by Robert Reich
Should we breath a sigh of relief that Goldman Sachs has posted record earnings as revenue from trading and stock underwriting reached all-time highs (second quarter net income was $3.44 billion) -- less than a year after the firm took $10 billion directly from taxpayers and $13 billion indirectly through AIG?In some ways, yes. That Goldman is back signals that the worst of Wall Street's recent meltdown is over. And at least New York City's economy will again benefit from the trickle-down effects of the multi-million dollar bonuses of Goldman's executives and traders.
But in another respect, Goldman's resurgence should send shivers down the backs of every hardworking American who has lost a large chunk of retirement savings in this economic debacle, as well as the millions who have lost their jobs. Why? Because Goldman's high-risk business model hasn't changed one bit from what it was before the implosion of Wall Street. Goldman is still wagering its capital and fueling giant bets with lots of borrowed money. While its rivals have pared back risks, Goldman has increased them. And its renewed success at this old game will only encourage other big banks to go back into it.
Meanwhile, Goldman is still depending on $28 billion in outstanding debt issued cheaply with the backing of the Federal Deposit Insurance Corporation. Which means you and I are still indirectly funding Goldman's high-risk operations.