So What's the Story Morning Glory?
You know I had a feeling that when the first full "earnings report" from a bank was released there was going to be fireworks. It was all well an fine for Wells Fargo (WFC) to give a "pre-announcement" because that does not require any real details. The first batter up was Goldman Sachs (GS) and over 24 hours later there is still confusion and conflicting information. Transparent markets indeed!
The Curious Case of the Missing Month
When GS moved to become a "bank holding" company this required them to report their earnings in a slightly different way. Instead of the quarter just ended encompassing December to February, the new reporting structure would include January to March instead. Seeing that this was a first run for GS, one would have expected them to issue some details for the "orphan month" and what exactly transpired in that span of 4 weeks.
That did not happen. The month of December was basically glossed over. Was there anything material from December? If you guessed yes, you are both correct and a conspiracy nut via The Big Picture from Floyd Norris:
Goldman’s 2008 fiscal year ended Nov. 30. This year the company is switching to a calendar year. The leaves December as an orphan month, one that will be largely ignored. In Goldman’s news release, and in most of the news reports, the quarter ended March 31 is compared to the quarter last year that ending in February.
The orphan month featured — surprise — lots of writeoffs. The pre-tax loss was $1.3 billion, and the after-tax loss was $780 million.
Would the firm have had a profit if it stuck to its old calendar, and had to include December and exclude March?
Very slick move indeed.
AIG Payments - Non Event or Meaningful Ripoff?
The hottest area of contention is whether AIG payoffs of counter party's added to the GS bonanza. GS CFO David Viniar said today that is was a total non-event (via Clusterstock).
Of course opinions vary, and Yves Smith at Naked Capitalism has a different take.
Karl Denninger at Market Ticker keeps the pressure on the AIG double payment issue as well with this post.
So the CFO says no, and others say not so fast. What a mess. As I wrote lats time, this will be an ongoing process to figure out just what the heck happened.
TARP Funds Needed or Not?
As if all that was not enough, now there are issues with GS repaying the TARP money while other money lent by the government goes missing (via Self Evident):
So let me get this straight. Goldman Sachs has issued tens of billions of dollars of debt insured by the FDIC. They have access to the TSLF, TAF, and the good old-fashioned discount window, where they can borrow at half a percent or less to finance their long-term investments. And of course, they received at least $13 billion in taxpayer money via AIG. (That certainly helps to explain the profits this quarter.)
But if they repay the TARP — just the TARP — they will be freed from any meddling government interference in, say, their executive compensation. And that is precisely what they are about to do.
Ahhh, American capitalism at its finest. We truly have the best government money can buy.
Again, another mess.
Economic Disconnect argued loud and hard against any government intervention for the banks because of moral hazard and clear conflicts that can never be sorted out. The GS earnings report provides the best evidence of these facts.
The GS offering went off without a hitch this morning at $123. The stock closed at $115. Another brilliant play by the Goldman boys to capture the best price possible for their stock. I would love to see the buyers faces right now as they are slowly figuring out they just "got punked" once again.
Have a good night.