Goldman Sachs Reaps $3.4 Billion: Is the Moral Hazard Caused by TARP Already Here?

Is Goldman well capitalized enough to survive the next black swan? It doesn’t matter. As Shanley says in her analysis of Goldman’s bonds: “The company’s debt spreads clearly benefit from the perception that it is too big to fail.” So the price of Goldman’s bonds mean that traders expect that the government will bail Lloyd Blankfein out of any serious trouble his traders get into.”
—Wall Street Learned Nothing, Forbes.com, July 20, 2009.

ATLANTA— Only a few short months removed from the near-collapse of our financial system last Fall, we are reading that Wall Street appears to be reaping significant profits engaging in highly risky transactions, many of which are the same types of transactions that were at the root of the financial crisis.  

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