21 January 2010

Goldman Expects to Keep Cake, Eat Same, Stick Public with Tab

Dick Bove says that Obama's proposal will be good for Goldman Sachs because it will take away the prop trading from banks that have deposits, but will not affect Goldman Sachs who will once again eliminate more competition.

So buy the stock. Hard to imagine anything short of Armageddon that would cause the word 'sell' to emanate from his bloviateness when he is talking his book.

And Goldman Sachs says that it is 'unrealistic' to take away their place at the Fed's teats as a subsidy sucking bank holding company.

"Goldman Sachs Chief Financial Officer David Viniar said it’s “unrealistic” to imagine the firm won’t be a federally supervised bank, even as new regulatory proposals cast doubt on that status."

Perhaps they will lobby for a special category of bank. Some banks are more equal than others? The public might be dumb enough to buy it, but doubtful Lloyd's peers on the Street would not raise a fuss.

More likely that the corrupt Congress takes this idea of Volcker's, and leads it up a blind alley, and strangles it with delays, transitions, and deceptions, and grandiose discussion of new regulatory architectures, rather than simple but elegant focus on primary mission, and the elimination of conflicts of interest.

The threats of 'lack of competitiveness,' 'stifling the recovery,' and 'portfolio diversity' are already resounding from the canyons of Wall Street and their pond skimming sibyls on financial television.

Goldman Will Benefit From Obama’s Proposal, Bove Says

By Rita Nazareth

Jan. 21 (Bloomberg) -- Goldman Sachs Group Inc. will benefit from President Barack Obama’s proposal to limit Wall Street risk because it may force deposit-taking banks to unwind trading operations, Rochdale Securities analyst Dick Bove said.

Obama called for limiting the size and trading activities of financial institutions as a way to reduce the risk of another financial crisis. The proposals would prohibit banks from running proprietary trading operations solely for their own profit and sponsoring hedge funds and private equity funds.

He also proposed expanding a 10 percent market-share cap on deposits to include other liabilities such as non-deposit funding as a way to restrict growth and consolidation.

“Banks with large deposit bases have distinct advantages in certain sectors of the market,” Bove wrote in a report today. “If the banks are told they cannot use deposits in this fashion in the future, it ‘levels the playing field’ for companies like Goldman Sachs. This is not a time to sell this stock, it is a time to buy it.”

Goldman Sachs shares erased an early advance as Obama prepared to outline his proposal. The shares lost 4 percent to $161.15 in New York at 2:56 p.m. after rising as much as 1.9 percent at the start of trading.

Bonus Pool Slashed

Goldman, the most profitable securities firm in Wall Street history, reported record earnings that beat analysts’ estimates as the bank slashed its bonus pool. Net income of $4.95 billion, or $8.20 per share, for the three months ended Dec. 31 compared with a loss of $2.12 billion, or $4.97 a share, for the same period in 2008. The average estimate of analysts in a Bloomberg survey was $5.18 a share.

The record profit came as Goldman Sachs, facing criticism from politicians and labor unions for near-record compensation, set aside $16.2 billion to pay employees, the smallest portion of revenue since the firm went public in 1999.

“The adjustment of compensation lower leaves more money for shareholders,” Bove wrote.

Bove said that if the bank had not slashed its bonus pool, earnings may have been only about 3 cents to 5 cents a share in the quarter, “under certain assumptions concerning compensation,” because of a slowdown in trading.

“Investors are reacting sharply to the fourth quarter results at this company,” Bove wrote. “However, all indicators -- M&A, new financings, increasing volatility in a number of markets, growth in the money supply -- all suggest that this quarter may be a one-time event.”

Goldman Sachs Chief Financial Officer David Viniar said it’s “unrealistic” to imagine the firm won’t be a federally supervised bank, even as new regulatory proposals cast doubt on that status.