NY Times Praises Wall Street Greed

The New York Times and other mainstream media are reporting that the top seven execs at Goldman Sachs have foregone their year end bonuses.

The NY Times doesn’t mention that there are 443 partners at Goldman Sachs, leaving 436 who could still be eligible for bonuses, that were to average over $4.5 million per partner (before the top seven’s announcement), according to the Daily Mail.

The NY Times does reveal:

“In the last several years, Goldman Sachs has posted some of the biggest profits and paid out some of the biggest bonuses in Wall Street history. The company’s chief executive, Lloyd C. Blankfein, received a salary and bonus package last year worth $68.5 million. Goldman Sachs paid its two co-presidents, Gary D. Cohn and Jon Winkelried, around $67.5 million each last year, more than most chief executives. All three will receive no bonuses this year.”

However, as the historically large bonuses had been going on for “several years,” one can only imagine how much Goldman Sachs (and other Wall Street) investment bankers have received in bonuses while the economy has been heading for crisis. The NY Times does not shed any light on the scope of this profit taking.

The NY Times also notes that “[i]n September, Goldman Sachs and Morgan Stanley transformed themselves into bank holding companies that take deposits, take less risk and are subject to more government oversight. That new structure may limit their ability to generate big profits, because they cannot use as much borrowed money to make big investment bets.” [my emphasis]

“Transformed themselves?” Are we now to understand that they have undertaken to evolve consciously into “good corporate citizens” by limiting big profits and, in Goldman Sachs’ case, by their top executives forgoing bonuses?

Just as it did not report on the true scope of the bonuses, the NY Times is not revealing much about Goldman Sachs and Morgan Stanley becoming bank holding companies.

The NY Times neglects the federal role in the transformation. The federal government approved their requests to become bank holding companies after the collapse of Lehman Brothers, shortly before the bailout (and shortly before Warren Buffet pumped $5 billion into Goldman Sachs). Mainstream media largely ignored the transformation, or that there was a 5 day waiting period before a yea decision by the feds could take effect.

By becoming bank holding companies, Goldman Sachs and Morgan Stanley can now seek to acquire banks. In fact, this is exactly what Goldman Sachs intends to do.  On October 20, 2008, Bloomberg quoted GS spokesman Michael DuVally as saying: “Goldman Sachs intends to grow its deposit base both organically and through acquisitions.” Also, incoming bank deposits will give Goldman Sachs and Morgan Stanley cash flows that put them at an advantage compared to other investment firms. As reported by Bloomberg: “New York-based Goldman Sachs and Morgan Stanley converted themselves from securities firms into bank holding companies last month so they could gather deposits.”

Mainstream media’s not noticing much about Goldman Sachs is not surprising, as it did not notice that Goldman Sachs was the second largest organizational contributor – at $874,207 – to Barack Obama’s election efforts. (Donations do not come directly from companies; opensecrets.org looks to donations by a company’s PAC and by its partners, employees and immediate families.) By comparison, Goldman Sachs contributed $228,695 to elect John McCain. (Morgan Stanley’s figures were $425,102 for Obama and $262,777 for McCain.)

While the NY Times story makes headlines with its story about the Goldman Sachs top seven, it does not reveal much behind the headlines. The bonuses given up this year by the Goldman Sachs top seven are just the ugly tip of the proverbial iceberg. And, their becoming a bank holding company will enable Goldman Sachs to carry out its plan to buy up banks. This will consolidate the banking industry further and build on Wall Streets well-deserved reputation for greed.