While Goldman's quarterly earnings of $1.81 billion exceeded the expectations of analysts, its not surprising of America's most sagacious and powerful investment bank. Read Charles Ellis's The Partnership: The Making of Goldman Sachs and you'll catch my drift. With plans to issue $5 billion in common shares, Goldman's on its way to paying down its $10 billion dept to the US government, possibly making it the first and fastest big bank to do so.
However, as hinted in the WSJ article, Goldman's precocious profits and early loan repayment could prove systemically problematic. The US government, along with loaning major investment banks copious amounts of money, shackled them and their major bread-winners with pay restrictions. As a result, the first banks to pay off their debt will be the first to freely attract talent at the natural astronomical market rate. With money-earners flocking to unrestricted banks, debt-laden companies will be subject to a growing brain-drain. The ensuing cyclical pattern isn't hard to imagine and will make loan repayment for banks with restricted compensation schemes increasingly improbable. As we know from the Lehmam experience, a bankrupt investment bank threatens the system as whole, including blue-chips like Goldman Sachs.
For a topical lighter note, have a look at Malcolm Gladwell's New Yorker essay on the successes of Sydney Weinberg, one of Wall Street and Goldman Sach's most idiosyncratic, inspirational and influential executives of the mid 20th century.
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