Goldman's 42 $100MM+ Trading Days In Q2 (just 2 days of trading losses)
zerohedge.com
zerohedge.com
4.2 billion in profit in 42 days is just nuts. That sum could keep 100.000 "regular" people afloat for a full year.
This is outside my expertise, and its true that the market is doing very well compared to a few months ago, so big profits are not inconceivable. however, one has to wonder why Goldman needed in on the bank bailout last year (although they have since paid the taxpayer back) - did they just have a momentary lapse of genius?
On a broader level, the average person is just not going to find such consistent success credible. The best thing that could happen to GS right now is a top to bottom SEC audit, because otherwise more and more people are going to start screaming for its breakup.
All banks of that class were required to participate to avoid stigmatizing any single one and weakening their credit further. Goldman took the money and simply gave it right back.
And if Goldman was entirely populated by "geniuses", why did they need $13 billion from AIG? They made all the same bad bets as everyone else, but they "hedged" them with a counterparty unable to pay out. And once AIG was downgraded to AA in 2005, everyone should have known that they'd be unable to pay out the ridiculous CDS contracts they guaranteed on subprime bonds. It'd be like buying volcano insurance from a homeless guy - and you live next to a volcano. Goldman isn't run by geniuses; its run by people who control the government.
The chain of collapse without a backstop is not a robust argument in general, becuase at the point you say Morgan, etc. fail without a government backstop and then try to assume that those firms were the only (or majority) beneficiaries, it becomes shaky. Why? Because if the banks failed as you described, nearly most would have as well and then anybody holding cash in a bank (read all of us sans the mattress crowd) would have been in horrendous trouble. Remember, the government had to backstop not just investment banks, but money market funds as well (which were failing due to the related crisis of confidence issues). Remember the northern rock episode with huge lines of people unssucessfully trying to withdraw their money in the UK?
Imagine not being able to withdraw your cash from a money market or savings account. Banks being structurally exposed to runs and therefore requiring government backstops is actually a well understood issue. The point is we all benefited from the federal backstop, and this argument that, why should banks benefit from an implied or explicit backstop ignores the fact that all of us are backstopped by this as well, whether you realize it or not. Nobody can claim that people keeping their life savings in a money market or savings account and earning 5% interest a year is not also implicitly benefiting from government backstops in general, so let's not single out the investment banks in this case.
As for AIG, this has been discussed in infinite more detail so the interested reader can look up articles on this, but the essence of the point is that of the 13 billion owed, most of it was already collateralized (which means they would have just kept the US treasury collateral had AIG collapsed). Yes, there was a smaller portion that was hedged via CDS that could have failed as insurance, but let's not claim this is the entire 13 billion, in fact, it was far from that. And let's also remember had CDS truly failed it would have reflected a state of the world where most banks were in default, and forget about some investment bank not being able to collect their insurance, we are talking about ATMs not working anymore at this point. So the point is the backstop prevented things from getting to this nightmare, saving banks but also the rest of us as well.
Regulatory capture anyone?
Yep. Sadly I personally don't see anything I can do about it.
We know they have access to a special tier, we know they have this real time software, and we know they have unprecedented profit records (not just in $, but in successful days). Do you think maybe something funny is going on?
As you can imagine, the market conditions in a period of such volatility were ripe for statistical arbitrage and other high speed strategies.
If you ask a startup to create a simple computer-based trading system that allow the buying and selling of stocks, how much would capital would they need? Not much. Trading systems should be operated by a non-profit, this sounds like a hefty and unnecessary trading tax.
To me this is hacker news as what the high-frequency traders is pretty serious technology.