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For Goldman's stock, it's like the crash never happened

July 16, 2009 |  6:30 am

Goldman Sachs Group's record second-quarter earnings report this week just generated more enmity toward the Wall Street titan, if more is even possible at this point.

Fans of Matt Taibbi must immediately have flashed back to his characterization of Goldman as "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money."

Charlie Gasparino asserts that the $3.4-billion quarterly profit shows that the firm has expertly milked its government bailout and the collapse of its rivals, while resuming "many of the risk-taking activities that got it into trouble in the first place."

Mike Morgan, who just won a court battle with the bank to keep his goldmansachs666.com website operating, says he will remain devoted to demonstrating "how destructive this company is to our lives and the hopes and dreams of our children." Yikes.

Fi-goldman16 But for Goldman’s long-time shareholders, it’s all good. On Wednesday the company’s stock jumped $5.60 to close at $155.26, the highest since Sept. 11 of last year.

Why is that date significant? It was just before the weekend that Lehman Bros. collapsed -- the trigger for the financial-system meltdown.

So, for a buy-and-hold Goldman shareholder, it’s now as if the fall credit wipeout and market crash never happened. And, by the way, Goldman investors never suffered a dividend cut, either.

Most financial stocks still are far below their pre-Lehman prices. The average financial issue in the Standard & Poor’s 500 index would have to rise 71% to recoup its post-Lehman losses.

Among Goldman’s major rivals, shares of JPMorgan Chase, now $36.26, were at $41.17 just before Lehman’s end. That isn’t too much ground to make up.

But Bank of America Corp., at $13.42 now, is less than half its pre-Lehman price of $33.74. Morgan Stanley, at $28.80, would have to get to $37.23 to make up all the lost ground. And Citigroup? At $3.17, it would have to rise 466% to get back to the pre-Lehman price of $17.96.

Goldman being Goldman, it has managed not only to survive the financial calamity but to thrive. And of course, it didn’t hurt the firm to have $10 billion of government capital on its books during the worst of the crisis, just in case. That money has since been repaid.

The risk-taking issue, particularly with regard to Goldman’s vaunted trading operations, is no small matter. You don’t make $3.4 billion in a quarter on Wall Street by being risk-averse.

So what would happen if markets were to crumble again and Goldman were to get caught on the wrong side of too many trades? Would the public really stand for another infusion of government money into the most hated firm on the Street?

If the Obama administration has a recurring nightmare about what could yet go wrong in the battered financial system, the image of Goldman hat-in-hand must be one of the most vivid scenes.

Inconceivable? Certainly -- just like so many things that have happened over the last 12 months.

-- Tom Petruno

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