Goldman Sachs Employees Get Loans For Failed Investments

Now this is an interesting piece of news:

Goldman Sachs got its bailout. Now some of its bankers, those aristocrats of Wall Street, apparently need a bit of a bailout too.

Goldman, which accepted billions of taxpayer dollars last fall and, as learned Sunday, was also a big beneficiary of the rescue of the American International Group, is offering to lend money to more than 1,000 employees who have been squeezed by the financial crisis. The loans, offered via e-mail last week, could range from a few thousand dollars to hundreds of thousands.

Working at Goldman has long been regarded as a sure path to riches. But Goldman’s employees are losing money on their personal investments — particularly in Goldman’s own elite investment funds, which have been considered one of the perks of working at the bank.

Now these funds have stumbled, and some Goldman employees who financed their gilded lifestyles by borrowing in good times are suddenly short on cash needed to meet commitments to their personal investments in the funds.

I think these folks at Goldman Sachs (GS) need to understand some basic elements of diversification in one's investments. You should never put all your eggs in one basket, no matter how good that basket looks, especially if that basket pays your check every two weeks.

Let's get some things straight: these guys were dependent upon Goldman Sachs for their income and probably owned Goldman Sachs stock. They then decided it was a good idea to have their personal money invested in private equity, real estate, and hedge funds - yes, managed by Goldman Sachs.

Perhaps there was internal peer pressure to invest in these funds, but why put your eggs all in one basket? The financial performance of Goldman Sachs itself was largely dependent upon the performance of its funds, and the alternative investments industry as a whole. And even then, it would have been smarter to just load up on Goldman Sachs stock, which has a major advantage over any kind of alternative investment fund - you can sell it pretty much whenever you want.

The US government has stepped in to stop the bonus mess at AIG (AIG). You can bet they'll be looking at these loans very soon unless that TARP money gets paid back pronto.

BTW, can somebody give me a loan for my mistakes in the stock market? I'm down on Raymond James Financial (RJF) and Activision Blizzard (ATVI).

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