5 ms·

Goldman Sachs loses $428 million in third quarter

60 points by acak 15y ago

sp332 15y ago
Why are people happy about this? I thought Warren Buffet was supporting higher taxes on rich people. And GS is already moving toward closing up the "investment banking" part of their business and becoming a normal "bank holding company". Who are they hurting?
- leverage 15y ago
  Actually, GS will never be a "normal" bank holding company. Their commercial banking business is open to a very select number of clients, and will stay that way. GS became a BHC because they would have access to the Fed's emergency funds in case of another major crash -- a line of defense. GS hardly makes any money from their commercial banking arm. GS's core business will remain their cash cows: Investment Banking, Securities, and Asset Management (in that order). GS will NEVER wind down their Investment Banking arm, in which GS is king above all other banks (closely followed by Morgan Stanley). GS's core businesses actually did quite well relative to the rest of the industry. This loss is really just "on paper", coming primarily from the Private Equity portfolios. GS has a reputation for aggressively marking-to-market, and their PE portfolio lost a lot of value on paper because the equity markets shit the bed this quarter.
astrodust 15y ago
I wonder how much of this is attributable to bonus payouts.
- paperwork 15y ago
  General bonuses don't get payed out until end of the year. The actual disbursement doesn't usually occur until well into the first quarter, although the record books probably reflect the bonuses in the fourth quarter (not sure about this).
  - suking 15y ago
    Looks like they might amortize the bonuses over the year though?
- acak 15y ago
  If you're looking for compensation information from the company's quarterly statement: Compensation and Benefits: The accrual for compensation and benefits expenses (including salaries, estimated year-end discretionary compensation, amortization of equity awards and other items such as benefits) was $1.58 billion for the third quarter of 2011, a 59% decline compared with the third quarter of 2010. The ratio of compensation and benefits to net revenues for the first nine months of 2011 was 44.0%. Total staff levels decreased 4% compared with the end of the second quarter of 2011. http://www2.goldmansachs.com/media-relations/press-releases/current/pdfs/2011-q3-results.pdf http://www2.goldmansachs.com/media-relations/press-releases/...
nextparadigms 15y ago
Obama better get out quickly before he gives them one last bailout.
- melling 15y ago
  Obama made money lending to Goldman. They paid all their loans back with interest. http://dealbook.nytimes.com/2009/06/17/jpmorgan-repays-treasury-as-tarp-exits-continue/ http://dealbook.nytimes.com/2009/06/17/jpmorgan-repays-treas...
  - veyron 15y ago
    The article only says that JP Morgan paid back the loans with interest. Did GS actually pay interest on the loans? Also keep in mind the returns also reflect stock appreciation (and buybacks of warrants)
    - alttag 15y ago
      From TFA: "Goldman said it paid a one-time dividend of $425 million on its preferred stock." (Off of a "loan" of $10 billion USD.) The TARP moneys weren't "loans" in the traditional sense, but equity purchases or preferred shares, which allowed U.S. Treasury to impose some significant restrictions on how the company operated.
  - alttag 15y ago
    Yes, Goldman paid back (with what looks to be about 4% interest), but the total expenditures of TARP have not yet been recovered, and are still a significant loss. From wikipedia [1]: Of the $245 billion invested in U.S. banks, over $169 billion has been paid back, including $13.7 billion in dividends, interest and other income, along with $4 billion in warrant proceeds as of April 2010 1: http://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program http://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program
    - melling 15y ago
      On that page, they list the participants, the amounts borrowed, and how much they paid back. http://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program#Participants http://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program#P... It looks like most of the money has been paid back. GMAC is one of the big outstanding exceptions. (+ 45 45 40 25 25 8.1 10 10 7.579 6.6 4 3.555 3.389 3 3 1.23)
chris_dcosta 15y ago
I doubt if they "lost" anyting. They are probably writing-down something so that next year will be a bumper harvest.
- deleted 15y ago
  [deleted]
ck2 15y ago
revenue slumped 60 percent So bonuses are going to be 60% lower, right? (not likely)
- sp332 15y ago
  As acak pointed out above, they are 59% lower. http://www2.goldmansachs.com/media-relations/press-releases/current/pdfs/2011-q3-results.pdf http://www2.goldmansachs.com/media-relations/press-releases/...
- cims 15y ago
  I have difficulty understanding the negative attitude people have towards bonuses in this case. Are you a Goldman shareholder who feels that the bank is performing so poorly that its employees don't deserve bonuses? And when you refer to bonuses, are you referring to bonus pay-outs to all employees or just those connected with the financial losses? Just trying to understand this perspective because it seems very bandwagony.
  - squishi 15y ago
    1. When banks loose money they shouldn't get bailed out. 2. The Bonuses come from bailout money. 3. If the banks want bailout money they should work as civil-servants(and get an average salary) and not pretend that they are winners(like traders or hedge funds - who get no bailouts, when they loose they really loose). Bankers lost money, and caused a major financial crisis so they should Loose their bonuses! We have no capitalism right now. we have Lemon socialism.
    - cims 15y ago
      I do understand this sentiment, to an extent. The reality is that all the banks participate in the same job market and need to compete to attract and retain talent. If a bank (regardless of bail-out status) does not compensate employees competitively, it will fail to attract and retain the necessary talent and as such fail to perform. The only way a bank could still succeed without paying bonuses is if all banks did the same thing. Don't hate the player, hate the game.
owlmusic 15y ago
My heart bleeds...
cpeterso 15y ago
I misinterpreted this article title as "Goldman Sachs "misplaces" $428 million".
- wmf 15y ago
  That's such a small amount it wouldn't be newsworthy.
heyrhett 15y ago
Cry me a river.
gcb 15y ago
They found out that loosing money and then getting bailed out gives even more profits.
monochromatic 15y ago
Anything less than $50 billion rounds to zero. http://www.smh.com.au/business/lot-of-bull-about-goldman-20090728-dzrl.html http://www.smh.com.au/business/lot-of-bull-about-goldman-200...
raheemm 15y ago
Q1 profits: $2.7 billion Q2 profits: $1.0 billion Q3 profits: -$.5 billion Unless they lose $3.2 billion in the 4th quarter, they will still be plenty profitable.
1010011010 15y ago
Not enough.
chrisbennet 15y ago
It's a bit like a business that takes horrible risks with fire. The business burns down and the fire takes out most of the town. The business borrows money from the town to rebuild itself and pays what it borrowed back with interest. How do you think the rest if the town's citizens feel toward the fabulously wealthy business owner when he states: "I paid you back with interest!"

60 points by acak 15y ago

sp332 15y ago

Why are people happy about this? I thought Warren Buffet was supporting higher taxes on rich people. And GS is already moving toward closing up the "investment banking" part of their business and becoming a normal "bank holding company". Who are they hurting?

leverage 15y ago
Actually, GS will never be a "normal" bank holding company. Their commercial banking business is open to a very select number of clients, and will stay that way. GS became a BHC because they would have access to the Fed's emergency funds in case of another major crash -- a line of defense. GS hardly makes any money from their commercial banking arm. GS's core business will remain their cash cows: Investment Banking, Securities, and Asset Management (in that order). GS will NEVER wind down their Investment Banking arm, in which GS is king above all other banks (closely followed by Morgan Stanley). GS's core businesses actually did quite well relative to the rest of the industry. This loss is really just "on paper", coming primarily from the Private Equity portfolios. GS has a reputation for aggressively marking-to-market, and their PE portfolio lost a lot of value on paper because the equity markets shit the bed this quarter.

astrodust 15y ago

I wonder how much of this is attributable to bonus payouts.

paperwork 15y ago
General bonuses don't get payed out until end of the year. The actual disbursement doesn't usually occur until well into the first quarter, although the record books probably reflect the bonuses in the fourth quarter (not sure about this).
- suking 15y ago
  Looks like they might amortize the bonuses over the year though?
acak 15y ago
If you're looking for compensation information from the company's quarterly statement: Compensation and Benefits: The accrual for compensation and benefits expenses (including salaries, estimated year-end discretionary compensation, amortization of equity awards and other items such as benefits) was $1.58 billion for the third quarter of 2011, a 59% decline compared with the third quarter of 2010. The ratio of compensation and benefits to net revenues for the first nine months of 2011 was 44.0%. Total staff levels decreased 4% compared with the end of the second quarter of 2011. http://www2.goldmansachs.com/media-relations/press-releases/current/pdfs/2011-q3-results.pdf http://www2.goldmansachs.com/media-relations/press-releases/...

nextparadigms 15y ago

Obama better get out quickly before he gives them one last bailout.

melling 15y ago
Obama made money lending to Goldman. They paid all their loans back with interest. http://dealbook.nytimes.com/2009/06/17/jpmorgan-repays-treasury-as-tarp-exits-continue/ http://dealbook.nytimes.com/2009/06/17/jpmorgan-repays-treas...
- veyron 15y ago
  The article only says that JP Morgan paid back the loans with interest. Did GS actually pay interest on the loans? Also keep in mind the returns also reflect stock appreciation (and buybacks of warrants)
  - alttag 15y ago
    From TFA: "Goldman said it paid a one-time dividend of $425 million on its preferred stock." (Off of a "loan" of $10 billion USD.) The TARP moneys weren't "loans" in the traditional sense, but equity purchases or preferred shares, which allowed U.S. Treasury to impose some significant restrictions on how the company operated.
- alttag 15y ago
  Yes, Goldman paid back (with what looks to be about 4% interest), but the total expenditures of TARP have not yet been recovered, and are still a significant loss. From wikipedia [1]: Of the $245 billion invested in U.S. banks, over $169 billion has been paid back, including $13.7 billion in dividends, interest and other income, along with $4 billion in warrant proceeds as of April 2010 1: http://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program http://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program
  - melling 15y ago
    On that page, they list the participants, the amounts borrowed, and how much they paid back. http://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program#Participants http://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program#P... It looks like most of the money has been paid back. GMAC is one of the big outstanding exceptions. (+ 45 45 40 25 25 8.1 10 10 7.579 6.6 4 3.555 3.389 3 3 1.23)

chris_dcosta 15y ago

I doubt if they "lost" anyting. They are probably writing-down something so that next year will be a bumper harvest.

deleted 15y ago
[deleted]

ck2 15y ago

revenue slumped 60 percent So bonuses are going to be 60% lower, right? (not likely)

sp332 15y ago
As acak pointed out above, they are 59% lower. http://www2.goldmansachs.com/media-relations/press-releases/current/pdfs/2011-q3-results.pdf http://www2.goldmansachs.com/media-relations/press-releases/...
cims 15y ago
I have difficulty understanding the negative attitude people have towards bonuses in this case. Are you a Goldman shareholder who feels that the bank is performing so poorly that its employees don't deserve bonuses? And when you refer to bonuses, are you referring to bonus pay-outs to all employees or just those connected with the financial losses? Just trying to understand this perspective because it seems very bandwagony.
- squishi 15y ago
  1. When banks loose money they shouldn't get bailed out. 2. The Bonuses come from bailout money. 3. If the banks want bailout money they should work as civil-servants(and get an average salary) and not pretend that they are winners(like traders or hedge funds - who get no bailouts, when they loose they really loose). Bankers lost money, and caused a major financial crisis so they should Loose their bonuses! We have no capitalism right now. we have Lemon socialism.
  - cims 15y ago
    I do understand this sentiment, to an extent. The reality is that all the banks participate in the same job market and need to compete to attract and retain talent. If a bank (regardless of bail-out status) does not compensate employees competitively, it will fail to attract and retain the necessary talent and as such fail to perform. The only way a bank could still succeed without paying bonuses is if all banks did the same thing. Don't hate the player, hate the game.

owlmusic 15y ago

My heart bleeds...

cpeterso 15y ago

I misinterpreted this article title as "Goldman Sachs "misplaces" $428 million".

wmf 15y ago
That's such a small amount it wouldn't be newsworthy.

heyrhett 15y ago

Cry me a river.

gcb 15y ago

They found out that loosing money and then getting bailed out gives even more profits.

monochromatic 15y ago

Anything less than $50 billion rounds to zero. http://www.smh.com.au/business/lot-of-bull-about-goldman-20090728-dzrl.html http://www.smh.com.au/business/lot-of-bull-about-goldman-200...

raheemm 15y ago

Q1 profits: $2.7 billion Q2 profits: $1.0 billion Q3 profits: -$.5 billion Unless they lose $3.2 billion in the 4th quarter, they will still be plenty profitable.

1010011010 15y ago

Not enough.

chrisbennet 15y ago

It's a bit like a business that takes horrible risks with fire. The business burns down and the fire takes out most of the town. The business borrows money from the town to rebuild itself and pays what it borrowed back with interest. How do you think the rest if the town's citizens feel toward the fabulously wealthy business owner when he states: "I paid you back with interest!"