Well, it's official. Goldman Sachs is no longer a part of the Troubled Asset Relief Program.
The company announced yesterday that it had come to terms with the Treasury on a valuation of the warrants the Treasury was holding on behalf of the taxpayers. The final figure was $1.1 billion, after some wrangling on the part of the bank to value the warrants around $500 million.
http://www.washingtonpost.com/wp-dyn/content/arti…
This frees the bank from any and all provisions of TARP legislation, most notably the pesky executive compensation limits. Which is a good thing for the bank, because every time I hear about the bonus pool, the average number gets larger.
The last I heard it was up to $900,000 per employee. It simply wouldn't do to have taxpayer input on something like that!
HALLELUJAH!!! Oh yeah, f*ck Obama's shitty policies.
Yeah. It wouldn't.
Funny this is how badly the gov got slammed by the media all this time. When GS paid back the $10B last month they paid $318M in preferred dividends, which translates to a 20+% return annualized.
Now they received another $1.1B just for the warrants. And they're going to auction off the JPM ones at open auction. People are so stupid.
I think I know what you're trying to say, but your math is a little off. The TOTAL return (and the figure the financial press keeps quoting) amounts to roughly 23% annualized after the repurchase of the warrants for $1.1 billion. The actual interest paid was only 4.75% (annualized).
However, this rate of return assumes a zero value on the warrants at the time of issue, and that simply wasn't the case.
At the time the warrants were issued, they were theoretically worth about $620 million. Since the taxpayer had to give up the warrants upon redemption, the return on the warrants was roughly $480 million. Combined with the interest income, the total net return was about $798 million in 8 months, or about 12% annualized.
Still not a bad ROI.
All of this stuff is explained in the TARP Guide HERE.
The WSO Guide to Understanding TARP
Yeah the 23% was including the warrants and was basically just what the Treasury reported (no wonder it was misleading); didn't bother to personally confirm but thanks for breaking it down.
Buffett is keeping his until they expire... Strike price of $115 and the right to buy up to $5B. And people were bashing him when GS traded under $50 last year. Maybe when his GE calls are in the $ people will finally shut up.
thanks for some of the math eduardo.
heh
Why don't you guys calculate the awesome return on our money when you consider that GS was floated some 10 billion through the aig bailout? Probably a terrible NEGATIVE return on the taxpayer dollar. GS(Goldman Sucks)
Creativity is clearly not your forte, is it?
It was clear that Goldman did not need to be bailed out, and that accepting $10 billion in TARP funding really amounted to "taking one for the team." However, Goldman desperately needed AIG to be bailed out, and maybe playing along with Treasury's plan to save the world was just a little payback for the $13 billion Goldman knew was coming their way after the AIG bailout.
Some of you will contend that Goldman didn't actually need AIG to be bailed out because Goldman took short positions against the very CDOs that AIG provided swaps for. Ethical and fiduciary quandaries aside, this is pretty naive in that $13 billion is still $13 billion.
That money makes up the vast majority of the gargantuan bonus pool they're working up over there.
Now if you want to talk about net return, Goldman laid out $798 million for a $23 billion net benefit ($13 billion of which they got to keep free and clear), so the actual cost of funds to Goldman was zero. They essentially invested $798 million to earn a return of $13 billion.
The WSO Guide to Understanding TARP
It also misses the point of Goldman's counterparty risk to AIGs other counterparties. Even if GS was fully hedged against AIG, many of AIG's other counterparties were not, and GS would've suffered indirectly from that.
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