The Brutal Reality of Gov't Red TARP and Goldman Sachs Developing, As Predicted...

When it comes to the TARP, Goldman Sachs (GS) and the Obama administration have been portrayed as two Englishmen arguing over a restaurant check: "Please let me pay," "No, no, my dear boy, I won't hear of it." Goldman's desire to repay its $10 billion slug of TARP money pronto is understandable. The chief reason is to remove associated restrictions on something that goes to the heart of its business model: how much people get paid. The Troubled Asset Relief Program's aim, though, is to stabilize the financial system as a whole. Recent signs of improvement on the front are still questionable. Goldman's outsize trading gains in the first quarter, coming alongside weakness in other businesses, offer limited comfort. And Goldman still utilizes other government guarantees, having issued $21 billion of cheap debt backed by the part the Temporary Liquidity Guarantee Program since October, according to Dealogic. From the government's perspective, more retail-exposed banks still face big hits on the consumer credit portfolios. Allowing Goldman to repay now, the thinking goes, risks stigmatizing others not yet able to do so, while the system is still fragile. The bank may well have to wait. Having just raised at least $5 billion by issuing stock, knocking 9% off its share price in the process, Goldman appears confident of success. In any case, a delay in approval to repay TARP would not wholly remove Goldman's advantage. Merely by demonstrating it can raise fresh capital to repay the TARP, it separates itself from the pack. Even if the long term outlook of the investment banking model remains foggy, the imperative to get one up on one's rivals remains as a strong as ever. Write to Liam Denning at liam.denning@wsj.com <mailto:liam.denning@wsj.com> (TALK BACK: We invite readers to send us comments on this or other financial news topics. Please email us at TalkbackAmericas@dowjones.com. Readers should include their full names, work or home addresses and telephone numbers for verification purposes. We reserve the right to edit and publish your comments along with your name; we reserve the right not to publish reader comments.) Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: http://www.djnewsplus.com/access/al?rnd=tttPu7foH6mxFOSPPy0mpw%3D%3D. You can use this link on the day this article is published and the following day. (END) Dow Jones Newswires April 14, 2009 16:48 ET (20:48 GMT) Copyright (c) 2009 Dow Jones & Company, Inc.- - 04 48 PM EDT 04-14-09