The Ignorant Investor

Ignorance Can't Stand in the Way of My Opinion

Tuesday, July 14, 2009

 

Everyone back to the races

Comfortably beating analysts’ forecasts, Goldman Sachs earned second-quarter profits of $3.44 billion, or $4.93 a share, the bank announced on Tuesday. The results continue a robust turnaround for the firm since it rode out the final tumultuous months of 2008 with the help of a federal rescue. They come just one month after it paid back its $10 billion in federal aid.

This is a very significant development for Wall Street and the Obama administration as a whole. Once Goldman records big profits, the pressure will be on everyone else on the street to catch up. Those traders and managers that now hesitant to take too much risk will be prodded into putting more capital on the line. Or they'll be replaced with braver gamblers. Who will cover the losses if the worst happens? Geithner and Bernanke, with new checks.

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