Two financial giants posted dramatic earnings this morning: Goldman Sachs wowed investors with a 79% surge in third quarter net income, while Bear Stearns’ dropped 61% thanks to massive hedge-fund losses. The two were on opposite sides of the subprime collapse. Bear Stearns is among the top packagers of mortgage-based securities, which Goldman short-sold for huge gains.
Goldman’s return on equity, which measures how efficiently funds reinvest earnings, rose to 36.6% from 31.6%, while Stearns’ plummeted to 5.3% from 13.7%, reports the Wall Street Journal. Stearns lost almost $200 million this summer when two of its hedge funds imploded. Goldman, meanwhile, lost $1.48 billion on junk-bonds, but offset that with the $2.15 billion sale of Horizon Wind Energy.