Yes, We Should Worry About the Risk-Taking at Goldman Sachs

In a Wealth Daily article about Goldman Sachs's "expectations," the author talks about the increasing risks and leverage Goldman is taking in order to earn more revenue.  Although Goldman's revenue increased, its shares dropped.

Goldman Sachs Beats Expectations 
Shaky Banking Sector
By Swagato Chakrovorty - Wealth Daily
. . . .
Leveraged finances, or high-risk/high-yield debt finances, are precisely what played a major role in the financial crisis that decimated Wall Street just a few years ago.

The bank’s investing and lending revenue of $2.1 billion is 8 percent higher than figures of a year ago. However, Q1 returns on equity dropped to 12.4 percent despite these increases in overall profits and earnings.

Return on equity is usually seen as a metric of how successful a banking institution is in giving capital back to its shareholders. For comparison’s sake, Goldman Sachs typically posted returns on equity in excess of 20 percent annually before the financial crisis.

Moreover, CNN reports that CEO Harvey Schwartz refused to answer some fairly standard questions (such as the bank’s target for its next return on equity) during the conference call for Goldman’s earnings report. No doubt, that has increased investors' trepidation regarding the company.

Read the article here