But detractors were quick to point out that the quarterly results would have been substantially weaker had the $1 billion loss from December 2008 been included (Goldman’s year-end moved to a calendar-year basis when it became a bank holding company).
Any profits are to be welcomed when the economy is contracting at an unprecedented rate. So we should not be too churlish about the fact that the US bank made most of its profits through trading and principal investments, offsetting a decline in fees generated from investment banking activities. Some 70% of earnings came from fixed income, currencies and commodities – twice as much as is normally the case.
Banks like to portray the way they make money as being highly sophisticated but traditional spread banking is the primary driver of their profitability. The principle of borrowing short and lending long is as old as the hills, and first-quarter market conditions of declining interest rates, steep yield curves and a large amount of supply were the banking equivalent of a killing zone for making easy money – if you knew what you were doing.
Over many years, Goldman’s traders have made it clear that they do.