Goldman Wants Out From Under Government's Thumb

Escape the grip of the government, extricate itself from heightened government control, get out from under the government's thumb—these are some of the terms used by the New York Times and the Wall Street Journal to describe Goldman Sachs' motives in repaying a $10 billion government loan extended six months ago. The bank, which has remained one of the strongest vestiges of precrunch Wall Street, reported yesterday that it earned $1.81 billion last quarter, a stronger showing than expected, and planned to raise an additional $5 billion through the sale of new commons shares. With that, Goldman intends to pay back taxpayer money as soon as possible.

"If successful, Goldman would become the first major bank to return funds received under the Troubled Asset Relief Program, or TARP. Such a step would probably enable Goldman—long one of the most lucrative places to work on Wall Street—to free itself from government-imposed restrictions on compensation," the NYT says. The WSJ adds: "Goldman managers have a big incentive to escape the state's clutches. Last year, 953 Goldman employees—nearly one in 30—were paid in excess of $1 million apiece, according to people familiar with the matter. But tight federal restrictions connected to the financial-sector bailout have severely crimped the Wall Street firm's ability to offer such lavish pay this year."

In its coverage, the Washington Post indulges readers' taste for juicy details, describing how at a White House meeting two weeks ago where President Obama urged the CEOs of all the major banks not to repay the loans too soon, Jamie Dimon, CEO of JPMorgan, gave Treasury Secretary Timothy Geithner a fake check. "Geithner looked at it and, without smiling, handed it back to Dimon."

Did someone say nationalization? Bloomberg, which also gave the Goldman story top billing in its breaking news section, is reporting that the government may take a stake in a "stripped down" General Motors as payment for the $13.4 billion owed it by the foundering carmaker. The size of the stake has not yet been determined. The company's bondholders, who own $27.5 billion in debt, may also get a small stake (ditto on the size) in the revamped manufacturer. Previously, bondholders had been offered 90 percent of the company's equity, but that proposal was duly squashed by the White House when it rejected GM's restructuring plan. "The swap would be part of an effort to cut GM's debt as the carmaker approaches a June 1 deadline to come up with a plan to become viable," Bloomberg says.

The WSJ leads its front page with a look at Herb Allison, CEO of Fannie Mae, who has been identified as the frontrunner to head TARP. The 65-year-old former chairman of TIAA-CREF joined Fannie in September after the government nationalized the mortgage-lender. The only snag, says the paper, is that if Allison leaves Fannie, the government will have to find permanent leaders to oversee both Fannie and its sister company, Freddie Mac, from which CEO David Moffett announced his resignation last month. "If confirmed ...[Allison] will have to defend plans for spending the program's remaining cash, and would likely represent the administration if it requests more bailout funds, which many observers expect," the WSJ writes.

The Carlyle Group, "one of the nation's largest and most politically connected private equity firms," according to the NYT, is feeling the heat from the New York State prosecutors office and the SEC, which are investigating the firm's involvement in an alleged pay-to-play scandal involving two aides to former New York State Comptroller Alan Hevesi. The aides "were accused of selling access to the state's $122 billion pension fund and reaping millions of dollars for themselves," explains the paper. The SEC, meanwhile, has filed a "parallel action" against the aides, accusing them of violating several securities laws. Carlyle might have paid "millions of dollars in improper payments to intermediaries in exchange for investments from New York's state pension fund." The firm manages $1.5 billion in pension monies for the state. Carlyle has denied any wrongdoing.