Mean Street: Congratulations, American Taxpayer, You’re the Loser
[By Evan Newmark - WSJ ] Well, it may not be official, America, but within a month or two, it will be. You’re getting stuck with all the losers. You’re already the proud owner of AIG, Fannie Mae and Freddie Mac.
And even with today’s better-than-expected earnings out of Citi, it’s clear that you’ll be holding this “TARP baby” (Jamie Dimon’s words, not mine) for some time to come.
Meanwhile, Wells Fargo, Goldman Sachs and J.P. Morgan Chase have recently reported strong profits and are looking to exit the TARP as soon as possible.
They’re the winners. And guess what that makes the ones you own?
Of course, it was inevitable that the good banks would pull away from the bad ones. It was clear even back in October when Treasury Secretary Hank Paulson forced the top nine U.S. banks to accept the TARP money that only a few – Citi, Bank of America and Morgan Stanley — desperately needed it.
But what is surprising is the Mach 2 speed by which the good banks are pulling away.
Earlier this week on the back of strong quarterly earnings, Goldman raised $5 billion to repay the TARP. All along, CEO Lloyd Blankfein has said that Goldman had no intention of changing what it does.
And boy, he meant it. The bank is still taking plenty of trading risks. Average daily VAR, the amount of money Goldman can lose in a given day, rose 22% over last quarter.
And TARP or no TARP, Goldman just set aside a fat 50% of its revenues for salaries and bonuses — just as before the Crash. Blankfein intends to keep his best people.
The view from another winner, J.P. Morgan, pretty much mirrors that of Goldman: record revenues in investment banking, no big changes to comp policy and hasta la vista TARP.
On yesterday’s earnings call, CEO Jamie Dimon made polite noises of wanting to do “what’s in the interest of the United States.” But you can forget about Dimon participating in the Treasury’s big Public-Private Investment Program. He’s done with Washington.
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