Once Again, It's Good to Be Goldman

Updated

If you've followed the crazy situation at Knight Capital (NYS: KCG) at all, you probably know that Goldman Sachs (NYS: GS) was involved. Somehow that always seems to be the case, doesn't it?

In a few different news articles, I've seen the word "helped" used in describing Goldman's involvement in the situation. That's a pretty charitable way to put it. In fact, Goldman saw this as a great business opportunity -- it took a steamy mass of dumb purchases off Knight's hands and was paid $440 million by Knight for its troubles. "Help" and just generally being a good financial-market citizen had nothing to do with Goldman's decision to step in.

What's interesting is that Goldman is far from the only investment bank able to handle something like this. JPMorgan Chase (NYS: JPM) , Morgan Stanley, Bank of America (NYS: BAC) , and Citigroup (NYS: C) , among others, all have the capabilities and the balance sheet to tackle this kind of trade. Yet it was Goldman.


A very plausible explanation for why it ended up in Goldman's hands is that Goldman is simply better than the others. Or, at least, it has confidence in its ability to handle a block like that and was willing to not only do it, but also do it on short notice and potentially offer a lower execution price than anyone else that might've been willing to take it on.

But pardon me if I put on my Matt Taibbi "Goldman as vampire squid" hat for a moment and wonder: Why is it that when there's a financial disaster like this, we could expect that Goldman would show up for a feeding? During the financial crisis, while everyone else was on the verge of sinking from errant mortgage exposure, Goldman was on the right side of the trade and raking in profits. Now a major market maker finds itself on the verge of extinction, and Goldman pockets nearly a half of a billion dollars for services rendered.

Pick your poison: Goldman as best in the business, or Goldman as crafty vampire squid. Either way, one thing seems eminently clear -- it's good to be Goldman.

The article Once Again, It's Good to Be Goldman originally appeared on Fool.com.

The Motley Fool owns shares of Citigroup, JPMorgan Chase, and Bank of America.Motley Fool newsletter serviceshave recommended buying shares of Goldman Sachs and formerly recommended JPMorgan Chase. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.Fool contributorMatt Koppenhefferowns shares of Bank of America and Morgan Stanley, but he has no financial interest in any of the other companies mentioned. You can check out what Matt is keeping an eye on by visiting hisCAPS portfolio, or you can follow Matt on Twitter,@KoppTheFool, or onFacebook. The Fool'sdisclosure policyprefers dividends over a sharp stick in the eye.

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