Six months after accepting a financial lifeline from Washington, a newly profitable Goldman Sachs is pushing to return the billions of taxpayer dollars that it received in an effort to extricate itself from heightened government control.
Goldman, which rode out the final, tumultuous months of 2008 with the help of a federal rescue, reported strong quarterly profits on Monday and said that it would seek to raise money in the capital markets to repay the government.
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.
Many analysts welcomed the news as the latest in a series of signs that the financial industry is stabilizing. But others warned of a looming divide between a handful of banks like Goldman, which may be strong enough to return their TARP money, and the many others that are too weak to go without government funds.
It is unclear how quickly Goldman, which was also a beneficiary of a separate government rescue of the American International Group, might be allowed to return the $10 billion it accepted last October. While Goldman’s latest results bolster its case for untangling itself from TARP, federal regulators are nonetheless concerned about the health of the broader financial industry and the implications such a move might have for other institutions.
“The issue is really, will the government give Goldman special dispensation to get out first?” said Brad Hintz, an analyst at Sanford C. Bernstein. “Goldman can walk the halls of Congress waving a check, but is it in the best interest of the marketplace for them to pay it back?”
Goldman indicated in early February that it would seek to repay the funds, and since then, several other banks have said they would like to do the same. Not all banks, however, are likely to bounce back as quickly as Goldman, despite expectations that other banks will report strong results for the first quarter.
Goldman announced profits of $1.66 billion in the quarter, marking a strong comeback from a loss in late 2008.