Many malls and even Fleet Farm, moved to discount Halloween goods a week ago. They did this to make room for Christmas displays and merchandise. While many folks are already able to do their Christmas shopping, most of us wait until December 24th or 25th to deliver our Christmas gifts. Not so with the Treasury department!
After a ridiculous delay, considering we were all in “grave danger,” Treasury has finally gotten around to doling out its $700 billion dollar bail out. Over the past couple of weeks Treasury has struck deals with nine financial institutions including Goldman Sachs who Paulson used to work for.
You may remember one of the items I carped about in the “bail out” bill was that it gave Paulson incredible latitude in determining how, when and why to use the $700 billion. One would think that for that kind of money Congress would be just slightly concerned about how it would be used…but they really weren’t. Paulson had evidently convinced Congress that the problems were so complex and changing so rapidly that he couldn’t be held accountable to a fixed plan. Well, in the immortal words of Jeremiah Wright, “America’s chickens are coming home to roost!”
The United Steel Workers have been doing a little research, analysis and calculation on Paulson’s “investments.” One of his new found pets, Goldman Sachs, just happened to have a very comparable transaction just a couple of weeks back. You may remember the news when just 3 weeks ago Warren Buffet invested $5 billion in Goldman Sachs. Turns out that his investment was very similar to the one that the Treasury made so the value should be similar too, right?
Wrong!
The analysis that the UAW did showed that in just 3 weeks time while Buffet got paid interest of 10%, Treasury was only able to get 5%. Second, while Buffet got warrants (the ability to buy additional shares) that equal 100% of his original investment, Treasury was only able to get 15%…oh and it could be diluted down to 7.5%.
Using a well recognized financial analysis method for determining the value of these types of transactions, the UAW determined that Warren Buffet paid $5 billion, Treasury paid $10 billion for….just 3 weeks later a 100% premium! Does anyone remember anyone sounding the “all clear” in the financial markets that would warrant a 100% increase in valuation for Goldman Sachs in just 3 weeks?
I’m not normally a fan of union leadership. Most of what I see them doing is feathering their own nests at the expense of their membership. In this case, however, kudos to them for doing a little research and getting this information out.
May I remind you one last time that Paulson, and many of the people currently working for him are former employees of Goldman Sachs. As the UAW points out, neither Paulson or his employees have disclosed whether they are still shareholders of Goldman Sachs.
If the gift that Treasury gave Goldman Sachs is replicated in each of their deals, the $700 billion bail out, that wasn’t supposed to cost the taxpayer anything, contains at least, a $350 billion gift!
Merry Christmas Wall Street! I hope you remember all of us come Kwanzaa
