Do “Greater Levels of Risk” Worry You Just a Bit?

July 15, 2009
Goldman Sachs Reports Big Profit, Beating Forecasts

Goldman Sachs comfortably exceeded analysts’ forecasts on Tuesday as the bank reported that it earned $3.44 billion, or $4.93 a share, in the second quarter.

The results continue a robust turnaround for Goldman since it rode out the final tumultuous months of last year with aid from the government’s banking rescue. The earnings announcement came just one month after the bank paid back $10 billion in federal aid.

Goldman’s profit was lifted by record quarterly revenue of $6.8 billion in its fixed-income, currency and commodities unit, where mortgage and other credit instruments are traded, the bank said in a statement. This business has performed well because the bank has taken on greater levels of risk since the end of last year.

–read entire article–


I gotta admit that, with $60 trillion or so of worthless credit-default-swaps still out there–unaccounted for, like children in the wilderness, I worry about greater levels of risk.

Goldman, champion of the risk-takers as an investment bank, converted to a more regulated commercial bank structure last fall, promising to work and play well with others in exchange for $20 billion in Fed funny money.
Losing Boardwalk and Park Place was the price for federal funding and not getting indicted.

Apparently they had a Get Out of Jail Free card up their sleeve that no one knew about. Two quarters later, they paid back half the vig and earned $3.4 billion in an economy that’s literally falling apart, with enormous (and unknown) liabilities yet to come–because they took on greater levels of risk.

Does that make you nervous, or is it just me?

Leave a Reply

Your email address will not be published. Required fields are marked *