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Mar-24-2009Goldman Sachs Said to Be in Talks to Return TARP by Mid-April(topic overview)
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NEW YORK (Reuters) - Goldman Sachs Group ( GS.N ) may sell part of its 4.9 percent stake in Industrial and Commercial Bank of China ( 601398.SS ), the Wall Street Journal reported on Monday, citing people familiar with the matter. The move could raise $1 billion for Goldman, these people told the WSJ. Goldman's shares in ICBC are worth about $7.5 billion, according to the newspaper. [1] Goldman Sachs Group Inc. is considering selling part of its minority stake in Industrial & Commercial Bank of China Ltd., according to a Wall Street Journal report Monday. A sale of part of its stake in the Chinese bank, which Goldman acquired in 2006, could raise more than $1 billion, the Journal said. Discussions about a possible sale began late last year and could lead Goldman to sell 15 percent to 20 percent of its stake, the Journal said, citing people familiar with the discussions.[2]
Goldman Sachs ( GS Quote - Cramer on GS - Stock Picks ) is considering selling part of its 4.9% stake in Industrial & Commercial Bank of China, a move that could raise more than $1 billion, the Wall Street Journal reports, citing several people familiar with the matter.[3]
In order to raise some money, Goldman Sachs may sell part of its 4.9% stake in Industrial and Commercial Bank of China (other-otc: ICBAF - news - people ), according to The Wall Street Journal. Its stake is worth around $8.5 billion, based on ICBC's market capitalization of about $178.0 billion.[4] For details, see: UBS ( UBSN.VX ) Stifel Financial Corp ( SF.N ) said it would acquire up to 55 branches of UBS Wealth Management Americas to expand across the United States in a deal that will boost the investment bank's profit in the first year. For related news, click on ALLIANZ ( ALVG.DE ) Goldman Sachs ( GS.N ) and China's ICBC ( 1398.HK ) have been in discussions about Goldman reducing its 4.9 percent ICBC stake, worth around $8.5 billion based on ICBC's market capitalisation, the Wall Street Journal reported.[5]
The Wall Street Journal reported on Monday that Goldman Sachs Group, Inc (NYSE:GS) may be trying to unload its shares of the Industrial and Commercial Bank of China, Ltd. The sale could raise up to $1 billion, much of which the WSJ suspects, would be used to repay the funds received from the Treasury Department.[6] Goldman Sachs Group Inc. (NYSE:GS) may become the next Western institution to sell a stake in a Chinese bank. The Wall Street Journal reported Tuesday that the New York company has held discussions with Industrial & Commercial Bank of China Ltd. about selling up to a fifth of its 4.9% holding in the world's largest lender by market value.[7]
The firm had already received $10 billion in TARP money and was sitting on $100 billion in cash. On September 15, when then-NY Fed official Timothy Geithner and then-Treasury Secretary Henry Paulson met to mull bailing out AIG, Goldman Sachs CEO Lloyd Blankfein was the only Wall Street executive they consulted. (Despite the New York Times' reporting of Blankfein's participation in the meeting, Goldman's CFO denies discussions took place between Blankfein and Paulson.)[8] "Goldman Sachs ( GS ) may return its $10 billion of TARP money to the U.S. government within the next month, The New York Times reported, citing people involved in the process. That's quicker than the end of year goal previously set out by CEO Lloyd Blankfein, the newspaper reported." GS is going to pay back the TARP funds!'' What CEO wants to limit his bonus?'' And when AIG paid on the CDS, taxpayer money, they now have funding to repay TARP. It really chaps my hide the way the government is being played. It is not government being played. it is the citizens. GS is paying government a lot of money for its hard work. That's better than them not paying back. Not sure why anyone is complaining about this.[9] NEW YORK (Reuters) - Goldman Sachs Group Inc ( GS.N ) hopes to pay back the $10 billion it took from the U.S. government's $700 billion Troubled Asset Relief Program within a month, The New York Times said on Tuesday, citing people involved in the process. The urgency to repay the money follows last week's uproar over bonuses paid to executives at the insurer American International Group Inc ( AIG.N ), and revelations that Goldman was the largest recipient of government money stemming from its role as an AIG counterparty, the newspaper said.[10] Any transaction would have to wait until late next month, when a lockup on half the stake is set to expire. Since it received $10 billion from the U.S. government last October, Goldman has looked to repay those funds, the Journal reports. Cutting its stake in ICBC would garner just a fraction of that $10 billion, but it would help Goldman bolster its cash position without dipping into its current cash reserves, the Journal adds. The New York Times, meanwhile, reports Tuesday that Goldman is planning to give back its Troubled Asset Relief Program money soon, ideally within the next month, according to people involved in the process. That's a much quicker timetable than the end-of-year goal previously set out by CEO Lloyd Blankfein, the Times reports. Wang Zhenning, an official in the news office of ICBC, said he wasn't aware of any talks with Goldman over its stake, the Journal reports.[3]
Goldman Sachs hopes to repay the $10 billion it took from the U.S. government's $700 billion TARP program within a month, the New York Times reported on Tuesday. The urgency to repay the money follows news that Goldman was the largest recipient of government money stemming from its role as an American International Group counterparty, the report said, citing unnamed sources.[11] Goldman Sachs (GS 111.93) may return $10 billion in TARP money to the government soon, according to a report from The New York Times.[12] It looks like the healthiest of the major banks will be the first to return its TARP aid -- money that has come with all kinds of new restrictions since it was doled out. The New York Times' Andrew Ross Sorkin says that Goldman Sachs (GS) is looking to return its $10 billion in TARP aide very soon, possibly as early as next month. Previously, its CEO Lloyd Blankfein had suggested the money could be returned by the end of the year. Why the quick turnaround? No doubt, it's the business restrictions which seem to grow every day. On Goldman insider told Sorkin: "It's just impossible to run our business in this environment."[13]
The toxic assets would be eliminated through the bankruptcies, and the government--and taxpayers--would be $1 trillion less in the red. Why isn't the Obama administration doing this? Because Obama has put his trust in the advice of men--Treasury Secretary Tim Geithner, Chief Economic Advisor Larry Summers, and, informally, former Clinton Treasurer Robert Rubin, all linked to the investment bank Goldman Sachs, which was also the corporate home of Bush Treasury Secretary Henry Paulson. The same Goldman Sachs which was given $10 billion in Troubled Assets Relief Program funds directly, and which then snagged another $13 billion in TARP funds in secret, which was laundered through the now-government-owned insurance company AIG. It should be clear at this point that the Goldman cabal burrowed deep inside the Washington apparatus is working not to rescue the U.S. economy, but rather to ensure the survival and enrichment of the big banking establishment, and of course Goldman Sachs. What we are witnessing in the policies of the Obama administration is not the creative experimentation of a modern-day Franklin Roosevelt, but rather the greatest heist in the history of mankind, as trillions of dollars in public funds are shifted from taxpayers' pockets into the hands of the very banks and bankers and bank investors who brought us this financial debacle.[14] With all the new TARP limitations, look for the vaguely healthy banks to do whatever they can to pay back the government. According to the WSJ, Goldman Sachs (GS) is looking to part of its 49.9% stake in Chinese bank ICBC, a move that could raise it $1 billion.[15] Goldman Sachs is considering selling part of its 4.9% stake in Industrial & Commercial Bank of China, a move that could raise more than $1 billion, according to several people familiar with the matter.[16]
Now the firm may be ready to take some money off the table -- especially to pay down the onerous TARP loans. According to a report in the Wall Street Journal, it looks like Goldman is thinking about unloading a part of its 4.9% stake in the Industrial & Commercial Bank of China Ltd. It could result in more than a billion in cash (or about 15% to 20% of the equity stake).[17] Goldman's 4.9 percent stake in the ICBC is worth about $8.5 billion. The Wall Street Journal reported that a Goldman sell-down could raise about $1 billion for the bank by selling 15 percent to 20 percent of its holding.[18] Goldman and ICBC began discussing a sale late last year of up to 15 percent to 20 percent of the Wall Street bank's stake, two people with knowledge of the discussions told the WSJ.[1]
Talks between Goldman and ICBC about a sale began late last year and include potentially divesting 15% to 20% of the New York company's stake in the Chinese bank.[16] There'''s speculation that the payment might be funded by the sale of Goldman'''s ever depreciating stake in ICBC, although the New York Times points out that Goldman is sitting on '''$100bn of available cash, so a mere $10bn should be no problem.'''[19]
The Journal report coincides with a New York Times article claiming that Goldman hopes to return to Treasury the $10 billion of Troubled Asset Relief Program funding it received in October within the next month, though the two initiatives are believed to be unconnected.[7] The New York Times reports Goldman plans to pay back the $10 billion it borrowed from U.S. taxpayers last fall perhaps within the next month.[20]
According to reports, 15 of AIG's (NYSE:AIG) top 20 executives have returned their bonuses following last week's uproar over the company's decision to pay bonuses despite receiving $170 billion of government bailout capital in order to stay afloat. In total, American International Group (NYSE:AIG) employees have returned approximately $50 million of its $165 million doled out in bonuses this month. New York Attorney General Andrew Cuomo said that his office didn't expect to get more than $80 million back. Some of the company's employees are reportedly still considering returning their bonuses while others have refused. AIG chief executive Edward Liddy told congress that he was concerned the company would be unable to attract and retain talented employees without bonuses.[6] Fifteen of 20 leading bonus recipients at American International Group have agreed to give back the bonuses in full, said Andrew Cuomo, the New York Attorney General. Cuomo said he hopes to recoup $80 million of the bonus payments, or about half of the $165 the insurance company paid out to its employees.[18]
William Dudley, the head of the New York Federal Reserve, on Tuesday said that American International Group would eventually be able to pay back all the money taxpayers had injected into it. "Although it will take time, we still expect that proceeds from asset sales should enable AIG to repay the New York Fed in full," he said in prepared testimony to the House Financial Services Committee.[11] Sources say Goldman Sachs could give back its TARP money within a month, reports The New York Times.[21] According to the report in The New York Times, Goldman Sachs has more than $100 billion in available cash.[12]
A spokesman at Goldman Sachs declined to comment on the report. During the fiscal fourth quarter, Goldman lost $631 million from its investment in the bank as ICBC's share price fell.[2] The U.S. bank may use money from any sale of ICBC shares to repay $10 billion in government funds it received in October, according to the WSJ. Goldman has already said the bank would like to repay this money to get out from under executive pay and other restrictions tied to the funds.[1] The miner is looking at possible iron ore joint ventures or acquisition opportunities in Australia, a senior company official said. Rio Tinto said its proposed deal with Chinese state-owned Chinalco would not influence iron ore contract price negotiations for the year ahead. BHP Billiton has agreed to set prices for coking coal to major Japanese steelmakers at around $128 a ton for the fiscal year starting in April, down about 57 percent from this year, the financial daily Nikkei said in its Tuesday edition. Spanish bank Santander and utility Fenosa are finalising the sale of their 36 percent stake in oil company Cepsa to Abu Dhabi fund IPIC at 33 euros per share, Expansion reported, without naming sources.[22] Abu Dhabi National Energy paid $320 million for a 50 percent stake in Marubeni Corp's Caribbean power portfolio, which it had agreed to purchase in February, Taqa said. Bank Muscat said it had sold about 81 percent of its stake in India's HDFC Bank and earned about 39 million rials ($101.3 million) in pre-tax profit from the sale. Bahrain-based lenders Al Salam Bank and Bahrain Saudi Bank said on Monday that their planned merger, which would create a bank with combined market value of $400 million, is on track.[23]
It is unclear whether those rules would affect any possible sale by Goldman. Goldman paid $2.6 billion for its stake in ICBC in 2006. Goldman's move to reduce its ICBC stake is said to be motivated by a desire to curb a "concentrated" position that hasn't been hedged because of the terms of its initial agreement with the Chinese bank.[24] Chinese capital usually makes it way to the U.S. Treasury when the communist central government buys American debt. It is the most direct route, but clearly not the only one. Or Goldman may just keep the money. It may have concerns about the nature of its Chinese investment. The Journal writes one person familiar with the matter said Goldman's move to reduce its ICBC stake is motivated by a desire to curb a "concentrated" position that hasn't been hedged because of the terms of its initial agreement with the Chinese bank.[25] Goldman Sachs was among the first financial institutions to receive money from the Treasury Department late last year under the government's stock purchase program. Earlier this year, Goldman's Chief Financial Officer David Viniar was quoted by media outlets as saying at an investor conference that the bank would consider raising capital this year to pay back the investment.[2] Deutsche Bank was a little more generous and in addition to one month for every year worked, employees who were let go in December got 10% of the 2007 bonus. This all seems set to change with lay-offs still to come. Cash bonuses for 2008 at firms such as UBS were capped, while others, including the Royal Bank of Scotland, paid no cash bonus for 2008 performance. At Goldman Sachs and other U.S. investment banks there is a move to pay as much incentive compensation for 2008 as possible in stock, both to bind employees to the firm and to reduce cash outflow. Employees who are laid off this year will probably just get the statutory minimum due to them, based on the jurisdiction in which they are employed. This article is part of the FinanceAsia March cover story "Out of Pocket", which takes an in-depth look at compensation trends across the banking industry.[26]
Goldman Sachs (nyse: GS - news - people ) President Gary Cohn said the firm is not likely to return the money recieved from the U.S. Treasury's Troubled Asset Relief Program before the stress test, according to TradeTheNews.com.[4] Goldman Sachs is known to have received bailout money given to A.I.G. Goldman may have participated in the government decision to provide the original bailout money to A.I.G. Geithner told Waters that Goldman Sachs could help manage the new program to help banks remove toxic assets from their books. "It is possible, if they are qualified," he said.[27] Maybe the real outrage is the covert second bailout to Goldman Sachs, Bank of America, and other investment houses that were AIG's trading partners. Maybe there's more fury to come this week, when the administration rolls out its new plan to provide subsidies to private investors to buy up toxic assets from banks.[28]
Six months after the failed Bush administration effort to "rescue" the U.S. financial system, and after two months of failed efforts by his own new administration, at an expense to the American public of several trillion dollars and counting, the Obama administration is announcing plans to blow another $1 trillion in a massive taxpayer giveaway to investors who will be subsidized in an effort to get them to buy the so-called toxic assets on the books of the nation's biggest banks. The problem with this plan is fundamental: These zombie banks will not start lending again no matter how much money we lavish on them. It doesn't matter how good the balance sheets of the banks are.[14] Still Goldman Sachs gets most of the welfare bail out from U.S. Taxpayers hard earned money. Welfare for the richest and hardship for the rest continues as Barack Obama continues his speeches brainwashing people and soothing down the anger of the middle class. He is no President. He is just the agent of the oligarchs that tell him what to do. His current job is to get the budget passed, and sooth down the American middleclass anger and frustration, and maintain the stays quo. You cannot write about this too much. World's most vigorous democracy has a new rule implanted by Bush-Cheney and never repealed by the 'new Bush' Obama ' the U.S. Administration reserves the right to jail any one they do not like without any legal defense or intervention of the judicial system in the name of homeland security.[29] Look at the tens of billions of dollars Goldman Sachs got as charity from the taxpayers money through AIG. Goldman's collaterals were protected by its former boss Henry Paulson ' yes that guy who George Bush allowed to hand over the U.S. treasury to the rich American oligarchs.[29]
Of course Goldman Sachs got substantially more money, roughly $13 billion from the AIG bailout, and there are numerous others programs, including but not limited to, loan guarantees that Goldman has used to stay afloat over the last six months. The idea that simply paying back the TARP money means they're back on their own is really a crock. We'll be bringing you more on this shortly.[30] The largest recipient of AIG bailout money was Goldman Sachs, which received a cool $13 billion. AIG's whopping transfer to Goldman is curious considering Goldman's claim that it required no federal assistance because its bets were properly hedged.[8]
Thanks to the government guarantee, and accounting for fees, Goldman is saving several hundred million dollars per year in interest. There's still more! A good chunk of the money taxpayers gave to AIG as part of the bailout found its way to financial institutions-including Goldman Sachs.[31] By the same token, the astronomical fees charged by many company chiefs would seem to defy laws of gravity, though not necessarily nature. Top athletes know the score: executive compensation has a relational value that outweighs its nominal one. That is to say, it's not how much you get paid that's important; it's whether your paycheck is bigger than your competitor's. That's how Goldman Sachs CEO Lloyd Blankfein can walk away with a $65 million pay check in 2006. This is a nonsensical amount of money - more than could be spent by the family Blankfein over several generations.[23] Rumour has it that Goldman Sachs now aspires to repay its $10bn of TARP money very, very soon, quite possibly as early as next month. Blankfein originally aspired to repay by the end of the year, so this undoubtedly has something to do with the punitive tax proposals going through Congress.[19] Andrew Ross Sorkin reports today that Goldman Sachs is going to pay all its TARP money quickly. The idea being that they're tired of federal interference and oversight. Paying it off will mean they're back on their own.[30] Goldman Sachs is looking to pay the government's money back, but when that might happen and where it would get the money are still unanswered questions.[4]
Goldman Sachs spokesman Ed Canaday declined to comment. A growing number of TARP recipients have said they plan to repay their money or do so as fast as possible. Some have complained that investors perceive TARP recipients as not being strong enough to operate on their own. Others have complained about the government's unilateral ability to impose new restrictions on TARP recipients, including limitations on bonuses that could prompt thousands of employees to leave.[10]
Financial-industry professionals I spoke to on Wall Street were unsurprised by news of Goldman's backdoor bailout. "At the end of the day, Hank Paulson was there, so obviously he was going to take care of Goldman Sachs and his people there," one financial consultant remarked. "If there's one corporate entity that everyone feels gets away clean," said a trader taking a cigarette break, "it's Goldman because they have people in all the right places."[8] In the wake of the AIG bonus controversy, and the company's backdoor bailout of Goldman Sachs and foreign banks, Max Blumenthal went to Wall Street to talk to stunned denizens. He found street preachers, people recommending enhanced interrogation techniques, and a former credit analyst who had been forced to work in a strip club.[8]
While it was singed in the credit meltdown, Goldman Sachs, the alpha male of Wall Street, has emerged as a survivor. The cover of last week's Barron's heralded the resurrection of Goldman and Morgan Stanley - "the sole standouts," as Andrew Bary called them.[31]
Needless to say (and as CNBC pointed out last week ), if Goldman repays early it will be in a position to '''rule Wall Street''' by poaching superior talent from other firms still subject to TARP pay restrictions.[19]
Suncor Energy, Canada' No.2 oil company, agreed to buy rival Petro-Canada for about C$18.43 billion ($14.86 billion) to expand its oil sand reserves and create the country's biggest energy group. Britain's BG Group has acquired 70 percent of Australian coal seam gas producer Pure Energy and has extended the offer period in its agreed A$1.03 billion takeover bid for Pure. India-focused mining group Vedanta Resources plans to pay $34 million to boost its stake in Madras Aluminium Company Limited to 93 percent from 80 after an offer to minorities shareholders. Australian miner Straits Resources will sell part of its coal and salt assets to Thai energy firm PTT PCL in a deal worth about A$500 million ($343 million), a source familiar with the deal said. Palestinian Prime Minister Salam Fayyad said that a deal for Kuwait's Mobile Telecommunications Co to take a major stake in Palestinian operator Palestine Telecommunication Company (PalTel) could be signed in the coming days. [23] ICBC signed a deal in 2005 to sell a 10 percent stake to a consortium that included Goldman, Allianz and American Express Co for more than $3 billion.[32]
Goldman's investment was worth $1.8 billion in August 2005, when it agreed to buy the shares alongside Allianz AG and American Express Co. before ICBC's IPO the following year.[7]
Just a month earlier, when Goldman raised $5 billion from investor Warren Buffett, it sold preferred shares that carried a 10 percent interest rate. (At the same time, Goldman also raised $10 billion in a public offering of stock.)[31] On Oct. 28, Goldman sold $10 billion in preferred stock to the government, which bears an interest rate of 5 percent through 2013 (after which the rate bumps up to 9 percent).[31]
For Goldman and most other recipients, the annual payout is 5 percent. Richard Kovacevich, the chairman of Wells Fargo & Co ( WFC.N ), on March 13 complained about the strings attached to TARP. He also said that had the government not forced Wells Fargo to take $25 billion, the bank would have been able to raise private capital and perhaps avoid a later dividend cut.[10]
The timing of a sale seems right, as a lock-up period tying Goldman's hands ends late next month. The Journal reported Goldman could raise more than $1 billion by selling 15-20 percent of its holding.[20] Goldman could use proceeds from the sale to repay some of the $10 billion in capital it received from U.S. government last October.[16]
The Financial Times reports that sale of the stake in ICBC could raise $1.5 billion.[3] Wang Zhenning, an official in the news office of ICBC, said Monday that he wasn't aware of any talks with Goldman over its stake. Earlier this month, ICBC Chairman Jiang Jianqing told reporters that his bank was in talks with its strategic investors about a possible stake sale, but that a final decision hadn't been made.[24] Talks between Goldman and ICBC about a sale began late last year and include potentially divesting 15% to 20% of Goldman's stake in the Chinese bank.[3]
Reports surfaced that Goldman is in talks with Barclays (nyse: BCS - news - people ) about the sale of the British bank's iShares unit, which offers exchange-traded funds.[4] For related news, click on BARCLAYS ( BARC.L ) Barclays is in talks with Goldman Sachs ( GS.N ) about a sale of the British bank's iShare, a source familiar with the situation said, adding one more name to a growing list of possible bidders.[5] NEW DELHI: Financial major Goldman Sachs on Monday said there is still room for infusion of liquidity by the apex bank, despite the fact that the Reserve Bank has lowered rates aggressively since the economic crisis hit India. "Although there is still room to cut the cash reserve ratio (CRR), and we think they (RBI) will cut it by 150 basis points by mid-2009, the bulk of the rate cuts is behind us," Goldman Sachs Economist Tushar Poddar said in a research note. The central bank has lowered the CRR, the percentage of cash deposits banks are mandatorily required to keep with the central bank, from a high of 9 per cent in the third quarter of this fiscal to the current level of 5 per cent.[33]
Goldman Sachs shares jumped $14.61, or 15 percent, to finish at $111.93 on Monday amid a broad market rally.[2] H&F; wanted to form a consortium and was eyeing an offer of around $5.0 billion, while Bain Capital and Goldman Sachs were mulling separate offers.[4] Former Treasury Secretary Hank Paulson once served as Chairman and Chief Executive Officer for Goldman Sachs, afer working for the firm for decades. "Neither did it look good when Geithner ' himself a prot'g' of notorious Goldman alum John Thain, the Merrill Lynch chief who paid out billions in bonuses after the state spent billions bailing out his firm ' picked a former Goldman lobbyist named Mark Patterson to be his top aide," writes Matt Taibbi in Rolling Stone.[27]
AIG's securities lending unit paid Goldman $4.8 billion, Maiden Lane III (the entity created to unwind credit default swaps) paid Goldman $5.6 billion, and AIG has posted another $2.5 billion in collateral to Goldman. Goldman, and many other firms, made the mistake of a) buying insurance from a company that, it turned out, couldn't make good on its insurance contracts, and b) borrowing securities from, and lending securities to, a company that essentially went bankrupt. In normal bankruptcies, firms in these in situations have to get in line with other creditors and ultimately settle for a fraction of the amounts they're owed.[31] In November, Goldman was the first company to tap the program, issuing $5 billion in three-year notes at a 3.367 percent rate.[31]
According to the Journal, Goldman's shares in ICBC are valued at about $7.5 billion.[3] A sale of any ICBC shares would be impossible until a lockup period expires at the end of April, though, as the Journal points out, from May the U.S. bank would have to contend with new regulations governing share transactions in Chinese banks by foreign institutions.[7] Newell Rubbermaid (NYSE:NWL) said that it will offer $250 million in convertible notes and set up a new receivables financing facility in order to repay some of its outstanding debt. Newell also said it is lowering its first-quarter sales outlook, now expecting a mid-to-high-teen percentage rate decline. The company affirmed its earnings outlook, expecting 7-12 cents per share and will reduce its quarterly dividend to 5 cents from 10.5 cents.[6] The company now expects a net loss of $0.40 to $0.42 per share on sales of $115 to $120 million, vs. consensus estimates of a $0.35-per share loss on revenues of $135 million.[6]
Citigroup (NYSE:C) raised Phillips-Van Heusen Corp (NYSE:PVH) from Hold to Buy and increased its price target to $24 from $19. Despite a run up in the company's shares, the firm said it raised its rating because it still feels that the valuation remains attractive. Citigroup said it thinks the company "could report closer to the high end of its FY10 range of $2.00-$2.30 as the company controls costs, benefits from tough margin compares in the back half of the year, and saves money from restructuring plans."[6] The company's shares have rallied back above $100, and its market capitalization is nearly $47 billion.[31]
Shares of Dell closed Monday at $10.45 while Sun Microsystems shares slid 1 cent to $7.93 in premarket trade and IBM, a Dow component, slid 1.2 percent to $97.50. Iraq has invited Chevron Corp to jointly bid with France's Total against Norway's StatoilHydro for a contract to develop its 6 billion barrel Nahr Bin Umar oilfield, the country's oil minister said on Tuesday. "The Total and Chevron consortium are favored to win this contract because they have together studied a group of Iraqi oil fields, including Nahr Bin Umar," a senior official in the ministry told Reuters.[18]
Deutsche Bank on Tuesday said it remained comfortable that General Electric wouldn't be forced to raise further external equity funding, and that it had the internal capacity to provide up to $15 billion to $20 billion of support through the end of 2010. The firm kept its hold rating and $11 price target on the stock, a Dow component.[18] "If you want to be outraged, be outraged that the counterparties got paid out full value." During testimony before the Senate Banking Committee on March 6, Federal Reserve Vice Chairman Donald Kohn stonewalled senators when they demanded he identify the institutions that reaped money from the bailout of AIG. "I would be very concerned that if we gave out the names, people wouldn't want to do business with AIG," Kohn declared. By March 15, congressional pressure had become so overwhelming that AIG was compelled to release the names of its counterparties. They included French bank Société Générale, which received $11.9 billion; Germany's Deutsche Bank ($11.8 billion); and the UK's Barclays, which took $8.5 billion.[8] Deutsche Bank (NYSE:DB) announced that they had a good start to 2009 and said their capital positions were strong and expect to report a profit for the current fiscal year following its $5.3 billion (USD) loss for 2008. The company sees no reason that they would need to raise capital.[6]
Wait-there's more! Last fall, concerned that financial firms could raise funds only by issuing expensive debt to the likes of Buffett, the Federal Deposit Insurance Corp. established a program to guarantee new unsecured debt sold by banks. Many banks felt they didn't need to participate. (Here's a list of those that have opted out.) While the FDIC discloses the amount of debt that has been issued under the program (about $250 billion by the end of January), it doesn't disclose which firms have tapped into this program.[31] The bonuses paid to AIG executives from the insurance firm's bailout fund have become a national outrage, and with good reason. Members of AIG's financial-products division--the unit that sold more derivatives than the company could insure, bringing it to its knees--were essentially rewarded for their failures with $160 million in "retention" bonuses.[8] For related news, click on SWISS LIFE ( SLHN.VX ), MLP ( MLPG.DE ) Swiss Life said Germany's Talanx is buying a 9.9 percent stake in the company and will take 8.4 percent in German pensions specialist MLP from Swiss Life holdings, as the insurer announced a 2008 net profit of 345 million Swiss francs ($306.7 million).[5] The difference between borrowing $10 billion at 5 percent and borrowing $10 billion at 10 percent-in other words, the value of the government subsidy-is $500 million per year.[31] March flash PMI Due at 0828 GMT, manufacturing seen at 32.0 vs 32.1 in February, services seen at 41.0 vs 41.3 in February. The government expects the economy to shrink by between 4 percent and 4.5 percent this year, about twice as much as its previous forecast of a 2.25 percent contraction, Bild newspaper reported. It cited a government source as saying the government no longer expected Europe's biggest economy to return to slight growth in the fourth quarter of 2009.[32]
The Times report indicates that Goldman would like to return the money within the next month, a much quicker timetable than the year-end goal previously stated by CEO Lloyd Blankfein. The decision comes on the heels of criticism that Goldman was the biggest recipient of government money that AIG (AIG 1.48) paid out to its counterparties.[12] The real monster is in the secret money trail from U.S. Treasury to AIG to Goldman Sachs.[29] Was AIG just a conduit for Goldman? In the words of Eliot Spitzer, "The AIG bailout has been a way to hide an enormous second round of cash to the same group that had received TARP money already."[8] If Goldman did give back the TARP money, it would establish a new bar for financial and other businesses by which to measure the health of a company.[4] David Viniar, the chief financial officer of Goldman, has made noises about paying back the TARP funds soon.[31]
A Financial Times report indicates that Goldman has entered the bidding for iShares. Other interested parties, according to the report, are private equity group Bain Capital and a consortium led by Hellman & Friedman.[12] A sale, if it happens, would follow disposals of Chinese banking shares by UBS, Bank of America Corp (NYSE:BAC) and Royal Bank of Scotland Group plc, and make Goldman a large profit.[7] U.S. stocks jumped around 7 percent on Monday after Washington detailed a plan to purge toxic assets from bank balance sheets, rekindling hopes of a revival in bank lending. The FTSEurofirst 300.FTEU3 index of top European shares rose 3 percent on Monday, ending at its highest close since Feb. 19, propelled by buoyant banking shares.[5] PARIS, March 24 (Reuters) - European stocks were set to rise on Tuesday, extending the previous session's strong rally sparked by the U.S. plan to help banks get rid of troubled assets as well as better-than-feared housing data.[22]
DA Davidson on Tuesday said it expects the market to remain volatile "at least through the upcoming earnings season and most likely until the market gets strong evidence that the various Fed and Treasury programs have strengthened the banks' balance sheets." The firm added that the market was in a "lengthy bottoming process" and that many stocks have likely seen their bear market cycle lows, "including some of the most troubled banks that have received huge injections of TARP money." DA Davidson said it was waiting for three things before recommending that investors massively increase their equity exposure. It said it was looking for improvement in the credit markets, improvement in the housing market and for monthly job losses to stabilize or slow down.[11] s counterparties ''' at 100 cents on the dollar. What'''s worse, some of those companies are foreign banks that used credit-default swaps to exploit a regulatory loophole. Bottom line: covert subsidies were given to bank via AIG. Remember, Henry Paulson, who had perilously few inhibitions about shoveling money at banks, even when the pretexts were often dubious and the checks non-existent, nevertheless was afraid to overpay openly for dud assets, which is why he retreated from his original conception of the TARP as as way to hoover up bad debt.[28] The news may create a sense that scrutiny of the bailout, however late it might have been applied, is forcing some important reforms. An arguably greater outrage remains shrouded behind the bonus controversy: AIG's secret funneling of tens of billions in bailout money to its counterparties, including several foreign banks.[8] Instead of decrying the bonus payments to AIG executives, the American public should be demanding the indictment of Paulson, Summers, Geithner and Co. for IGL: Incomprehensibly Grand Larceny. Instead of trying to rescue the nation's giant banks, we should be demanding that they be shattered into little harmless pieces. Come to think of it, maybe it's time for a run on the banks--not because your money is not safe at Chase or Citibank or B of A, but because these institutions need to be killed off for the good of the nation.[14]
Dudley also said that saving AIG from collapse was the right thing to do to prevent further damage to the world economy. Shares of Newell Rubbermaid tumbled on Tuesday, after the company said it would slash its dividend in half for the second time in two months in a move to maintain an investment-grade rating. It also said its first-quarter sales would fall in the mid- to high-teens on a percentage basis. It previously forecast a low-to-mid-teen decline.[11] In his testimony prepared for the House Financial Services Committee, Federal Reserve Chairman Ben Bernanke said he wanted to sue AIG (NYSE:AIG) in order to block the company from paying millions of dollars in unwarranted bonuses, which has triggered a public backlash.[6] Everyone from financial workers to street preachers seemed fed up. When I jokingly raised a scenario to interview subjects where AIG executives were waterboarded until they returned their bonuses, few people even flinched.[8]
"If that's possible, it would be a good idea," one man flatly stated. On March 23, New York Attorney General Andrew Cuomo announced that nine of the top ten AIG bonus recipients had announced plans to return their bonuses.[8] For related news, click on DEUTSCHE BANK ( DBKGn.DE ) Deutsche Bank said it expects to return to profitability in 2009 if the global economy, financial markets, regulatory and competitive environment develop as foreseen.[5] The new rules include a requirement that trades in Chinese financial firms by foreigners must be executed on a stock exchange at prevailing market prices. They are set to take place on May 1 of this year.[24] Just last week, China made it more difficult for foreign institutions to buy or sell blocks of stock in Chinese financial firms. It cited a need to protect national assets.[24]
Auriga USA cut Cerner Corporation (NASDAQ:CERN) to Hold from Buy. The firm said the fundamentals remain intact, but the stock is trading within 8% of its target price of $47, which leaves very little upside potential.[6] GS appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a May '09 110 covered call (GS EB) for a net debit in the $98.38 area. That is also the break even stock price for this trade. This covered call has a 53 day duration, provides 12.11% downside protection and an 11.81% assigned return rate for an 81.34% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the GS Jan '10 20 Call (YFT AD) and selling the May '09 110 call (GS EB) for a $77.90 debit.[34]
Yves Smith called it "a lot of bells and whistles to finesse the fact that the government will wind up paying well above market for crappy paper." To this end the plan proposes to create funds in which private investors put in a small amount of their own money, and in return get large, non-recourse loans from the taxpayer, with which to buy bad ''' I mean misunderstood ''' assets. This is supposed to lead to fair prices because the funds will engage in competitive bidding. It'''s immediately obvious, if you think about it, that these funds will have skewed incentives.[28] Thanks Dave for reminding me. On the other hand.borrowing money has become a way of life for most Americans and anybody else who has easy access to it.some folks borrow money knowing from the beginning they will never pay it back.I personally believe at some points, it can become compulsive and even additive behavior to borrow money unecessarily. Therefore I personally believe we are witnessing the success of the biggest "Sting" operation known to mankind. we have become victims of our own bad habits and the Credit Card Cartel has taken advantage of a long known weakness of the American Society. Here's how it worked.loan the people what ever they want.if they don't pay it back, no problem, the government will pass legislation and pay it off for them.either way the Credirt Card Cartel wins. and the people pay the interest in any case.What a Deal!!!!!![14] The TARP has already been handed out, there's nothing we can do right now. We can only hope the banks pay back with interest so the government can profit from this move.[9] Speaking of Dutch, the Finance Ministry in The Hague said it would tackle bonuses at companies receiving government support. Big Dutch bank ING said it was asking some staff to give back their bonus payments for 2008.[23]
REUTERS/Andrew Winning Last fall Goldman transformed itself from an unregulated U.S. investment bank into a bank holding company so it could accept deposits. [31] Last fall, in the wake of the failure of Lehman Bros., Goldman transformed itself from an unregulated investment bank into a bank holding company so it could accept deposits.[31]
Stifel Financial Corp said it would acquire up to 55 branches of UBS Wealth Management Americas to expand across the United States in a deal that will boost the investment bank's profit in the first year.[20]
Over the years, Goldman Sachs (NYSE: GS ) has amassed a hefty portfolio of investments.[17] It's natural to assume that those who are fired early get the worst deal - after all, they've been out of work longest. When it comes to severance packages, on average, those who were the first victims of the subprime-sparked crunch got better deals. At Goldman Sachs, for example, those who were retrenched in the summer got statutory severance plus a pro rata bonus for the months they had worked, based on 2007 levels of incentive compensation. In the third quarter, those who were laid off at Merrill Lynch and UBS also got severance pay plus a payout to compensate them for the fact that they would not be on the payroll at bonus distribution time.[26] In February, Congresswoman Waters received a lot of attention after telling " the heads of J.P. Morgan Chase, Bank of America, Goldman Sachs and five other powerhouses " at a prior House hearing, "To the captains of the universe sitting here before all of us, all of my political life I have been in disagreement with the banking industry."[27] Rep. Maxine Waters (DEM-CA) asked Treasury Secretary Timothy Geithner about his connections to Goldman Sachs at a House banking hearing Tuesday morning.[27]
Goldman Sachs stock has been showing support around 97.76 and resistance in the 119.02 range.[34]
For the paperback, Ellis might want to add the following proviso: so long as the government is willing to give it billions of dollars. People sometimes refer to the firm as Government Sachs because so many of its former employees wind up in high positions in Washington (Robert Rubin, Henry Paulson, etc.). [31] Global energy giants BP, Eni and Shell are eyeing possible bids for Australia's No.3 oil and gas firm Santos, which one analyst valued at around $7 billion, but a bid from China looks unlikely, dealmakers say.[20] The company left open the possibility of raising the offering amount to 1.25 billion euros. The global steel producer also said its first quarter 2009 EBITDA guidance could come in plus or minus 15% of its $1 billion (USD) estimate.[6] The move could reportedly raise more than $1 billion, people close to the talks say.[24] Revenues in the quarter fell 26.6% year-over-year to $1 billion, but came in ahead of consensus estimates of $976 million.[6] The company sees full-year 2009 revenue in the range of $2.80 billion and $2.95 billion, vs. estimates of $3.33 billion.[6] On March 12, it sold another $5 billion. In all, the company says it has sold $21 billion in such bonds.[31]
The value of the stake has spiked by 3X to $7.5 billion or so. Although, there could be a hitch (doesn't this seem to be the case for all mega-deals?).[17] Based on Tuesday's close in Hong Kong, the 4.9% stake was worth $8.8 billion.[7]
The bank is reported to be cutting its stake in Industrial and Commercial Bank of China and perhaps buying into exchange-traded funds provider iShares. [20] A stake sale sanctioned by Goldman's rocket scientists hardly indicates the direction of the herd.[20]
Geithner and Paulson were former Goldman executives themselves; as CEO in 2005 and 2006, Paulson orchestrated many of the firm's risky endeavors with AIG's financial-products division. Though details of the meeting remain sparse, its outcome is now clear: With two of Goldman's top guns by his side, Paulson arranged to cover his former company's losses with federal welfare.[8] Goldman's emergence from the wreckage could be seen as yet another glorious chapter for the firm. Charles Ellis, in his book about Goldman, The Partnership, lionized the firm as the only company "with such strengths that it operates with almost no external constraints in virtually any financial market it chooses, on the terms it chooses, on the scale it chooses, when it chooses, and with the partners it chooses."[31] An interesting graph in yesterday'''s FT (which unfortunately hasn'''t been replicated on the web), showed Goldman is doing quite well already - it now ranks ninth by market value among global financial services firms, up from 20th in 1999.[19]
Tally up the various forms of direct and indirect taxpayer assistance Goldman has received in the last several months, and it turns out that you and I are providing billions of dollars to bail out the proud firm.[31] Lloyd Blankfein- current CEO who helped orchestrate the AIG bailout, without which Goldman would have suffered billions of dollars in losses.[8] As Eliot Spitzer pointed out, because the government didn't let AIG formally file for bankruptcy, Goldman, and so many others, have instead been made whole.[31]
The Supreme Court really represents the American oligarchs that keep the politicians as servants. Look at what happened in AIG. Do not look at the $200 million or so they distributed to some morons that were worth nothing but jail terms.[29] You can flip the coin from Democrats to Republican and back; you find same old junk ' the representation of the rich, corrupt, greedy, blood sucking American oligarchs. If you have any doubt, listen to this: Senator's Todd, Kerry, Obama, and Clinton were the top receivers of Fannie Mae political contributions from 1989 to 2008. They also received top funds from AIG.[29]
How convenient, they're giving back the TARP money right after getting bailed out the backdoor via AIG.[13] There is a much bigger issue that has barely been touched upon by Congress: the way tens of billions of dollars of taxpayers''' money has been funneled to A.I.G.'''[28]
ENDESA ( ELE.MC ) Utility Endesa is seeking a forward-start agreement on an existing 1.53 billion euro ($2.1 billion) loan and is also raising a new 1.5 billion euro loan, banking sources close to the deal said on Monday. [5] U.S. taxpayers were unknowingly tapped for $20 billion in foreign aid to companies that exploited regulatory loopholes.[8] Bids for iShares, could reach as high as $6.5 billion according to some reports.[12] Sources said over the weekend that private equity groups Hellman & Friedman, Bain Capital and TPG had all shown interest in iShares, so a rare bit of pricing power could be emerging for the Barclays unit, which could raise up to $5 billion.[20]
Bank of America (NYSE:BAC) raised Ener1, Inc. (NYSE:HEV) from Neutral to Buy. The firm raised its price target from $3 to $7.[6] UBS (NYSE:UBS) lowered Intermune (NASDAQ:ITMN) to Sell from Neutral. The firm raised its price target to $15.00 from $12.50.[6]
Benchmark Capital downgraded Tesoro (NYSE:TSO) to Sell from Hold while setting its price target to $10 per share.[6]
Since the start of the current fiscal year, booking volumes have risen 10% from the year-ago period, but on significantly lower prices. The company trimmed its full-year 2009 EPS, now expected in the range of $2.10 and $2.30, down from its previously forecasted range of $2.25 and $2.75, but still ahead of estimates of $2.18.[6] The company sees Q1 revenues in the range of $600 million and $625 million, vs. estimates of $649 million.[6] Consulting firm BearingPoint Inc said it agreed to sell a large portion of its public services unit to Deloitte for $350 million.[20] The firm set a target price of $211 holding that the worst is over and the firm can re-focus on generating profits.[6]
China remains a massive market opportunity for Goldman. The firm needs to be fairly cautious with these matters.[17] Over the last few months, others have also beaten a retreat from China and other points East as risk aversion has grown to dizzying heights. Other financial heavyweights, notably Citigroup, had to repair tattered balance sheets, while Goldman appears to be acting from a position of relative strength.[20]
Bernanke once again supported the notion for a need of increased oversight, after which Treasury Secretary Geithner seized the opportunity to request powers that would enable the Treasury to seize control of banks, take over toxic assets and spin off good ones to rivals in better condition, much like the ability granted to the Federal Deposit Insurance Corporation (FDIC). Geithner was clear in his belief that the nation's Treasury Secretary should hold unprecedented power in the event that a major financial institution needed to be taken over and run. [6] Now, it seems, more details of the AIG rescue are coming to light, with more reasons for anger. Just wait until Treasury Secretary Timothy Geithner formally unveils this week the administration's plan to buy up toxic assets from banks.[28]
Credit Suisse (NYSE:CS) shares rose in overseas trading after the Swiss bank said it expects to emerge better positioned from the credit crisis than its main competitor UBS (NYSE:UBS) as it expects to gain additional market share in wealth management following the U.S. tax scandal that has crippled its rival. Credit Suisse has said it will request approval from shareholders to adjust its share capital, which could be an indication of possible acquisitions. [6] You say that the new trillion-dollar bailout proposal will lead to disaster, because it will fail, in the sense that it won't lead to renewed lending (when people are cutting back on spending, etc). It's even much worse than that, because even if it "succeeded" (ie, stimulated more lending), the U.S. taxpayers would still be paying for the sins of the banksters for the next 50 years.[14] Lindorfs article is right on target,instead of helping the failed institutions pay off the honest folks who just deposited their money and destroy the slimeballs who used their money on ponzi schemes.We could have saved trillions in tax dollars and taught the crooks a lesson.To the fools who keep saying if only we elected hillary things wuld have changed.No,just look at bill,he allowed free trade to expand and helped destroyed unions,it would have been more of the same as Obama.If Democrats would have been smart instead of stupid they would have elected Kucinich a real outsider who isn't beholding to the corporations.All you people destroyed America as much as the republicans.FDR propped up the people not the corporations,he put and tried to put limits on the power of the corporations with regulations.Do you see Obama,Hillarty or especially the Republicans and libertarians trying to do this and make capitalism work for not against the people.When this country really fails in the next few years,remember you caused it by trusting corporate stooges and not real liberals who actually do give a damn about you and not big business.Any one with a lick of sense would have seen promoting the global economy would cause the destruction of America by destroying our manufacturing base and wage based system,anyone with a lick of sense would have seen deregulating business would cause problems as they have throughout our countries history.Business greed has always caused recessions and depressions or if your really stupid you can believe the republican lie its part of the cleensing cycle.[14]
Deutsche Bank, Germany's largest bank, did add words of caution to the report, saying that there was little sign of recovery in the current year and it may not be till 2010 when the banking industry sees a recovery of "some degree."[6] Carl Gutierrez, 03.24.09, 10:15 AM EDT The bank holding company wants to return funds to taxpayers, but it will not do so before the stress test.[4]
SOURCES
1. Goldman mulls ICBC stake sale: report | Deals | Reuters
2. Report: Goldman considering selling ICBC stake - BusinessWeek
3. Goldman Mulls Sale of 4.9% China ICBC Stake | Banks | Financial Articles & Investing News | TheStreet.com
4. Goldman Looking To De-TARP - Forbes.com
5. Europe Factors-Shares set to extend rally on bank plan | Reuters
6. News Briefs - Comtex SmarTrend Alert
7. Report: Goldman plans ICBC share sale (Dealscape)
8. Goldman Rage - The Daily Beast
9. GS to repay TARP. Why not?
10. Goldman Sachs eyes repaying TARP in month: report | U.S. | Reuters
11. Business finance news - currency market news - online UK currency markets - financial news - Interactive Investor
12. Briefing.com: Goldman May Return TARP Money Soon
13. Goldman Sachs May Repay TARP Next Month
14. OpEdNews ' Obama Administration Careening Towards Disaster (and Taking the Country With It)
15. Goldman Looking To Dump Shares Of ICBC
16. Hawaii Reporter: Hawaii Reporter
17. Goldman: Pulling the trigger on some mega-deals? - BloggingStocks
18. Business finance news - currency market news - online UK currency markets - financial news - Interactive Investor
19. Finance jobs, banking jobs, recruitment in investment banking & in the financial markets
20. DealZone » Blog Archive » Goldman: short East, long West? | Blogs |
21. Moneynews - Goldman Could Return TARP Cash Soon
22. Business finance news - currency market news - online UK currency markets - financial news - Interactive Investor
23. DealZone » Blog Archive » Office of Executive Compensation, it's a Public-Private Affair | Blogs |
24. Goldman Sachs Might Sell Stock In China Bank ICBC - Financials * US * News * Story - CNBC.com
25. Goldman Sachs (GS) May Take Chinese Money To Pay Back TARP Money - 247 Wall Street
26. Severance packages take a dive - General - FinanceAsia.com - The network for financial decision makers
27. The Raw Story | Congresswoman presses Geithner on connections to Goldman Sachs
28. The Washington Independent » Move Over AIG, There's Plenty of Outrage To Go Around
29. IndiaDaily - Barack Obama - a President without Presidency ' the secret money trail from AIG to Goldman
30. Talking Points Memo | Not So Fast
31. Goldman Sachs, Welfare Queen
32. German stocks - Factors to watch on March 24 - Forbes.com
33. Goldman Sachs sees scope for more rate cuts by RBI- Finance-Economy-News-The Economic Times
34. Goldman Sachs (GS) PriceWatch Alert Shows Bullish Technicals
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