Bloomberg: JPMorgan (JPM) Thrives As Markets Find Faults With Goldman Sachs (GS)

Bloomberg columnist David Reilly noted in his article that if there is one bank that is gaining from Goldman Sachs’ (NYSE: GS) woes, then it is JPMorgan Chase & Co. (NYSE: JPM). David added that Goldman Sachs is indirectly protecting JPMorgan as the market is busy finding faults with Goldman, ignoring JPMorgan in the process.

In March 2008, JPMorgan rescued Bear Sterns and the deal helped JPMorgan win a lot of derivatives contracts. On the other hand, the market had forgotten that the Federal Reserve agreed to backstop losses on $29 billion of Bear Stern’s problem assets once JPMorgan had written down $1 billion. As of September 30, those assets are worth $26.14 billion, which means that the US taxpayer has lost more than $2 billion.

Troubled Asset Relief Program:

Goldman earned good profits from trading. Thanks to Fed’s low interest regime, it got funds through the Troubled Asset Relief Program and issued debt guaranteed by the Federal Deposit Insurance Corp. JPMorgan did this even better, and its investment-banking division generated more than half the firm’s third-quarter net profit of $3.6 billion.

Goldman Sachs has set aside close to $16.7 billion so far this year towards compensation – which has not gone down well with its own shareholders. On the compensation front, while Goldman Sachs got the most attention, there were 1,144 JPMorgan employees in 2008 that got a bonus of $1 million or more, compared to 953 Goldman employees getting that kind of payout. Also, JPMorgan’s top four bonus recipients received a combined $74.8 million, way ahead of $45.9 million for Goldman’s top four.

David says that “ The end result: JPMorgan, looking like a Boy Scout, gets the last laugh as the pitchfork-wielding crowds bay for Goldman’s blood.”