Goldman Sachs may find Uncle Sam isn't ready to cash out bailout

Goldman Sachs (GS) wants to try to repay the $10 billion it received from the Treasury Department's bank bailout fund ahead of schedule, ideally within a month. With all the strings attached to the money, it's no wonder that a bank would want to be rid of it and free to run its business as it sees fit.

Originally, Goldman CEO Lloyd Blankfein said the goal was to return the money by the end of the year. Now, the New York Times reports insiders claim the new goal is to pay it back within a month. The reasons are probably numerous and likely include the criticism Goldman got after it received more money from American International Group (AIG) than any of the insurer's other counterparties, which strikes many as a back-door bailout. Add to that restrictions on executive pay imposed by the Treasury's bank rescue program, lawmakers' attempts to impose a 90 percent tax on bonuses, and a 5 percent interest payment on the government's capital infusion, and it's a wonder the healthiest of the major banks didn't try to return the money sooner. Judging from Goldman's balance sheet, it seems it could.

And if Goldman doesn't want to dip to far into its cash reserves, it may sell its stake in the Industrial and Commercial Bank of China, as The Wall Street Journal has reported the bank considering. The sale of its 4.9 percent stake in ICBC could raise more than $1 billion and would be welcome by investors.

But it may not be easy for Goldman to sell its ICBC stake due to probable new regulations the Chinese government is considering. And it may also prove difficult for the company to return the government's bailout money. Just as some banks were muscled into accepting the funds, they may be asked to hold off on returning them.

Why? It's all about appearances. If Goldman returns the money, some banks, attempting to look just as competent, may return the money too. Great, no? No.

Others may try to look as healthy as Goldman, but they aren't. Returning the aid money could hurt them further. Investors know there's a difference between Goldman and Citigroup (C), for example. Goldman shares trade at over $110, while Citi shares are around $3. In fact, only one other bank, another former securities firm, may be able to pay the government's money back, according to analysts -- J.P. Morgan Chase & Co. (JPM).

By returning the money, Goldman will distance itself from the other banks -- not only in the eyes of investors and the public, but also by no longer having the restrictions that come with it. If the firm isn't taxed on bonuses while others are, it could attract the best talent, for example, giving it an operational advantage.

Politically, the Obama Administration could find itself at odds with voters if it doesn't allow Goldman to return the money. The public has been crying out to get its money back. The American people may be right, though. The stigma is there anyway.
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