Sunday, June 21, 2009

More Big Finance Uber Alles

Per Calculated Risk comes more irritating news, as reported in the Guardian (UK): Goldman Sachs to make record bonus payout.

Staff at Goldman Sachs can look forward to the biggest bonus payouts in the firm's 140-year history after a spectacular first half of the year, sparking concern that the big investment banks which survived the credit crunch will derail financial regulation reforms.

A lack of competition and a surge in revenues from trading foreign currency, bonds and fixed-income products has sent profits at Goldman Sachs soaring, according to insiders at the firm.

Staff in London were briefed last week on the banking and securities company's prospects and told they could look forward to bumper bonuses if, as predicted, it completed its most profitable year ever. Figures next month detailing the firm's second-quarter earnings are expected to show a further jump in profits. Warren Buffett, who bought $5bn of the company's shares in January, has already made a $1bn gain on his investment.

Goldman is expected to be the biggest winner in the race for revenues that, in 2006, reached £186bn across the entire industry. While this figure is expected to fall to £160bn in 2009, it will be split among a smaller number of firms.

Barclays Capital, Credit Suisse and Deutsche Bank are among the European firms expected to register bumper profits, along with US banks JP Morgan and Morgan Stanley following the near collapse and government rescue of major trading houses including Citigroup, Merrill Lynch, UBS and Royal Bank of Scotland.

The entire rescue operation, and perhaps even aspects of the crisis, is looking more and more like a well-planned looting operation. All of a sudden Credit Suisse, which helped set off the current mess with the alleged loss of a few billion by Jerone Kerviel (January 2008 news), has a bumper profit?

The current news fully explains why it was necessary for the last large AIG payout to Goldman, Deutsche Bank et al to be covered up by simultaneously publicizing the relatively trivial bonuses some AIG individuals received.

These guys are all for free markets except when they benefit from unfree and unfair markets. The deal that's going on is clear. Big Finance will make sure that Big Government will prosper. They are working hand-in-glove.

What that means for the economy and the markets has not yet been revealed to the hoi polloi.

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