Goldman Sachs (GS) may be first to say “thanks, but no thanks” to TARP
Today's Financial News - Posted March 24, 2009
Goldman Sachs Group Inc. (NYSE:GS) and JPMorgan Chase & Co. (NYSE:JPM) accepted billions in TARP money. But just a few months into their new-found relationship with the U.S. government, both banks want out. And who can blame them?
by J. Christoph Amberger
Baltimore—TFN: Who pays the fiddler calls the tune.
But when Goldman Sachs Group Inc. (NYSE:GS) accepted $10 billion in the first round of the Troubled Asset Relief Program (TARP), they were reasonably unaware that what was sold to them as an emergency loan really implied turning over management of the company to a hyper-ventilating Congress.
No wonder, really, that they now want that horde of screaming monkeys off their back… repaying the money by mid-April, if at all possible. Or at least right after the Treasury finishes its “stress tests” of major banks’ financial stability.
Their colleagues across the street at JPMorgan Chase & Co. (NYSE:JPM) indicated on Feb. 23 that management was planning to pay back TARP “as soon as it is prudent”. Given last week’s precedent of Congress engineering end-runs around its own slapdash legislation and use the U.S. tax code arbitrarily as a publicity tool, it may be prudent to cut that check as soon as humanly possible.
While the intentions of both banks indicate that there’s still some Capitalist spirit kicking in America, we also must consider them votes of no confidence in the integrity of the U.S. government as a business partner.
In the long term, buying off Uncle Sam will put both Goldman Sachs and JPMorgan Chase at a competitive advantage in their industry, both in their domestic business, but also (and more importantly) in regard to their international position.
While we’re expecting yet another broad and deep decline in U.S. equities, we’re moving both GS and JPM onto our core portfolio watch list.
Next Article: Dyax Corp. (DYAX) could soar on FDA approval for DX-88 HAE drug
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March 24th, 2009 at 2:33 pm
When I heard about TARP, the first thing that I thought of was, “Do these companies really want the government sticking its nose in their every day business?” But I guess it’s hard to say no to billions of dollars. It appears that now the financial sector is seeing just how bad of a business partner Uncle Sam can be.