nature of Lehman? We will have to wait until March 18 to find out.


Bloomberg points out another reason Goldman’s nose is likely not as clean as you might think based on their write-downs so far:

VIEs may contribute to another $88 billion in losses for banks roiled by the collapse of the housing market, according to bond research firm CreditSights Inc. Goldman, which hasn’t had any of the industry’s $163 billion in writedowns, said last month it may incur as much as $11.1 billion of losses from the instruments.

Goldman, which earned a record $11.6 billion in the year ended in November 2007, said it avoided writedowns by setting up trades that would profit from a weaker housing market. Now the threat is $18.9 billion of CDOs in VIEs, the firm said in a regulatory filing on Jan. 29. Goldman spokesman Michael DuVally declined to comment.

VIE’s are yet another alphabet-soup three-letter-acronym that simply stands for “off-balance-sheet vehicle” (and hence, liability). We talk more about them over at our Citigroup entry.

Mish also has a nice rant on this subject and the above article.

$11.1B in losses from these plus some 20% losses on $26B of leveraged loans would come to an additional (approximately) $16B in further write-downs.

Numbers like that would easily wipe out Goldman’s ’07 earnings. Entirely.

So, yeah, we’re not exactly ready to go long the Golden boys of finance just yet.


Investment banks now face around $197 billion in exposure to leveraged loans used to back big buyouts in 2007, adding inestimable stress to their efforts to extricate themselves from the credit crunch. Was it worth it?

Not for Goldman Sachs. In addition to the $2.4B we now see they have a whopping estimated $26B exposure to leveraged Loans they made during the bubble binge.


Goldman is an “interesting” case. The firm has only written down about $2.4B related to subprime, a number which was supposedly larger on a gross basis, but which was effectively reduced by hedging. Deutsche Bank figures there are remaining exposures of $1.8B in subprime CDOs, and $2.9B in subprime RMBS.

The bank’s own Q3 10K figures give $2.9B for CDO exposure.

In counterparty-risk land, Goldman reportedly has in excess of $23B in exposure to AA-or-lower counterparties. That comes to about 70% of tangible equity according to Dec. 2007 figures. Thus we reckon we have yet to see most of how the roiling of insurers and tottering of other counterparties involved with mortgage securitization has impacted Goldman Sachs.

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