While publicly maintaining a posture that they were financially healthy and implying they didn't need a government bailout, Goldman Sachs in reality borrowed multi-billions from the Fed. Most curious, given the sums involved and because it would have provided important insight to investors as to Goldman's ability to borrow in the markets (versus using Fed money), Goldman failed to disclose in their quarterly report with the SEC that these borrowings were taking place. As one trader put it to me, "Goldman Sachs never figured they would be caught in this lie."
Here's Harper with the details:
Chief Executive Officer Lloyd Blankfein, 56, was quoted by Vanity Fair last year as saying the company might have survived the credit crisis without government help. The firm’s president, Gary Cohn, was more definitive, according to the magazine: “I think we would not have failed,” he was quoted as saying. “We had cash.”
Treasury Secretary Timothy Geithner, who was president of the Federal Reserve Bank of New York during 2008 and 2009, has disputed such an assessment.
“None of them would have survived,” without government help, Geithner said in an interview last December with Bloomberg Television’s “Political Capital with Al Hunt.”
Goldman Sachs took a $100 million overnight loan from the Primary Dealer Credit Facility on March 18, 2008, the day after the facility was created in the wake of Bear Stearns Cos. near collapse and rescue by JPMorgan Chase & Co. At the time, spokesman Michael DuVally said his firm was “testing” the facility and would use it “if doing so makes sense from an economic and funding diversification point of view.”
The firm didn’t borrow any more from the PDCF until Sept. 15, the day that Lehman Brothers filed the largest bankruptcy in U.S. history. On that day Goldman Sachs borrowed $2.5 billion at a 2.25 percent interest rate and furnished the Fed with $2.68 billion of collateral. The firm doubled the amount it borrowed to $5 billion on Sept. 19 and doubled it again to $10 billion on Sept. 22, when Goldman Sachs’s London subsidiary also took its first PDCF loan of $250 million.
At the peak, Goldman Sachs borrowed $24.2 billion on Oct. 15, which included $18 billion for the firm’s U.S. broker-dealer and $6.2 billion for the firm’s London division, the data show. The peak borrowing came two days after the U.S. Treasury Department assembled executives from the country’s nine biggest financial firms and told them they’d be provided with capital injections from the government, with Goldman Sachs receiving $10 billion from the Troubled Asset Relief Program.
In its quarterly filings with the U.S. Securities and Exchange Commission, Goldman Sachs didn’t disclose that it borrowed from the PDCF.
The firm also borrowed from the Term Securities Lending Facility, which offered longer-term funding than the PDCF’s overnight loans. On March 28, 2008, Goldman Sachs borrowed $7 billion from the Fed’s TSLF in exchange for $8.42 billion of collateral that included $3.5 billion in agency-backed mortgage debt and $4.9 billion of non-agency backed mortgage debt. Before the loan was scheduled to mature on April 25, Goldman Sachs borrowed an additional $4 billion on April 11 and $223 million on April 18.
The two largest TSLF loans to Goldman Sachs were $7.5 billion on Dec. 4, 2008, and the same amount on Dec. 31, 2008, the data show. The firm also didn’t disclose its TSLF borrowing in its quarterly SEC filings, although it provided data on its borrowing to the U.S. Treasury