Thursday, October 15, 2009

A bet on Obama turns to Gold for Goldman


America's Best Investment the Last Year - Obama's Presidential Campaign

So we just suffered through the worst year since the Great depression and the collapsing economy wiped out more than half of people's savings and investments along with a big chunk of their home and other real estate values. The stock market has now recovered about 40-50% of it's value. The Dow Jones hit 10,000 for the first time in a year.

Home prices have stabilized although below the value of the past few years. Unemployment is way up but economists say we are out of the recession. Oil prices have settled at about twice what they were before the economic crash. Even billionaires like Bill Gates and Warren Buffett lost a lot of value over the past year.

At least things seem to have stopped losing value and we can catch our breath. All in all we seem happy to be where we are which is far worse off than we were a year or two ago. Still some people managed to make a lot of money on the pain and suffering of the rest of the world, a whole lot of money.

There was an investment you could have made that would have made you wealthy in the past year. If you were a Goldman Sachs employee your investment in Barack Obama's presidential campaign resulted in the highest earnings per quarter for employees in history in this, Goldman's 140th year in business. Goldman employees donated about $1 million to Obama's campaign, helped raise a total of over $21 million from the Wall Street financial community and of course have helped guide his career since his start in politics.

Goldman's financial contributions to Obama amounted to about $32 per employee (there are 31,700 Goldman employees). The money Goldman earned in 2009 and is paying for wages and benefits just through the last nine months since Obama took office average $527,192 per employee. Imagine if you gave someone $32 last year and already were paid back over half a million dollars.

Goldman generated $35.6 billion in revenue so far this year, an increase of 49% over last year. 47% is allocated to the employees, a total of $16.7 billion. The only better year was 2007 when $16.9 billion was set aside and the only better quarter was the last quarter of this year.

Besides the billions of dollars in pay this year, the stock value has also been astronomical for Goldman's. They are the only financial services company to achieve such staggering success as their stock value increased from $53.31 a share when Obama was elected to about $187.32 today, an increase of over 3.5 times in less than a year.

Compare Goldman's to the next largest investment bank and another Obama backer JP Morgan. Morgan also had a great year but allocated just $8.79 billion to employees, half of the Goldman allocation. The Morgan stock hit $23.38 when Obama got elected and today is up to $46.83, double the value but far below the Goldman record pace.

Goldman was a major player in the sub-prime mortgage market and oil futures market whose wild swings drove the world into economic chaos. They also were selling mortgage packages to clients while they were spending their own money betting the mortgage market would collapse. It earned them the record earnings in 2007 and cost them $60 million in state fines so far. However, the fine was paid with no admission of guilt to limit the corporate liability and allow the expense to be deducted. Some people have all the breaks it seems.

In addition, Goldman received $10 billion in bank bailout funds last year and billions more from the AIG bailout. The bank funds were repaid so the federal government could not challenge the payoffs to their employees. Yet to be determined is the long term relationship between Goldman and Obama to explain why one of the largest investment banks in the world took a state senator from Illinois under their wing and led him to the presidency of the nation.


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