The New York Times reports that Goldman Sachs, a firm that received both TARP funds and some of AIG's bailout money, plans to offer loans to employees. Well, everyone's scraping by in this economy and if a coworker needs a little help through a rough patch, I suppose that wouldn't be so bad.

Except that the loans must be used to meet capital demands from Goldman funds, which the firm allows its employees to join. Goldman Sachs will loan taxpayer money so people can invest it in the company's funds. Yes, these are the funds that sapped the employee's wealth so severely that they must borrow money now to keep the fund - and their share in it - alive.

One needn't wonder why people with large obligations, like the taxes on six or seven figure bonuses, don't have money put away to pay those taxes, or for their private fund capital commitments. It's the myth of the leveraged lifestyle, the fantasy that we can borrow ourselves into wealth. People forget that when we apply too much leverage, sometimes the lever breaks.

According to the Times article:

Some Goldman employees got rich before the markets collapsed, allowing them to invest several million dollars in the funds, often on a leveraged basis. Only three years ago, Goldman paid more than 50 employees more than $20 million apiece...

But one former Goldman partner estimated that a quarter of the bank's roughly 100 partners are now worth $5 million or less because of losses on their company stock and other investments.

At some point, the masters of finance have to recognize that it just didn't work. We cannot live beyond our means, invest beyond our means, and borrow beyond our means forever. The alternative to the leveraged lifestyle - earning your own money, saving your own money, and investing your own money - has been reliably building wealth since money was invented. Perhaps the partners at Goldman Sachs should focus on earning enough money to repay the taxpayers before they try to salvage their employees' bad investments.