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Why (and how) Goldman Sachs profited

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KAI RYSSDAL: One would expect the world’s most successful investment bank to be resourceful. Able to find the diamonds in a very rough economy. And resourceful Goldman Sachs has been — $3.3-billion-in-profit-last-quarter resourceful.

In a way, it’s exactly what was supposed to happen once the government decided on a bailout. Washington wanted banks to start making money again. Another way to look at Goldman’s news this morning, though, might be to see it as a company profiting from a crisis it helped create. Here’s our Senior Business Correspondent Bob Moon.

BOB MOON: It turns out what happens when the financial system crashes is a lot like what happens when a computer program crashes.

Who are you gonna call? You’re likely to end up paying the same people you’re cursing, for the technical support to maneuver your way out of the mess.

As Manhattan College finance professor Charles Geisst sees it, that’s what’s behind all the money Goldman Sachs is raking in now.

CHARLES GEISST: They have a reputation for hiring the best and the brightest people on Wall Street. And when times like this arise and the crunch comes, one needs that sort of expertise to dig one’s way out. So in other words, they find themselves on all sides of the market, and all sides of the crisis, and they’re benefiting from it.

Businesses have been flocking to Goldman for loans, and for help issuing stock to raise much-needed funding. And the firm’s high-tech, split-second trading systems have made a fortune. It’s been able to cash in on volatility in oil and other commodities, and the stock market.

Geisst finds irony in Goldman’s fast footwork paying back the rescue money it got from the government’s Troubled Asset Relief Program. That means taxpayers aren’t seeing much benefit from their $10 billion largess.

GEISST: It’s sort of difficult to say whether or not the TARP money actually provided the capital that they needed for these activities. My guess is, yes, it did.

Geisst says Goldman’s rivals are either gone or still struggling to compete on the same level. But it probably won’t continue to have the field and the profits mostly to itself much longer. Goldman’s Chief Financial Officer David Venier conceded as much during a conference call with analysts today.

DAVID VENIER: I think some part of it is sustainable and some part of it is not. Over time, you know, firms will recover, firms will be willing to provide more risk capital. And, you know, it’s going to happen over time, and it will drive spreads narrower.

For now, though, Goldman is enjoying a very profitable financial crisis.

I’m Bob Moon for Marketplace.

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