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Goldman Sachs (NYSE: GS) reported stellar news Monday night, beating the analysts’ consensus view for its first quarter earnings. The news should not have stunned a soul, however, since signs and signals abound that something good was in store. In retrospect, you have to admire the level of cunning within Goldman Sachs. The company truly is a cut above, and its stock, a hundred above for the same reason.

Goldman, You Sly Dog You

On the heels of Wells Fargo’s (NYSE: WFC) big news of “record” profits, however perverted they may have been by the inclusion of Wachovia assets, most expected the darling of Wall Street (read Goldman) to also do well. GS stock rose into the report after all, which is a telltale sign. Goldman didn’t disappoint either, as the financial kingpin reported EPS of $3.39, which was just a tad better than the consensus view for $1.33.

Still, only a fool couldn’t see the blowout report coming, we gently posit. If Wells’ news was not enough for ya, let’s not forget the wonderful announcements from Citigroup (NYSE: C), Bank of America (NYSE: BAC) and J.P. Morgan Chase (NYSE: JPM) in early March. Recall, those press releases and internal memo “leaks” drove us to the betting window in the first place. Still none of those signs were as compelling as Goldman’s gesture, and a gesture from the object of our obsession is worth a thousand from its peers.

The Dead Give Away

Goldman, my dear, was scandalously rumored to be well on its way to diluting shareholder value for the sake of executive pay, err rather, to do its noble and patriotic duty… Did I mention how much I admire Goldman Sachs? The company was reportedly planning to repay the government for its kind gesture ($10 billion dollars worth of it to be exact). Dear sweet Mr. Blankfein, who earned just $1.1 million in 2008 (something CODEPINK clearly overlooked), versus the slightly higher $70.3 million he grabbed in 2007, thought it wise to give back the government’s money.

He Has a Point Though

You do run the risk of losing talent when you can’t afford to make them filthy rich any longer. But where would the suits go to anyway? Well, they might start their own blog, or buy an island or something akin to those equally valuable things… thank me later for the smile. Seriously speaking, talent might walk away for a short time to live the good life while the going is cheap. Just for kicks, let’s think of it another way. Imagine all the fantastic talent Goldman could drain from its handcuffed peers should it reinstall insane executive pay for its top ranks. Aha! we heard you say…

I Said! The Give Away

Goldman held back from issuing that infamous press release that would declare its new share offering. What does that tell you, or rather what did it tell you a few days ago? Aha, we heard again… it told us that Goldman had good news to report. After all, if it had a less than superstar EPS report in queue, then it would have sold its stock while the getting was still good. However, if it could garner more money for less dilution, say on the wind-filled sails of a strong earnings report, well then it made all the more sense to wait.

The stock gave back 11.6% on the day though, and after a gap lower open. That’s a market value killing of $6.945 billion (give or take a mil.) on share dilution of $5 billion. So the market overran then? Nah, because the government holds some warrants as well, and maybe Goldman wants to take those off its hands too. After all, it’s the honorable thing to do… Also, let’s not forget the run up ahead of the EPS news; value had already been created, and perhaps in excess.

Goldman would need $10 billion to repay its TARP debt, and so we’re guessing that would require it tapping its capital store. Therefore, clarity is missing and more money necessary. Paying back low cost debt doesn’t make sense, but the government’s debt has all sorts of hidden costs doesn’t it… It ain’t so cheap after all.

There’s rumor that the government might not oblige Goldman’s kind gesture, given concerns that this could cause a run on the TARP, so to speak. Banks might want to be on even footing with Goldman, or “to be as good as Goldman” as Dick Bove put it. There’s a fear bankers might do something rash, or selfish (who would have thunk it), like choose to be capital constrained versus making so few millions again next “no bonus” season.

It should be very interesting to see how the government plays this. Thus far, a couple of quick-to-respond and absent-of-thought legislators have stated that it would be all the better if TARP recipients could repay earlier than expected. Looks like it might be time for some more “after the fact” legislating. We’ll have to get back to the blackboard and include a once unforeseen necessity, a start date for repayment. God bless Communist China! I mean the USA.

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