Goldman Sachs returns to big profits

Goldman Sachs benefited handsomely from Wall Street's rally and the recovering credit markets during the second quarter and distanced itself from the few competitors still standing. Thus, the result was a stunning profit of $2.7 billion — even as the bank repaid $10 billion in federal bailout money. The total blew past what Wall Street analysts were expecting.

Goldman has returned to what made it so profitable in the past — high-risk trading and investing in everything from mortgages to commodities and underwriting of stock and debt offers, while other firms have reduced risk and preserved cash to protect against further losses. Besides, it's gotten some hard cash into its corporate treasury that has also strengthened the company. Warren Buffett made a well-publicized investment of $5 billion in the bank in September. Goldman also benefited from the government's bailout money to insurer American International Group Inc., which paid Goldman $12.9 billion during the first quarter.

In addition, Goldman freed itself of government-imposed restrictions on executive pay and bonuses by repaying the bailout money. It spent $6.6 billion in the quarter on pay and benefits, 41 % more than in the first quarter. Year to date, the company has paid out $11.36 billion in compensation.

After paying preferred dividends, Goldman earned $4.93 per share for the quarter, while analysts polled by Thomson Reuters, on average, expected $3.54. Besides, Goldman shares rose 22 cents to close at $149.66 on the New York Stock Exchange. The stock was trading close to $50 during the financial crisis last fall.

The muted reaction from investors wasn't a negative sign. They had bid up Goldman, and the rest of the stock market, Monday after respected analyst Meredith Whitney issued a bullish report on the bank