Goldman Sachs To Repay Some Bailout Money

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Goldman Sachs sold $5 billion of stock Tuesday. The company says it wants to use the proceeds to begin paying back the government for all the bailout money it got last fall.


From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.


And I'm Robert Siegel. A few months ago it would have been nearly impossible for a big bank to raise five billion dollars in a single day by selling stock. But that is exactly what Goldman Sachs did today and the company says it wants to use the proceeds to begin paying back the government for all the bailout money it got last fall. Goldman says it has a duty to repay the money as soon as it can. But others say that the bank is more interested in escaping the conditions that came along with that government money. NPR's Jim Zarroli joins us now. And Jim, first how is that Goldman's in a position to pay back the money it received when other banks still appear to be struggling.

JIM ZARROLI: Well, Goldman Sachs has been a profitable bank for a long time. It lost money in the second half of last year. Yesterday it came out and said that it had basically rebounded. It did a lot better than anyone thought. Why did it do so well? The company says revenues and things like commodities and bond trading were higher than anyone expected. And one of the reasons it did so well in those areas interestingly is that its biggest rivals, Lehman Brothers and Bear Stearns, basically no longer exist. They collapsed last year. So, there's this kind of big landscape of destruction in investment banking and Goldman Sachs has sort of risen above that and survived.

SIEGEL: The boss at Goldman, Lloyd Blankfein, told us last week and they've said it again that Goldman wants to pay back the money that it took from the Troubled Asset Relief Program, the so-called TARP, as soon as they can. How long is that expected to take?

ZARROLI: Well, the company needs to raise more money. It needs $10 billion. It should be able to do that relatively easily. One of the things that Goldman has to do is to wait until till the end of these stress tests that the government is running. The government is basically running the banks through a series of computer simulations that address how they'd do in economic catastrophes, basically an effort to show investors that the banks are strong. The point is Goldman really cannot act until that is done and that's supposed to be finished at the end of this month.

SIEGEL: And the government's reaction to Goldman's enthusiasm, very public enthusiasm, of giving the money back?

ZARROLI: Well, there hasn't been any official comment yet. The Obama administration I think has made pretty clear that it feels like it doesn't want to see too many banks do that. And the reason for that is this: If you let Goldman out of the program then what does that say about the other banks that can't afford to pay the money back right away. Won't they be kind of stigmatized? Will people lose confidence in them, which is a terrible thing to happen to a bank? So the government really is in a position where it has to proceed pretty carefully…

SIEGEL: The government doesn't want TARP money to become an indicator of potential insolvency at any bank that's still holding it…

ZARROLI: Right, which is the reason why they forced some of the - all of the major banks to take TARP money last year.

SIEGEL: But if Goldman's aware of Washington's reluctance for it to get out of the TARP program, why is it expressing such eagerness to do so?

ZARROLI: Well if you take the TARP money you basically have to submit to a level of government interference that no bank likes - restrictions about pay for instance. Goldman has always been a place that pays very, very well. The Wall Street Journal today said that more than 900 people had earned a million dollars or more last year. That is much more than comparable sized investment banks. There is also something else I think that the environment for banks has really improved in the past few weeks. Stock prices were up, investors seemed to feel better about banks. So I think Goldman just said, you know, this is a pretty good opportunity for us to move in.

SIEGEL: Goldman just prior to this stock sell had a very good earnings report for the first quarter. We have other banks reporting their earnings later this week and those should be newsworthy.

ZARROLI: They should. We still have to hear from Citigroup, we have to hear from Bank of America, JP Morgan Chase. Some of those banks have come out and said already that they think their earnings were better than expected. Some of them are going to report losses.

SIEGEL: Thank you, Jim.

ZARROLI: You're welcome.

SIEGEL: That's NPR's Jim Zarroli.

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