How can you believe Government Sachs, I mean Goldman Sachs? During the week, Goldman’s CEO Lloyd Blankfein told The Wall Street Journal
that the investment house received no special treatment in the bailout, despite the presence of so many Goldmanites in the top echelons of the US Government.
In the same week, we had the extraordinary news that it had raised its ratings of US banks to “attractive”, claiming that these banks are under-valued. Why is Goldman Sachs talking up US banks which are about as attractive as a dead cat? Why is it talking them up when the Special Inspector General for the Troubled Asset Relief Program (TARP), Neal Barofsky issued a report showing that the banks were not as healthy as the US Treasury would want people to believe.
In contrast, prominent banking analyst Meredith Whitney has warned that credit is contracting so there is no hope of quick recovery. “Access to credit is being denied at an accelerating pace. Large, well-capitalized companies have no problem finding credit. Small businesses, on the other hand, have never had a harder time getting a loan … I believe that we are only in the early stages of the second half of this credit cycle. I expect another $1.5 trillion of credit-card lines to be removed from the system by the end of 2010. This includes not only the large lenders reducing exposure but also the shuttering of several major subprime credit-card lenders.”
Banks are lending less and that doesn’t sound like they are that healthy or attractive, regardless of what Goldman Sachs might claim.
Meredith Whitney had a hand in ending the bull market two years ago when she was the first to write off Citigroup. If you want to recap history, you can read about it here.
The bottom line is this: US banks are not healthy. They are lending less money to survive and zombie banks are still out in force.
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