The NYT discussed whether Goldman Sachs is really the poster child of the new welfare state. Unfortunately, it framed the story largely as a he said (Goldman is getting rich on taxpayers' money)/ she said (no, they earn their money) rather than presenting the key facts. High on the list of neglected facts is the $28 billion that Goldman borrowed with a guarantee from the FDIC. The article makes reference to this loan, but doesn't tell readers the amount. If the government guarantee lowered the interest rate by 2 percentage points, then the government is effectively handing Goldman shareholders and top management $560 million dollars. This is approximately equal to the money need to pay for health care for 180,000 kid years under the SCHIP program. Goldman also is borrowing an amount that the Fed will not disclose through its special lending facilities. At the time that Glass Steagall was repealed in 1999, there was a commitment to maintain a separation between investment banking and commercial banking, so that investment banks could not gamble with government insured deposits. The Federal Reserve Board and other regulators have allowed Goldman to completely ignore this separation as they quite openly speculate with money lent to them by the government.
--Dean Baker
