Record pay and profits at Goldman Sachs.
Goldman’s profits nearly doubled, reaching $3.44 billion compared to $1.8 billion in the first quarter and $2 billion a year ago. This was 35 percent higher than a survey of economists conducted by Bloomberg News had predicted. Goldman’s net revenue reached $13.8 billion in the second quarter, up 46 percent from the same quarter of 2008.
Later this week, many of Goldman’s rivals, including JPMorgan Chase, Citigroup and Bank of America, will release their quarterly earnings reports and are expected to report major gains in revenues and profits.
Wall Street’s profit bonanza comes amid reports of soaring bonuses for top traders and executives at most of the banks and financial firms that have been bailed out at taxpayer expense. Last week, American International Group (AIG), the insurance giant which has received over $160 billion in government handouts, requested approval for $235 billion in bonuses for its top employees.
In June, it was reported that Goldman executives had been told they could expect to receive record bonuses, while other banks, including Citigroup, Bank of America and Morgan Stanley, had sharply increased compensation for their top traders. Citigroup and Bank of America have each received $45 billion in government cash under the $700 billion Troubled Asset Relief Program (TARP) as well as guarantees on more than $300 billion of their assets. The US government presently owns 34 percent of Citigroup’s common stock.
These staggering figures demonstrate that the giant banks and financial companies--and their top executives, traders and shareholders--are exploiting the economic disaster for which they are chiefly responsible to further enrich themselves. They are doing so with the full support of the Obama administration, whose economic policies have been crafted with the single-minded goal of protecting and expanding the wealth of the financial aristocracy.
The full meaning of the administration’s insistence that the restabilization of the banks is the precondition for an economic “recovery” is becoming increasingly clear. Obama’s policy amounts to a blank check for the banks, with the cost of the explosive growth in federal, state and local budget deficits, along with the national debt, to be paid by the working class.
Obama is demanding that working people “tighten their belts” and accept a jobless recovery that will see an official unemployment rate of 10 percent or more for years to come. This is to be accompanied by an unprecedented drive to slash spending on basic social programs such as Social Security, Medicare and Medicaid.
Bank profits and pay have soared in inverse proportion to the economic security and well-being of the American people. Since Obama took office in January, the official unemployment rate has jumped by 1.9 percent, 3.3 million more jobs have been wiped out, workers’ weekly hours and earnings have declined, over half a million households have entered foreclosure, and the savings and house values of working families have continued to plummet.
Over this period, Goldman stock has soared by 77 percent.
Obama has orchestrated the bankruptcy of General Motors and Chrysler, leading to the destruction of hundreds of thousands of jobs in auto and related sectors and cuts in wages and benefits that spell poverty for millions of workers and retirees. The administration’s auto task force, led by Wall Street insiders, has spearheaded a further dismantling of basic industry in order to transform the auto companies into profitable sources of investment and create the conditions for a corporate offensive against the wages, jobs and living standards of the entire working class.
As Obama has repeatedly declared, he will do “whatever it takes” to pay off the gambling debts of the bankers, but there is “no money” to provide jobs or serious relief for the unemployed, stop foreclosures, or bail out state and local governments that are facing bankruptcy. While Wall Street CEOs celebrate their good fortune, California, the country’s biggest state, is paying its creditors with IOUs and shutting down essential social services.
The record profits and pay for the banks are not only the result of government cash, virtually interest-free loans and guarantees on trillions of dollars of debt, they are also the result of the refusal of the White House and Congress to place any serious restrictions on the banks’ predatory practices. As Bloomberg.com noted on Tuesday, Goldman has registered record profits by increasing its risk-taking.
The government is allowing the banks to conceal an estimated $2 trillion in bad debts in commercial real estate, credit card loans, auto loans, student loans and other forms of consumer credit that remain on their books. The banks refuse to sell off or write down these assets, whose market value is a fraction of their claimed value. This is setting the stage for another financial crash, as mass unemployment and growing poverty ripple through the financial system.
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