Goldman Sachs Said to Be in Talks to Repay TARP Funds

Goldman Sachs Group Inc., once the most profitable firm on Wall Street, is talking with U.S. regulators about repaying the $10 billion it received from the government by mid-April, a person familiar with the matter said.

Goldman Sachs hasn’t formally applied to give back the money, which the New York-based company received as part of the first round of the Troubled Asset Relief Program, the person said, declining to be identified because the talks are private.

Bank executives are chafing under increased scrutiny that accompanied the bailout money, as public outrage over bonuses and executive perks intensifies. The government may be reluctant to let any banks pay back the TARP money now, because it could pressure other companies that still need the cash to return it, according to Peter Sorrentino, who helps manage $13.3 billion at Huntington Asset Advisors in Cincinnati.

“The regulators do want to keep all these guys on the same page,” Sorrentino said in an interview. “It’s like a chain gang, you’ve got them all in handcuffs. If you let some of them out, then you’ve got a couple off the reservation.”

Goldman Sachs doesn’t expect to be allowed to repay the TARP money until the Treasury finishes so-called stress tests of major banks’ financial stability, the person said. Regulators said last month they expected to complete the review in April.

“We’ve indicated our desire to repay TARP capital sooner rather than later, but obviously won’t do anything without the approval of our regulators,” Goldman Sachs spokesman Lucas Van Praag said.

Bonuses Lost

The New York Times reported earlier today that Goldman Sachs was negotiating to return the money. Treasury spokesman Isaac Baker declined to comment.

David Viniar, Goldman Sachs’s chief financial officer, said Feb. 4 that running the company without government money “would be an easier thing to do.” The firm, which set a Wall Street record for pay in 2007, said in November that Chief Executive Officer Lloyd Blankfein, 54, and six deputies would forgo their year-end bonuses.

“We wouldn’t do anything that would potentially weaken the firm in an attempt to address a narrow issue,” Van Praag said on the issue of compensation.

Goldman Sachs is also mulling a potential sale of part of its 4.9 percent stake in Industrial & Commercial Bank of China Ltd. to raise more than $1 billion, the Wall Street Journal reported yesterday.

Predictable Earnings

Investors would likely welcome the sale as a means to raise capital and create a more predictable earnings stream, said William Fitzpatrick, an equity analyst at Optique Capital Management in Racine, Wisconsin, which holds Goldman Sachs shares among its $900 million in assets.

As part of the stimulus package, firms are allowed to repay TARP money without replacing the funds at the discretion of regulators.

JPMorgan Chase & Co. CEO Jamie Dimon said Feb. 23 the New York-based bank was planning to pay back TARP “as soon as it is prudent” in consultation with regulators. Richard Kovacevich, chairman of San Francisco-based Wells Fargo & Co., criticized the government’s retroactive curbs on bonuses last month and called the plan for bank stress tests “asinine.”

Goldman Sachs “can legitimately make the argument that it’s getting in the way of doing business since they keep changing the rules,” Sorrentino at Huntington said. “Politically I don’t know how you stop them from giving the money back.”