Hen House Preservation Principles
“Goldman to make record bonus payout.”
–headline, guardian.co.uk (6/21/09)
Principle #1: When presented with overwhelming evidence that the foxes have taken over the hen house . . . stop adding chickens!
Principle #2: It’s not hard to figure out — at least in the short run — which foxes stole the most chickens: look for the ones with the bulging bellies (see, headline).
At the height of the financial crisis last fall, Goldman Sachs “shapeshifted,” in record time, from a Wall Street investment bank to a bank holding company. As an investment bank, Goldman Sachs wasn’t eligible for direct aid from the Federal Reserve; as a bank holding company, it was.
Such aid was promptly forthcoming — by the tens of billions. Exactly how much of a lifeline that aid constituted isn’t known (and may never be). However, it never hurts to have another $10 (or $30) billion of capital and federal guaranties backstopping you in the midst of the worst financial melt-down since The Great Depression (one that you helped precipitate).
Now, of course, the financial markets (if not the broader economy) appear to be recovering, and Goldman Sachs has decided that the pay restrictions that came with the federal aid are unduly onerous.
Voila! The government gets its money back.
Want to bet what the company’s next move is? (assuming, of course, that the financial markets remain benign):
Take itself private, so it doesn’t have to publicly disclose its pay practices anymore.
[Not sure how much any of that had to do with real estate — but it sure felt good!]