Goldman Sachs
Encyclopedia
The Goldman Sachs Group, Inc. is an American multinational
bulge bracket
investment banking and securities firm that engages in global investment banking
, securities, investment management
, and other financial services
primarily with institutional clients. Goldman Sachs was founded in 1869 and is headquartered at 200 West Street
in the Lower Manhattan
area of New York City, with additional offices in major international financial centers. The firm provides mergers and acquisitions
advice, underwriting services, asset management
, and prime brokerage
to its clients, which include corporations, governments and individuals. The firm also engages in proprietary trading
and private equity
deals, and is a primary dealer in the United States Treasury security market.
Former employees include Robert Rubin
and Henry Paulson
who served as United States Secretary of the Treasury
under Presidents Bill Clinton
and George W. Bush
, respectively, as well as Mark Carney
, the governor of the Bank of Canada
since 2008, Mario Draghi
, governor of the European Central Bank
and Mario Monti
, the Italian Prime Minister
.
. In 1882, Goldman's son-in-law Samuel Sachs
joined the firm. In 1885, Goldman took his son Henry and his son-in-law Ludwig Dreyfuss into the business and the firm adopted its present name, Goldman Sachs & Co. The company made a name for itself pioneering the use of commercial paper
for entrepreneurs and was invited to join the New York Stock Exchange
(NYSE) in 1896.
In the early 20th century, Goldman was a player in establishing the initial public offering
(IPO) market. It managed one of the largest IPOs to date, that of Sears, Roebuck and Company
in 1906. It also became one of the first companies to heavily recruit those with MBA degrees from leading business schools, a practice that still continues today.
On December 4, 1928, it launched the Goldman Sachs Trading Corp. a closed-end fund
. The fund failed as a result of the Stock Market Crash of 1929, hurting the firm's reputation for several years afterward. Of this case and others like Blue Ridge Corporation and Shenandoah Corporation John Kenneth Galbraith
wrote: The Autumn of 1929 was, perhaps, the first occasion when men succeeded on a large scale in swindling themselves.
assumed the role of senior partner and shifted Goldman's focus away from trading and towards investment banking
. It was Weinberg's actions that helped to restore some of Goldman's tarnished reputation. On the back of Weinberg, Goldman was lead advisor on the Ford Motor Company's
IPO in 1956, which at the time was a major coup on Wall Street. Under Weinberg's reign the firm also started an investment research division and a municipal bond
department. It also was at this time that the firm became an early innovator in risk arbitrage
.
Gus Levy
joined the firm in the 1950s as a securities trader, which started a trend at Goldman where there would be two powers generally vying for supremacy, one from investment banking and one from securities trading. For most of the 1950s and 1960s, this would be Weinberg and Levy. Levy was a pioneer in block trading
and the firm established this trend under his guidance. Due to Weinberg's heavy influence at the firm, it formed an investment banking division in 1956 in an attempt to spread around influence and not focus it all on Weinberg.
In 1969, Levy took over as Senior Partner from Weinberg, and built Goldman's trading franchise once again. It is Levy who is credited with Goldman's famous philosophy of being "long-term greedy", which implied that as long as money is made over the long term, trading losses in the short term were not to be worried about. At the same time, partners reinvested almost all of their earnings in the firm, so the focus was always on the future. That same year, Weinberg retired from the firm.
Another financial crisis for the firm occurred in 1970, when the Penn Central Transportation Company went bankrupt with over $80 million in commercial paper outstanding, most of it issued by Goldman Sachs. The bankruptcy was large, and the resulting lawsuits threatened the partnership capital and life of the firm. It was this bankruptcy that resulted in credit rating
s being created for every issuer of commercial paper today by several credit rating services.
During the 1970s, the firm also expanded in several ways. Under the direction of Senior Partner Stanley R. Miller, it opened its first international office in London in 1970, and created a private wealth division along with a fixed income
division in 1972. It also pioneered the "white knight
" strategy in 1974 during its attempts to defend Electric Storage Battery against a hostile takeover bid from International Nickel and Goldman's rival Morgan Stanley
. This action would boost the firm's reputation as an investment advisor
because it pledged to no longer participate in hostile takeovers.
John L. Weinberg
(the son of Sidney Weinberg), and John C. Whitehead
assumed roles of co-senior partners in 1976, once again emphasizing the co-leadership at the firm. One of their initiatives was the establishment of the 14 business principles that are still used to this day.
, joined the firm as a result of this merger. In 1985 it underwrote the public offering of the Real Estate Investment Trust
that owned Rockefeller Center
, then the largest REIT offering in history. In accordance with the beginning of the dissolution of the Soviet Union
, the firm also became involved in facilitating the global privatization movement by advising companies that were spinning off from their parent governments.
In 1986, the firm formed Goldman Sachs Asset Management, which manages the majority of its mutual funds and hedge fund
s today. In the same year, the firm also underwrote the IPO of Microsoft
, advised General Electric
on its acquisition of RCA
and joined the London
and Tokyo stock exchange
s. 1986 also was the year when Goldman became the first United States bank to rank in the top 10 of mergers and acquisitions
in the United Kingdom. During the 1980s the firm became the first bank to distribute its investment research electronically and created the first public offering of original issue deep-discount bond
.
Robert Rubin
and Stephen Friedman
assumed the Co-Senior Partnership in 1990 and pledged to focus on globalization of the firm and strengthening the Merger & Acquisition and Trading business lines. During their reign, the firm introduced paperless trading to the New York Stock Exchange and lead-managed the first-ever global debt offering by a U.S. corporation. It also launched the Goldman Sachs Commodity Index
(GSCI) and opened a Beijing office in 1994. It was this same year that Jon Corzine
assumed leadership of the firm following the departure of Rubin and Friedman.
Another momentous event in Goldman's history was the Mexican bailout of 1995. Rubin drew criticism in Congress for using a Treasury Department account under his personal control to distribute $20 billion to bail out Mexican bonds, of which Goldman was a key distributor. On November 22, 1994, the Mexican Bolsa stock market had admitted Goldman Sachs and one other firm to operate on that market. The 1994 economic crisis in Mexico
threatened to wipe out the value of Mexico's bonds held by Goldman Sachs.
The firm joined David Rockefeller
and partners in a 50–50 joint ownership of Rockefeller Center
during 1994, but later sold the shares to Tishman Speyer in 2000. In 1996, Goldman was lead underwriter of the Yahoo! IPO and in 1998 it was global coordinator of the NTT DoCoMo
IPO. In 1999, Henry Paulson took over as Senior Partner.
). This left approximately 12% of the company as being held by the public. With the firm's 1999 IPO, Paulson became Chairman and Chief Executive Officer of the firm. As of 2009, after further stock offerings to the public, Goldman is 67% owned by institutions (such as pension funds and other banks).
In 1999, Goldman acquired Hull Trading Company
, one of the world's premier market-making firms, for $531 million. More recently, the firm has been busy both in investment banking and in trading activities. It purchased Spear, Leeds, & Kellogg, one of the largest specialist firms on the New York Stock Exchange, for $6.3 billion in September 2000. It also advised on a debt offering for the Government of China
and the first electronic offering for the World Bank
. In 2003 it took a 45% stake in a joint venture with JBWere, the Australian investment bank. In 2009 The Private Wealth Management arm of JBWere was sold into a joint venture with National Australia Bank. Goldman opened a full-service broker-dealer in Brazil in 2007, after having set up an investment banking office in 1996. It expanded its investments in companies to include Burger King
, McJunkin Corporation, and in January 2007, Alliance Atlantis
alongside CanWest Global Communications
to own sole broadcast rights to the all three CSI series. The firm is also heavily involved in energy trading, including oil, on both a principal and agent basis.
In May 2006, Paulson left the firm to serve as U.S. Treasury Secretary
, and Lloyd C. Blankfein was promoted to Chairman and Chief Executive Officer. Former Goldman employees have headed the New York Stock Exchange, the World Bank, the U.S. Treasury Department, the White House staff, and firms such as Citigroup
and Merrill Lynch
.
, Goldman was able to profit from the collapse in subprime mortgage bonds in the summer of 2007 by short-selling subprime mortgage-backed securities. Two Goldman traders, Michael Swenson and Josh Birnbaum, are credited with bearing responsibility for the firm's large profits during America's sub-prime mortgage crisis. The pair, members of Goldman's structured product
s group in New York, made a profit of $4 billion by "betting" on a collapse in the sub-prime market, and shorting mortgage-related securities. By summer of 2007, they persuaded colleagues to see their point of view and talked around skeptical risk management executives. The firm initially avoided large subprime writedowns, and achieved a net profit due to significant losses on non-prime securitized
loans being offset by gains on short mortgage positions. Its sizable profits made during the initial subprime mortgage crisis led the New York Times to proclaim that Goldman Sachs is without peer in the world of finance. The firm's viability was later called into question as the crisis intensified in September 2008.
On October 15, 2007, as the crisis had begun to unravel, Allan Sloan
, a senior editor for Fortune
magazine, said:
On September 21, 2008, Goldman Sachs and Morgan Stanley, the last two major investment banks in the United States, both confirmed that they would become traditional bank holding companies, bringing an end to the era of investment banking on Wall Street
. The Federal Reserve's approval of their bid to become banks ended the ascendancy of the securities firms, 75 years after Congress separated them from deposit-taking lenders, and capped weeks of chaos that sent Lehman Brothers
into bankruptcy and led to the rushed sale of Merrill Lynch & Co. to Bank of America Corp.
According to a 2009 BrandAsset Valuator survey taken of 17,000 people nationwide, the firm's reputation suffered in 2008 and 2009, and rival Morgan Stanley was respected more than Goldman Sachs, a reversal of the sentiment in 2006. Goldman refused to comment on the findings.
agreed to purchase $5 billion in Goldman's preferred stock, and also received warrants
to buy another $5 billion in Goldman's common stock
, exercisable for a five-year term. Goldman also received a $10 billion preferred stock
investment from the U.S. Treasury in October 2008, as part of the Troubled Asset Relief Program (TARP).
Andrew Cuomo
, then Attorney General of New York, questioned Goldman's decision to pay 953 employees bonuses of at least $1 million each after it received TARP funds in 2008. That same period, however, CEO Lloyd Blankfein and six other senior executives opted to forgo bonuses, stating they believed it was the right thing to do, in light of "the fact that we are part of an industry that's directly associated with the ongoing economic distress". Cuomo called the move "appropriate and prudent", and urged the executives of other banks to follow the firm's lead and refuse bonus payments.
In June 2009, Goldman Sachs repaid the U.S. Treasury’s TARP investment, with 23% interest (in the form of $318 million in preferred dividend
payments and $1.418 billion in warrant redemptions). In December 2009, Goldman announced their top 30 executives will be paid year-end bonuses in restricted stock, with provisions, that must go unsold for five years.
Goldman Sachs was one of the heaviest users of these loan facilities, taking out numerous loans from March 18, 2008 – April 22, 2009. The Primary Dealer Credit Facility
(PDCF), the first Fed facility ever to provide overnight loans to investment banks, loaned Goldman Sachs a total of $589 billion against collateral such as corporate market instruments and mortgage-backed securities
. The Term Securities Lending Facility
(TSLF), which allows primary dealers to borrow liquid Treasury securities for one month in exchange for less liquid collateral, loaned Goldman Sachs a total of $193 billion.
Goldman Sachs's borrowings totaled $782 billion in hundreds of transactions over these months. This number is a total of all transactions over time and not the outstanding loan balance. The loans have been fully repaid in accordance with the terms of the facilities.
As of 2009, Goldman Sachs employed 31,701 people worldwide. In 2006, the firm reported earnings of US$9.34 billion and record earnings per share of $19.69. It was reported that the average total compensation per employee in 2006 was US$622,000. However, this number represents the arithmetic mean
of total compensation and is highly skewed upwards as several
hundred of the top recipients command the majority of the Bonus Pools, leaving the median that most employees receive well below this number. In Business Week's recent release of the Best Places to Launch a Career 2008, Goldman Sachs was ranked No.4 out of 119 total companies on the list. The current Chief Executive Officer is Lloyd C. Blankfein. The company ranks No.1 in Annual Net Income
when compared with 86 peers in the Investment Services sector. Blankfein received a $67.9 million bonus in his first year. He chose to receive "some" cash unlike his predecessor, Paulson, who chose to take his bonus entirely in company
stock.
Goldman Sachs is divided into three businesses units: Investment Banking, Trading and Principal Investments, and Asset Management and Securities Services.
is divided into two divisions and includes Financial Advisory (mergers and acquisitions, investitures, corporate defense activities, restructuring
and spin-offs) and Underwriting (public offerings and private placements of equity
, equity-related and debt instruments). Goldman Sachs is one of the leading M&A advisory firms, often topping the league tables in terms of transaction size. The firm gained a reputation as a white knight in the mergers and acquisitions sector by advising clients on how to avoid hostile takeovers, moves generally viewed as unfriendly to shareholders of targeted companies. Goldman Sachs, for a long time during the 1980s, was the only major investment bank with a strict policy against helping to initiate a hostile takeover, which increased the firm's reputation immensely among sitting management teams at the time. The investment banking segment accounts for around 17 percent of Goldman Sachs' revenues.
The firm has also been involved in both advising and brokering deals to privatize major highways by selling them to foreign investors. In addition to advising 4 state and local governments on privatization projects, including Indiana, Texas, and Chicago.
products, mortgage-backed securities
and loans, currencies and commodities, insurance-linked securities
, structured and derivative products), Equities (trading in equities, equity-related products, equity derivatives, structured products and executing client trades in equities, options
, and futures contract
s on world markets), and Principal Investments (merchant banking investments and funds). This segment consists of the revenues and profit gained from the Bank's trading activities, both on behalf of its clients (known as flow trading
) and for its own account (known as proprietary trading
).
Most trading done by Goldman is not speculative, but rather an attempt to profit from bid-ask spreads
in the process of acting as a market maker
. On average, around 68 percent of Goldman's revenues and profits are derived from trading. Upon its IPO, Goldman predicted that this segment would not grow as fast as its Investment Banking division and would be responsible for a shrinking proportion of earnings. The opposite has been true however, resulting in now-CEO Blankfein's appointment to President and Chief Operating Officer after John Thain
's departure to run the NYSE and John L. Thornton
's departure for an academic position in China.
, financing, custody
, securities lending, and reporting services to institutional clients, including hedge funds, mutual funds, and pension funds. The division generates revenues primarily in the form of interest rate spreads or fees.
In 2009, the Goldman Sachs Asset Management hedge fund was the 9th largest in the United States, with $20.58 billion under management. This was down from $32.5 billion in 2007, after client redemptions and weaker investment performance.
On September 14, 2011, Goldman Sachs stated it was shutting down the Global Alpha fund, once the firm's largest hedge fund. The announcement followed a reported decline in fund balances to less than $1.7 billion in June 2011 from $11 billion in 2007. The decline was caused by investors withdrawing from the fund following earlier substantial market losses. The firm said it expected most of the fund assets to be liquidated by mid-October 2011.
. On April 23, 2007, Goldman closed GS Capital Partners VI with $20 billion in committed capital, $11 billion from qualified institutional and high net worth clients and $9 billion from the firm and its employees. GS Capital Partners VI is the current primary investment vehicle for Goldman Sachs to make large, privately negotiated equity investments.
" economies (Brazil, Russia, India, and China), Goldman Sachs named its "Next Eleven
" list of countries, using macroeconomic stability, political maturity, openness of trade and investment policies and quality of education as criteria: Bangladesh
, Egypt, Indonesia
, Iran, Mexico
, Nigeria, Pakistan
, the Philippines
, Turkey, South Korea
and Vietnam
.
The company also has been on Fortune Magazine's 100 Best Companies to Work For list since the list was launched in 1998, with emphasis placed on its support for employee philanthropic efforts. In November 2007, Goldman Sachs established a donor advised fund called Goldman Sachs Gives that donates to charitable organizations around the world, while increasing their maximum employee donation match to $20,000. The firm's Community TeamWorks is an annual, global volunteering initiative that in 2007 gave over 20,000 Goldman employees a day off work from May through August to volunteer in a team-based project organized with a local nonprofit organization.
In March 2008, Goldman launched the 10,000 Women
initiative to train 10,000 women from predominantly developing countries in business and management.
In November 2009, Goldman pledged $500 million to aid small businesses in their newly created 10,000 Small Businesses
initiative. The initiative aims to provide 10,000 small businesses with assistance – ranging from business and management education and mentoring to lending and philanthropic support. The networking will be
offered through partnerships with national and local business organizations, as well as employees of Goldman Sachs.
In addition to Goldman CEO Lloyd Blankfein, Berkshire Hathaway
's Warren Buffet and Harvard Business School
professor Michael Porter
will chair the program's advisory council.
Goldman Sachs employees are known to be highly loyal to their organization.
(D-TX), "with the right hand out begging for bailout money, the left is hiding it offshore."
(CDS) index to cover of high risk of Greece's national debt. The interest-rates of Greek national bonds have soared to a very high level, leading the Greek economy very close to bankruptcy in March and May 2010 and again in June 2011. Lucas Papademos
, Greece's new prime minister, ran the Central Bank of Greece at the time of the controversial derivates deals with Goldman Sachs that enabled Greece to hide the size of its debt. Petros Christodoufou, head of Greece's debt management agency began his carreer at Goldman Sachs. Mario Monti
, Italy's new prime minister and finance minister, who heads the new government that took over after Berlusconi's resignation, is an international adviser to Goldman Sachs. So is Otmar Issing
, former board member of the Bundesbank and the Executive Board of the European Bank. Mario Draghi
, the new head of the European Central Bank
, is the former managing director of Goldman Sachs International. Antonio Borges
, formerly head of the IMF's European Department is a former vice chairman of Goldman Sachs International. Peter Sutherland
, former Attorney General of Ireland is a non-executive director of Goldman Sachs International. Karel van Miert
, former EU Competition Commissioner is an ex-international adviser to Goldman Sachs. These ties between Goldman Sachs and European leaders is an ongoing source of controversy.
reported that Goldman Sachs, which earned $25M from underwriting California bonds, had advised other clients to short those bonds. While some journalists criticized the contradictory actions, others pointed out that the opposite investment decisions undertaken by the underwriting side and the trading side of the bank were normal and in line with regulations regarding Chinese walls.
relationship, in which its employees and consultants have moved in and out of high level U.S. Government positions, creating the potential for conflicts of interest. Former Treasury Secretary Paulson was a former CEO of Goldman Sachs. Additional controversy attended the selection of former Goldman Sachs lobbyist Mark Patterson as chief of staff to Treasury Secretary Timothy Geithner, despite President Barack Obama
's campaign promise that he would limit the influence of lobbyists in his administration. In February 2011, the Washington Examiner
reported that Goldman Sachs was "the company from which Obama raised the most money in 2008" and that its "CEO Lloyd Blankfein
has visited the White House 10 times."
on a takeover deal. Robert Freeman, who was a senior Partner, who was the Head of Risk Arbitrage, and who was a protégé of Robert Rubin
, was also convicted of insider trading, for his own account and for the firm's account.
In April, 2010, Goldman director Rajat Gupta
was named in an insider-trading case. It was said Gupta had "tipped off a hedge-fund billionaire", Raj Rajaratnam
of Galleon Group
, about the $5 billion Berkshire Hathaway investment in Goldman in September, 2008. According to the report, Gupta had told Goldman the month before his involvement became public that he wouldn't seek re-election as a director. In early 2011, with the delayed Rajaratnam criminal trial about to begin, the United States Securities and Exchange Commission
(SEC) announced civil charges against Gupta covering the Berkshire investment as well as confidential quarterly earnings information from Goldman and Procter & Gamble
(P&G). Gupta was board member at P&G until voluntarily resigning the day of the SEC announcement, after the charges were announced. "Gupta was an investor in some of the Galleon hedge funds when he passed the information along, and he had other business interests with Rajaratnam that were potentially lucrative.... Rajaratnam used the information from Gupta to illegally profit in hedge fund trades.... The information on Goldman made Rajaratnam's funds $17 million richer.... The Proctor & Gamble data created illegal profits of more than $570,000 for Galleon funds managed by others, the SEC said." Gupta was said to have "vigorously denied the SEC accusations". He is also a board member of AMR Corp.
.
The accounting change to a calendar fiscal year, which created the stub month, was required when the firm converted to a bank holding company and declared in Item 5.03 of its Form 8-K
U.S. Securities and Exchange Commission (SEC) filing of December 15, 2008. The December loss also included a $850M writedown on loans to bankrupt chemical maker LyondellBasell, as reported in late December (the chemical maker formally declared bankruptcy on January 6 but the loan would have been marked-to-market – it became clear in mid/late-December that Lyondell would not be able to meet its debt obligations).
Most financial analysts and the mainstream financial press (Bloomberg L.P.
, Reuters
, etc), aware of the accounting change and deteriorating market conditions into December, were unsurprised by the December loss (Merrill Lynch took at least $8.1B of losses in the same period). However, their lack of reaction and reporting of what was a widely expected result may have contributed to the surprise attributing this as a sign that the firm was trying to hide losses in December. On the contrary, the results of December 2008 were discussed up front and in detail by CFO David Viniar
in the first few minutes of the firm's Q1 2009 conference call, and were fully declared on page 10 of its earnings release document.
On April 22, 2009, Morgan Stanley
also reported a $1.3B net loss for the single month of December, alongside a $177M loss for the first quarter (Jan–Mar). However, whereas Goldman Sachs' first-quarter earnings (Jan–Mar) were well-above forecasts (which led to the speculation that the firm may have 'conveniently' shifted losses into December), Morgan Stanley's results for the same Jan–Mar period were below consensus estimates. This, in addition to Morgan Stanley's losses in December, would appear to support Goldman's rejection of the notion that they deliberately shifted losses into December. Like Goldman Sachs, Morgan Stanley converted to a bank holding company after the bankruptcy of Lehman Brothers
in September 2008.
At the end of 2009, the firm was on track to complete its most profitable year since its founding.
(AIG) was bailed out by the US government in September 2008 after suffering a liquidity crisis
, whereby the Federal Reserve initially lent $85 billion to AIG to allow the firm to meet its collateral and cash obligations.
In March 2009, it was reported that, in 2008, Goldman Sachs, alongside other major US and international financial institutions, had received billions of dollars during the unwind of credit default swap (CDS) contracts purchased from AIG, including $12.9bn from funds provided by the US Federal Reserve to bail out AIG. (As of April, 2009, US Government loans to AIG totaled over $180 billion.) The money was used to repay customers of its security-lending program and was paid as collateral to counterparties under credit insurance contracts purchased from AIG. However, due to the size and nature of the payouts there was considerable controversy in the media and amongst some politicians as to whether banks, including Goldman Sachs, may have benefited materially from the bailout and if they had been overpaid., The New York State Attorney General
Andrew Cuomo
announced in March 2009 that he was investigating whether AIG's trading counterparties improperly received government money.
(in the form of CDSs with other counterparties) and $7.5B of collateral
. The firm stated the cost of these hedges to be over $100M. According to Goldman, both the collateral and CDSs would have protected the bank from incurring an economic loss in the event of an AIG bankruptcy (however, because AIG was bailed out and not allowed to fail, these hedges did not pay out.) CFO David Viniar
stated that profits related to AIG in Q1 2009 "rounded to zero", and profits in December were not significant. He went on to say that he was "mystified" by the interest the government and investors have shown in the bank's trading relationship with AIG.
Considerable speculation remains that Goldman's hedges against their AIG exposure would not have paid out if AIG was allowed to fail. According to a report by the United States Office of the Inspector General of TARP, if AIG had collapsed, it would have made it difficult for Goldman to liquidate its trading positions with AIG, even at discounts, and it also would have put pressure on other counterparties that "might have made it difficult for Goldman Sachs to collect on the credit protection it had purchased against an AIG default." Finally, the report said, an AIG default would have forced Goldman Sachs to bear the risk of declines in the value of billions of dollars in collateral debt obligations.
Goldman argues that CDSs are marked to market (i.e. valued at their current market price) and their positions netted between counterparties daily. Thus, as the cost of insuring AIG's obligations against default rose substantially in the lead-up to its bailout, the sellers of the CDS contracts had to post more collateral
to Goldman Sachs. The firm claims this meant its hedges were effective and the firm would have been protected against an AIG bankruptcy and the risk of knock-on defaults, had AIG been allowed to fail. However, in practice, the collateral would not protect fully against losses both because protection sellers would not be required to post collateral that covered the complete loss during a bankruptcy and because the value of the collateral would be highly uncertain following the repercussions of an AIG bankruptcy. As with the bankruptcy of Lehman Brothers
, wider and longer-term systemic and economic turmoil brought on by an AIG default would probably have affected the firm and all other market participants.
has also reported that representatives from other firms were indeed present at the September AIG meetings. Furthermore, Goldman Sachs CFO David Viniar
has stated that CEO Blankfein had never "met" with his predecessor and then-US Treasury Secretary Henry Paulson to discuss AIG; However, there were frequent phone calls between the two of them. Paulson was not present at the September meetings at the New York Fed. It is also a lesser known fact that Morgan Stanley
was hired by the Federal Reserve to advise them on the AIG bailout.
According to the New York Times, Paulson spoke with the CEO of Goldman Sachs two dozen times during the week of the bailout, though he obtained an ethics waiver before doing so. While it is common for regulators to be in contact with market participants to gather valuable industry intelligence, particularly in a crisis, the Times noted he spoke with Goldman's Blankfein more frequently than with other large banks. Federal officials say that although Paulson was involved in decisions to rescue A.I.G, it was the Federal Reserve that played the lead role in shaping and financing the A.I.G. bailout.
, a former director of Goldman Sachs, was named Chairman of the Federal Reserve Bank of New York in January 2008. Although he had retired from Goldman in 1994, Friedman continued to own stock in the firm. Goldman's conversion from a securities firm to a bank holding company in September 2008 meant it was now regulated by the Fed and not the SEC. When it became apparent that Timothy Geithner, then president of the New York Fed, would leave his role there to become Treasury Secretary, Friedman was granted a temporary one-year waiver of a rule that forbids "class C" directors of the Fed from direct interest with those it regulates. Friedman agreed to remain on the board until the end of 2009 to provide continuity in the wake of the turmoil caused by Lehman Brothers' bankruptcy. Had the waiver not been granted, the New York Fed would have lost both its president and its chairman (or Friedman would have had to divest his Goldman shares). This would have been highly disruptive for the New York Fed's role in the capital markets, and Friedman later said he agreed to stay on the NY Fed board out of a sense of public duty, but that his decision was "being mischaracterised as improper".
Media reports in May 2009 concerning Friedman's involvement with Goldman, and in particular, his purchase of the firm's stock when it traded at historical lows in the fourth quarter of 2008, fueled controversy and criticism over what was seen as a conflict of interest in Friedman's new role as supervisor and regulator to Goldman Sachs. These events prompted his resignation on May 7, 2009. Although Friedman's purchases of Goldman stock did not violate any Fed rule, statute, or policy, he said that the Fed did not need this distraction. He also stated his purchases, made while approval of a waiver was pending, were motivated by a desire to demonstrate confidence in the company during a time of market distress.
was involved in these deals and later wrote a novel called How I Caused the Credit Crunch. Goldman did 25 Abacus deals from 2004–2008. The article claims Goldman tried to pressure Moody's
to rate its products higher than they should have been.
The article also claimed that many mortgage backed CDOs (Abacus, and others) sold by Goldman performed very poorly. It uses the example of the Hudson Mezzanine CDO, which Goldman bet against, but also sold to investors. It also claims that various rules regarding CDO-default pay outs were modified to favor short sellers in 2005.
Goldman claimed that it was simply hedging, not expecting the CDOs to fail. It also said that its investors knew it was betting against the products it was selling to them.
Goldman and one of its traders, Fabrice Tourre, were later sued by the SEC over circumstances surrounding one of these CDOs, Abacus 2007-AC1. (See below in this article) In late 2010 Tourre asked for dismissal of the suit against him based on the repercussions of the Morrison v. National Australia Bank Ltd
Supreme Court case, claiming his deals were outside the US and thus not subject to certain US laws.
See also: Merrill Lynch:CDO controversies, Magnetar Capital
. In a 2010 article in Harper's magazine, Frederick Kaufman magazine accused Goldman Sachs of profiting while many people went hungry or even starved. He argued that Goldman's creation of the commodity index helped passive investors (pension funds, mutual funds and others) enter the markets, which disturbed the normal relationship between Supply and Demand
and price levels. He argues that the result was a 'contango
' wheat market on the Chicago Mercantile Exchange, which caused prices of wheat to rise much higher than normal, defeating the purpose of the exchanges (price stabilization) in the first place.
In a June 2010 article in The Economist
, the argument is made that index-tracking funds (of which Goldman Sachs Commodity Index was one) did not cause the bubble. It describes a report by the Organisation for Economic Co-operation and Development
that used data from the Commodity Futures Trading Commission
to make the case. For example the report points out that even commodities without futures markets also saw price rises during the period.
product it originated called Abacus 2007-AC1. Goldman was paid a fee of approximately $15 million for its work in the deal. The allegation is that Goldman misrepresented
to investors that an independent selection agent, ACA, had reviewed the mortgage package underlying the credit default obligations, and that Goldman failed to disclose to ACA that a hedge fund, Paulson & Co.
, that sought to short the package, had helped select underlying mortgages for the package against which it planned to bet. The SEC further alleged that "Tourre also misled ACA into believing that Paulson invested approximately $200 million in the equity of ABACUS 2007-ACI (a long position) and, accordingly, that Paulson's interests in the collateral section [sic] process were aligned with ACA's when in reality Paulson's interests were sharply conflicting." Goldman Sachs stated that the firm never represented to ACA that Paulson was to be a long investor, and that as normal business practice, market makers do not disclose the identities of a buyer to a seller and vice versa.
The complaint states that Paulson made a $1 billion profit from the short investments, while purchasers of the materials lost the same amount. The two main investors who lost money were ABN Amro and IKB Deutsche Industriebank
. IKB lost $150,000,000 within months on the purchase. ABN Amro lost $840,909,090. Goldman stated the firm also lost $90 million and did not structure a portfolio that was designed to lose money. After the SEC announced the suit during the April 16, 2010 trading day, Goldman's Sachs's stock fell 13% to close at 160.70 from 184.27 on volume of over 102,000,000 shares (vs. a 52 week average of 13,000,000 shares). The firm's shares lost $10 billion in market value during the trading session. On April 30, 2010, shares tumbled further on news that the Manhattan office of the US Attorney General launched a criminal probe into Goldman Sachs, sending the stock down more than 15 points, or nearly ten percent to $145.
Goldman issued a statement on the same day the suit was filed, saying the SEC's charges were "unfounded in law and fact" and giving specific reasons as to why. The firm stated it had provided extensive disclosure to the long investors in the CDO, that the firm also lost money, that ACA selected the portfolio without the firm suggesting Paulson was to be a long investor, and that ACA was itself the largest purchaser of the Abacus pool, investing $951 million. Goldman also stated that any investor losses resulted from the overall negative performance of the entire sector, rather than from a particular security in the CDO. Goldman issued an additional public comment in response to the suit on April 19, 2010, raising additional points in their favor. While some have called these statements misleading, others believe Goldman has a strong defense or that the SEC has a weak case.
Experts on securities law contacted by The Wall Street Journal
believed the success or failure of the suit would depend on whether the facts not disclosed by Goldman were material. Some, such as James Cox, a Duke University
law professor, believed the suit had merit. Cox opined that Goldman was aware of the relevance of Paulson's involvement and took steps to downplay it. Others, including Wayne State University
law professor Peter Henning, noted that the major purchasers were sophisticated investors, capable of accurately assessing the risks involved, even without knowledge of the part played by Paulson.
On July 15, 2010, Goldman agreed to pay $550 million – $300 million to the U.S. government and $250 million to investors – in a settlement with the SEC. The company also agreed to change some of its business practices regarding mortgage investments, including the way it designs marketing materials. The SEC called the fine the largest commission penalty for a Wall Street firm. The company did not admit or deny wrongdoing. The settlement does not cover Tourre.
On April 14, 2011, the United States Senate’s Permanent Subcommittee on Investigations released a 635-page report entitled, Wall Street and the Financial Crisis: Anatomy of a Financial Collapse
which described some of the causes of the financial crisis. The report alleged that Goldman Sachs may have misled investors and profited from the collapse of the mortgage market at the expense of its clients. Senator Carl Levin (D-Michigan), Chairman of the Subcommittee, said he would refer the report to the Department of Justice for further investigation.
On June 2, 2011, following an "exploratory" meeting with the Manhattan district attorney, Goldman was subpoenaed for relevant information. Goldman is expected to accept a deferred-prosecution agreement if charges are filed.
, Bangalore
, and Salt Lake City. Salt Lake City is currently Goldman Sachs' fastest growing office worldwide.
Multinational corporation
A multi national corporation or enterprise , is a corporation or an enterprise that manages production or delivers services in more than one country. It can also be referred to as an international corporation...
bulge bracket
Bulge bracket
The bulge bracket comprises the "big banks," the world's largest and most profitable multi-national investment banks.- Technical meaning :The term 'bulge bracket' refers to the first group of investment banks listed on the "tombstone" notifying the public of a financial transaction or deal...
investment banking and securities firm that engages in global investment banking
Investment banking
An investment bank is a financial institution that assists individuals, corporations and governments in raising capital by underwriting and/or acting as the client's agent in the issuance of securities...
, securities, investment management
Investment management
Investment management is the professional management of various securities and assets in order to meet specified investment goals for the benefit of the investors...
, and other financial services
Financial services
Financial services refer to services provided by the finance industry. The finance industry encompasses a broad range of organizations that deal with the management of money. Among these organizations are credit unions, banks, credit card companies, insurance companies, consumer finance companies,...
primarily with institutional clients. Goldman Sachs was founded in 1869 and is headquartered at 200 West Street
200 West Street
Goldman Sachs Tower is the global headquarters of Goldman Sachs located in Lower Manhattan. The building is a , 43-story building that opened in October 2009 in the Battery Park City neighborhood of Manhattan. It is located on West Street, between Vesey and Murray Streets...
in the Lower Manhattan
Lower Manhattan
Lower Manhattan is the southernmost part of the island of Manhattan, the main island and center of business and government of the City of New York...
area of New York City, with additional offices in major international financial centers. The firm provides mergers and acquisitions
Mergers and acquisitions
Mergers and acquisitions refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or...
advice, underwriting services, asset management
Investment management
Investment management is the professional management of various securities and assets in order to meet specified investment goals for the benefit of the investors...
, and prime brokerage
Prime brokerage
Prime brokerage is the generic name for a bundled package of services offered by investment banks and securities firms to hedge funds and other professional investors needing the ability to borrow securities and cash to be able to invest on a netted basis and achieve an absolute return...
to its clients, which include corporations, governments and individuals. The firm also engages in proprietary trading
Proprietary trading
Proprietary trading occurs when a firm trades stocks, bonds, currencies, commodities, their derivatives, or other financial instruments, with the firm's own money as opposed to its customers' money, so as to make a profit for itself...
and private equity
Private equity
Private equity, in finance, is an asset class consisting of equity securities in operating companies that are not publicly traded on a stock exchange....
deals, and is a primary dealer in the United States Treasury security market.
Former employees include Robert Rubin
Robert Rubin
Robert Edward Rubin served as the 70th United States Secretary of the Treasury during both the first and second Clinton administrations. Before his government service, he spent 26 years at Goldman Sachs eventually serving as a member of the Board, and Co-Chairman from 1990-1992...
and Henry Paulson
Henry Paulson
Henry Merritt "Hank" Paulson, Jr. is an American banker who served as the 74th United States Secretary of the Treasury. He previously served as the Chairman and Chief Executive Officer of Goldman Sachs.-Early life and family:...
who served as United States Secretary of the Treasury
United States Secretary of the Treasury
The Secretary of the Treasury of the United States is the head of the United States Department of the Treasury, which is concerned with financial and monetary matters, and, until 2003, also with some issues of national security and defense. This position in the Federal Government of the United...
under Presidents Bill Clinton
Bill Clinton
William Jefferson "Bill" Clinton is an American politician who served as the 42nd President of the United States from 1993 to 2001. Inaugurated at age 46, he was the third-youngest president. He took office at the end of the Cold War, and was the first president of the baby boomer generation...
and George W. Bush
George W. Bush
George Walker Bush is an American politician who served as the 43rd President of the United States, from 2001 to 2009. Before that, he was the 46th Governor of Texas, having served from 1995 to 2000....
, respectively, as well as Mark Carney
Mark Carney
Mark J. Carney is the eighth and current governor of the Bank of Canada and the Chairman of the Financial Stability Board, an institution of the G20 based in Basel, Switzerland. These appointments were on October 4, 2007 , and on November 4, 2011...
, the governor of the Bank of Canada
Bank of Canada
The Bank of Canada is Canada's central bank and "lender of last resort". The Bank was created by an Act of Parliament on July 3, 1934 as a privately owned corporation. In 1938, the Bank became a Crown corporation belonging to the Government of Canada...
since 2008, Mario Draghi
Mario Draghi
Mario Draghi is an Italian banker and economist who succeeded Jean-Claude Trichet as President of the European Central Bank on 1 November 2011...
, governor of the European Central Bank
European Central Bank
The European Central Bank is the institution of the European Union that administers the monetary policy of the 17 EU Eurozone member states. It is thus one of the world's most important central banks. The bank was established by the Treaty of Amsterdam in 1998, and is headquartered in Frankfurt,...
and Mario Monti
Mario Monti
Mario Monti is an Italian economist and academic who is Prime Minister of Italy, as well as Minister of Economy and Finance, since November 2011. Monti served as a European Commissioner from 1995 to 2004, with responsibility for the Internal Market, Services, Customs and Taxation from 1995 to 1999...
, the Italian Prime Minister
Prime minister of Italy
The Prime Minister of Italy is the head of government of the Italian Republic...
.
1869–1930
Goldman Sachs was founded in New York in 1869 by the German-born Marcus GoldmanMarcus Goldman
Marcus Goldman was a German-born American businessman and entrepreneur. He was born in Trappstadt, Germany and emigrated to the United States in 1848...
. In 1882, Goldman's son-in-law Samuel Sachs
Samuel Sachs
Samuel Sachs was an American investment banker. He was born in the state of Maryland to Jewish immigrants from Bavaria, Germany. Sachs, along with his longtime friend Philip Lehman of Lehman Brothers, pioneered the issuing of stock as a way for new companies to raise funds...
joined the firm. In 1885, Goldman took his son Henry and his son-in-law Ludwig Dreyfuss into the business and the firm adopted its present name, Goldman Sachs & Co. The company made a name for itself pioneering the use of commercial paper
Commercial paper
In the global money market, commercial paper is an unsecured promissory note with a fixed maturity of 1 to 270 days. Commercial Paper is a money-market security issued by large banks and corporations to get money to meet short term debt obligations , and is only backed by an issuing bank or...
for entrepreneurs and was invited to join the New York Stock Exchange
New York Stock Exchange
The New York Stock Exchange is a stock exchange located at 11 Wall Street in Lower Manhattan, New York City, USA. It is by far the world's largest stock exchange by market capitalization of its listed companies at 13.39 trillion as of Dec 2010...
(NYSE) in 1896.
In the early 20th century, Goldman was a player in establishing the initial public offering
Initial public offering
An initial public offering or stock market launch, is the first sale of stock by a private company to the public. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises...
(IPO) market. It managed one of the largest IPOs to date, that of Sears, Roebuck and Company
Sears, Roebuck and Company
Sears, officially named Sears, Roebuck and Co., is an American chain of department stores which was founded by Richard Warren Sears and Alvah Curtis Roebuck in the late 19th century...
in 1906. It also became one of the first companies to heavily recruit those with MBA degrees from leading business schools, a practice that still continues today.
On December 4, 1928, it launched the Goldman Sachs Trading Corp. a closed-end fund
Closed-end fund
A closed-end fund is a collective investment scheme with a limited number of shares. It is called a closed-end fund because new shares are rarely issued once the fund has launched, and because shares are not normally redeemable for cash or securities until the fund liquidates.Typically an...
. The fund failed as a result of the Stock Market Crash of 1929, hurting the firm's reputation for several years afterward. Of this case and others like Blue Ridge Corporation and Shenandoah Corporation John Kenneth Galbraith
John Kenneth Galbraith
John Kenneth "Ken" Galbraith , OC was a Canadian-American economist. He was a Keynesian and an institutionalist, a leading proponent of 20th-century American liberalism...
wrote: The Autumn of 1929 was, perhaps, the first occasion when men succeeded on a large scale in swindling themselves.
1930–1980
In 1930, Sidney WeinbergSidney Weinberg
Sidney James Weinberg was a long-time leader of the Wall Street firm Goldman Sachs, nicknamed “Mr. Wall Street” by The New York Times and "director's director" by Fortune magazine...
assumed the role of senior partner and shifted Goldman's focus away from trading and towards investment banking
Investment banking
An investment bank is a financial institution that assists individuals, corporations and governments in raising capital by underwriting and/or acting as the client's agent in the issuance of securities...
. It was Weinberg's actions that helped to restore some of Goldman's tarnished reputation. On the back of Weinberg, Goldman was lead advisor on the Ford Motor Company's
Ford Motor Company
Ford Motor Company is an American multinational automaker based in Dearborn, Michigan, a suburb of Detroit. The automaker was founded by Henry Ford and incorporated on June 16, 1903. In addition to the Ford and Lincoln brands, Ford also owns a small stake in Mazda in Japan and Aston Martin in the UK...
IPO in 1956, which at the time was a major coup on Wall Street. Under Weinberg's reign the firm also started an investment research division and a municipal bond
Municipal bond
A municipal bond is a bond issued by a city or other local government, or their agencies. Potential issuers of municipal bonds includes cities, counties, redevelopment agencies, special-purpose districts, school districts, public utility districts, publicly owned airports and seaports, and any...
department. It also was at this time that the firm became an early innovator in risk arbitrage
Risk arbitrage
Risk arbitrage, or merger arbitrage, is an investment or trading strategy often associated with hedge funds.Two principal types of merger are possible: a cash merger, and a stock merger. In a cash merger, an acquirer proposes to purchase the shares of the target for a certain price in cash...
.
Gus Levy
Gus Levy
Gustave "Gus" Levy was senior partner of Goldman Sachs from 1969 until his death in 1976, succeeding the renowned Sidney Weinberg.Levy was born in 1910 in New Orleans, one of three children of Sigmund and Bella Levy...
joined the firm in the 1950s as a securities trader, which started a trend at Goldman where there would be two powers generally vying for supremacy, one from investment banking and one from securities trading. For most of the 1950s and 1960s, this would be Weinberg and Levy. Levy was a pioneer in block trading
Block trade
A block trade is a permissible, noncompetitive, privately negotiated transaction either at or exceeding an exchange determined minimum threshold quantity of shares, which is executed apart and away from the open outcry or electronic markets...
and the firm established this trend under his guidance. Due to Weinberg's heavy influence at the firm, it formed an investment banking division in 1956 in an attempt to spread around influence and not focus it all on Weinberg.
In 1969, Levy took over as Senior Partner from Weinberg, and built Goldman's trading franchise once again. It is Levy who is credited with Goldman's famous philosophy of being "long-term greedy", which implied that as long as money is made over the long term, trading losses in the short term were not to be worried about. At the same time, partners reinvested almost all of their earnings in the firm, so the focus was always on the future. That same year, Weinberg retired from the firm.
Another financial crisis for the firm occurred in 1970, when the Penn Central Transportation Company went bankrupt with over $80 million in commercial paper outstanding, most of it issued by Goldman Sachs. The bankruptcy was large, and the resulting lawsuits threatened the partnership capital and life of the firm. It was this bankruptcy that resulted in credit rating
Credit rating
A credit rating evaluates the credit worthiness of an issuer of specific types of debt, specifically, debt issued by a business enterprise such as a corporation or a government. It is an evaluation made by a credit rating agency of the debt issuers likelihood of default. Credit ratings are...
s being created for every issuer of commercial paper today by several credit rating services.
During the 1970s, the firm also expanded in several ways. Under the direction of Senior Partner Stanley R. Miller, it opened its first international office in London in 1970, and created a private wealth division along with a fixed income
Fixed income
Fixed income refers to any type of investment that is not equity, which obligates the borrower/issuer to make payments on a fixed schedule, even if the number of the payments may be variable....
division in 1972. It also pioneered the "white knight
White knight (business)
In business, a white knight, or "friendly investor," may be a corporation or a person that intends to help another firm. There are many types of white knights...
" strategy in 1974 during its attempts to defend Electric Storage Battery against a hostile takeover bid from International Nickel and Goldman's rival Morgan Stanley
Morgan Stanley
Morgan Stanley is a global financial services firm headquartered in New York City serving a diversified group of corporations, governments, financial institutions, and individuals. Morgan Stanley also operates in 36 countries around the world, with over 600 offices and a workforce of over 60,000....
. This action would boost the firm's reputation as an investment advisor
Investment Advisor
The term Investment Advisor is an individual or firm who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities...
because it pledged to no longer participate in hostile takeovers.
John L. Weinberg
John Weinberg
John Livingston Weinberg was an American banker and businessperson, running Goldman Sachs from 1976 to 1990.- Biography :...
(the son of Sidney Weinberg), and John C. Whitehead
John C. Whitehead
John Cunningham Whitehead is an American banker and civil servant, currently a board member of the World Trade Center Memorial Foundation and, until his resignation in May 2006, chairman of the Lower Manhattan Development Corporation.-Biography:He was born in Evanston, Illinois...
assumed roles of co-senior partners in 1976, once again emphasizing the co-leadership at the firm. One of their initiatives was the establishment of the 14 business principles that are still used to this day.
1980–1999
On November 16, 1981, the firm made a move by acquiring J. Aron & Company, a commodities trading firm which merged with the Fixed Income division to become known as Fixed Income, Currencies, and Commodities. J. Aron was a player in the coffee and gold markets, and the current CEO of Goldman, Lloyd BlankfeinLloyd Blankfein
Lloyd Craig Blankfein is an American business executive. He is currently the CEO and Chairman of Goldman Sachs. He has been in this position since the May 31, 2006 nomination of former CEO Henry Paulson as Secretary of the Treasury under George W...
, joined the firm as a result of this merger. In 1985 it underwrote the public offering of the Real Estate Investment Trust
Real estate investment trust
A real estate investment trust or REIT is a tax designation for a corporate entity investing in real estate. The purpose of this designation is to reduce or eliminate corporate tax. In return, REITs are required to distribute 90% of their taxable income into the hands of investors...
that owned Rockefeller Center
Rockefeller Center
Rockefeller Center is a complex of 19 commercial buildings covering between 48th and 51st streets in New York City, United States. Built by the Rockefeller family, it is located in the center of Midtown Manhattan, spanning the area between Fifth Avenue and Sixth Avenue. It was declared a National...
, then the largest REIT offering in history. In accordance with the beginning of the dissolution of the Soviet Union
Dissolution of the Soviet Union
The dissolution of the Soviet Union was the disintegration of the federal political structures and central government of the Union of Soviet Socialist Republics , resulting in the independence of all fifteen republics of the Soviet Union between March 11, 1990 and December 25, 1991...
, the firm also became involved in facilitating the global privatization movement by advising companies that were spinning off from their parent governments.
In 1986, the firm formed Goldman Sachs Asset Management, which manages the majority of its mutual funds and hedge fund
Hedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...
s today. In the same year, the firm also underwrote the IPO of Microsoft
Microsoft
Microsoft Corporation is an American public multinational corporation headquartered in Redmond, Washington, USA that develops, manufactures, licenses, and supports a wide range of products and services predominantly related to computing through its various product divisions...
, advised General Electric
Gê
Gê are the people who spoke Ge languages of the northern South American Caribbean coast and Brazil. In Brazil the Gê were found in Rio de Janeiro, Minas Gerais, Bahia, Piaui, Mato Grosso, Goias, Tocantins, Maranhão, and as far south as Paraguay....
on its acquisition of RCA
RCA
RCA Corporation, founded as the Radio Corporation of America, was an American electronics company in existence from 1919 to 1986. The RCA trademark is currently owned by the French conglomerate Technicolor SA through RCA Trademark Management S.A., a company owned by Technicolor...
and joined the London
London Stock Exchange
The London Stock Exchange is a stock exchange located in the City of London within the United Kingdom. , the Exchange had a market capitalisation of US$3.7495 trillion, making it the fourth-largest stock exchange in the world by this measurement...
and Tokyo stock exchange
Tokyo Stock Exchange
The , called or TSE for short, is located in Tokyo, Japan and is the third largest stock exchange in the world by aggregate market capitalization of its listed companies...
s. 1986 also was the year when Goldman became the first United States bank to rank in the top 10 of mergers and acquisitions
Mergers and acquisitions
Mergers and acquisitions refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or...
in the United Kingdom. During the 1980s the firm became the first bank to distribute its investment research electronically and created the first public offering of original issue deep-discount bond
Bond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...
.
Robert Rubin
Robert Rubin
Robert Edward Rubin served as the 70th United States Secretary of the Treasury during both the first and second Clinton administrations. Before his government service, he spent 26 years at Goldman Sachs eventually serving as a member of the Board, and Co-Chairman from 1990-1992...
and Stephen Friedman
Stephen Friedman (PFIAB)
Stephen Friedman is the former Chairman of the United States President's Foreign Intelligence Advisory Board. He was nominated on October 27, 2005 to replace Brent Scowcroft in the position.-Life and career:...
assumed the Co-Senior Partnership in 1990 and pledged to focus on globalization of the firm and strengthening the Merger & Acquisition and Trading business lines. During their reign, the firm introduced paperless trading to the New York Stock Exchange and lead-managed the first-ever global debt offering by a U.S. corporation. It also launched the Goldman Sachs Commodity Index
Goldman Sachs Commodity Index
The S&P GSCI serves as a benchmark for investment in the commodity markets and as a measure of commodity performance over time. It is a tradable index that is readily available to market participants of the Chicago Mercantile Exchange. The index was originally developed by Goldman Sachs...
(GSCI) and opened a Beijing office in 1994. It was this same year that Jon Corzine
Jon Corzine
Jon Stevens Corzine is the former CEO of Goldman Sachs and of MF Global, and a one time American politician, who served as the 54th Governor of New Jersey from 2006 to 2010. A Democrat, Corzine served five years of a six-year U.S. Senate term representing New Jersey before being elected Governor...
assumed leadership of the firm following the departure of Rubin and Friedman.
Another momentous event in Goldman's history was the Mexican bailout of 1995. Rubin drew criticism in Congress for using a Treasury Department account under his personal control to distribute $20 billion to bail out Mexican bonds, of which Goldman was a key distributor. On November 22, 1994, the Mexican Bolsa stock market had admitted Goldman Sachs and one other firm to operate on that market. The 1994 economic crisis in Mexico
1994 economic crisis in Mexico
The 1994 Economic Crisis in Mexico, widely known as the Mexican peso crisis, was caused by the sudden devaluation of the Mexican peso in December 1994....
threatened to wipe out the value of Mexico's bonds held by Goldman Sachs.
The firm joined David Rockefeller
David Rockefeller
David Rockefeller, Sr. is the current patriarch of the Rockefeller family. He is the youngest and only surviving child of John D. Rockefeller, Jr. and Abby Aldrich Rockefeller, and the only surviving grandchild of oil tycoon John D. Rockefeller, founder of Standard Oil. His five siblings were...
and partners in a 50–50 joint ownership of Rockefeller Center
Rockefeller Center
Rockefeller Center is a complex of 19 commercial buildings covering between 48th and 51st streets in New York City, United States. Built by the Rockefeller family, it is located in the center of Midtown Manhattan, spanning the area between Fifth Avenue and Sixth Avenue. It was declared a National...
during 1994, but later sold the shares to Tishman Speyer in 2000. In 1996, Goldman was lead underwriter of the Yahoo! IPO and in 1998 it was global coordinator of the NTT DoCoMo
NTT DoCoMo
is the predominant mobile phone operator in Japan. The name is officially an abbreviation of the phrase, "do communications over the mobile network", and is also from a compound word dokomo, meaning "everywhere" in Japanese. Docomo provides phone, video phone , i-mode , and mail services...
IPO. In 1999, Henry Paulson took over as Senior Partner.
Since 1999
One of the largest events in the firm's history was its own IPO in 1999. The decision to go public was one that the partners debated for decades. In the end, Goldman decided to offer only a small portion of the company to the public, with some 48% still held by the partnership pool. 22% of the company was held by non-partner employees, and 18% was held by retired Goldman partners and two longtime investors, Sumitomo Bank Ltd. and Hawaii's Kamehameha Activities Assn (the investing arm of Kamehameha SchoolsKamehameha Schools
Kamehameha Schools , formerly called Kamehameha Schools/Bishop Estate , is a private co-educational college-preparatory institution that specializes in Native Hawaiian language and cultural education. It is located in Hawaii and operates three campuses: Kapālama , Pukalani , and Keaau...
). This left approximately 12% of the company as being held by the public. With the firm's 1999 IPO, Paulson became Chairman and Chief Executive Officer of the firm. As of 2009, after further stock offerings to the public, Goldman is 67% owned by institutions (such as pension funds and other banks).
In 1999, Goldman acquired Hull Trading Company
Hull Trading Company
Hull Trading Company was an independent algorithmic trading firm and electronic market maker. Known for its quantitative and technology-based trading strategy, it was acquired by Goldman Sachs in 1999.-History:...
, one of the world's premier market-making firms, for $531 million. More recently, the firm has been busy both in investment banking and in trading activities. It purchased Spear, Leeds, & Kellogg, one of the largest specialist firms on the New York Stock Exchange, for $6.3 billion in September 2000. It also advised on a debt offering for the Government of China
Government of the People's Republic of China
All power within the government of the People's Republic of China is divided among three bodies: the People's Republic of China, State Council, and the People's Liberation Army . This article is concerned with the formal structure of the state, its departments and their responsibilities...
and the first electronic offering for the World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
. In 2003 it took a 45% stake in a joint venture with JBWere, the Australian investment bank. In 2009 The Private Wealth Management arm of JBWere was sold into a joint venture with National Australia Bank. Goldman opened a full-service broker-dealer in Brazil in 2007, after having set up an investment banking office in 1996. It expanded its investments in companies to include Burger King
Burger King
Burger King, often abbreviated as BK, is a global chain of hamburger fast food restaurants headquartered in unincorporated Miami-Dade County, Florida, United States. The company began in 1953 as Insta-Burger King, a Jacksonville, Florida-based restaurant chain...
, McJunkin Corporation, and in January 2007, Alliance Atlantis
Alliance Atlantis
Alliance Atlantis Communications Inc. was a Toronto-based media company that operated primarily as a specialty service operator in Canada. Alliance Atlantis also had offices in Halifax, Los Angeles, London, Dublin, Madrid, Barcelona, Shannon and Sydney.Alliance Atlantis was acquired by Canwest...
alongside CanWest Global Communications
CanWest Global Communications
Canwest Global Communications Corporation, which operated under the corporate brand Canwest, was a major Canadian media company based in Winnipeg, Manitoba, with its head offices at Canwest Place...
to own sole broadcast rights to the all three CSI series. The firm is also heavily involved in energy trading, including oil, on both a principal and agent basis.
In May 2006, Paulson left the firm to serve as U.S. Treasury Secretary
United States Secretary of the Treasury
The Secretary of the Treasury of the United States is the head of the United States Department of the Treasury, which is concerned with financial and monetary matters, and, until 2003, also with some issues of national security and defense. This position in the Federal Government of the United...
, and Lloyd C. Blankfein was promoted to Chairman and Chief Executive Officer. Former Goldman employees have headed the New York Stock Exchange, the World Bank, the U.S. Treasury Department, the White House staff, and firms such as Citigroup
Citigroup
Citigroup Inc. or Citi is an American multinational financial services corporation headquartered in Manhattan, New York City, New York, United States. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate...
and Merrill Lynch
Merrill Lynch
Merrill Lynch is the wealth management division of Bank of America. With over 15,000 financial advisors and $2.2 trillion in client assets it is the world's largest brokerage. Formerly known as Merrill Lynch & Co., Inc., prior to 2009 the firm was publicly owned and traded on the New York...
.
Actions in the 2007–2008 subprime mortgage crisis
During the 2007 subprime mortgage crisisSubprime mortgage crisis
The U.S. subprime mortgage crisis was one of the first indicators of the late-2000s financial crisis, characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages....
, Goldman was able to profit from the collapse in subprime mortgage bonds in the summer of 2007 by short-selling subprime mortgage-backed securities. Two Goldman traders, Michael Swenson and Josh Birnbaum, are credited with bearing responsibility for the firm's large profits during America's sub-prime mortgage crisis. The pair, members of Goldman's structured product
Structured product
In finance, a structured product, also known as a market linked investment, is generally a pre-packaged investment strategy based on derivatives, such as a single security, a basket of securities, options, indices, commodities, debt issuance and/or foreign currencies, and to a lesser extent, swaps...
s group in New York, made a profit of $4 billion by "betting" on a collapse in the sub-prime market, and shorting mortgage-related securities. By summer of 2007, they persuaded colleagues to see their point of view and talked around skeptical risk management executives. The firm initially avoided large subprime writedowns, and achieved a net profit due to significant losses on non-prime securitized
Securitization
Securitization is the financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans or credit card debt obligations and selling said consolidated debt as bonds, pass-through securities, or Collateralized mortgage obligation , to...
loans being offset by gains on short mortgage positions. Its sizable profits made during the initial subprime mortgage crisis led the New York Times to proclaim that Goldman Sachs is without peer in the world of finance. The firm's viability was later called into question as the crisis intensified in September 2008.
On October 15, 2007, as the crisis had begun to unravel, Allan Sloan
Allan Sloan
Allan Sloan is an American journalist who is currently senior editor at large at Fortune magazine.Sloan was born in Brooklyn, New York and is a 1966 graduate of Brooklyn College and a 1967 graduate of the Columbia University Graduate School of Journalism...
, a senior editor for Fortune
Fortune (magazine)
Fortune is a global business magazine published by Time Inc. Founded by Henry Luce in 1930, the publishing business, consisting of Time, Life, Fortune, and Sports Illustrated, grew to become Time Warner. In turn, AOL grew as it acquired Time Warner in 2000 when Time Warner was the world's largest...
magazine, said:
So let's reduce this macro story to human scale. Meet GSAMP Trust 2006-S3, a $494 million drop in the junk-mortgage bucket, part of the more than half-a-trillion dollars of mortgage-backed securities issued last year. We found this issue by asking mortgage mavens to pick the worst deal they knew of that had been floated by a top-tier firm – and this one's pretty bad.
It was sold by Goldman Sachs – GSAMP originally stood for Goldman Sachs Alternative Mortgage Products but now has become a name itself, like AT&T and 3M.
This issue, which is backed by ultra-risky second-mortgage loans, contains all the elements that facilitated the housing bubble and bust. It's got speculators searching for quick gains in hot housing markets; it's got loans that seem to have been made with little or no serious analysis by lenders; and finally, it's got Wall Street, which churned out mortgage "product" because buyers wanted it. As they say on the Street, "When the ducks quack, feed them."
On September 21, 2008, Goldman Sachs and Morgan Stanley, the last two major investment banks in the United States, both confirmed that they would become traditional bank holding companies, bringing an end to the era of investment banking on Wall Street
Wall Street
Wall Street refers to the financial district of New York City, named after and centered on the eight-block-long street running from Broadway to South Street on the East River in Lower Manhattan. Over time, the term has become a metonym for the financial markets of the United States as a whole, or...
. The Federal Reserve's approval of their bid to become banks ended the ascendancy of the securities firms, 75 years after Congress separated them from deposit-taking lenders, and capped weeks of chaos that sent Lehman Brothers
Lehman Brothers
Lehman Brothers Holdings Inc. was a global financial services firm. Before declaring bankruptcy in 2008, Lehman was the fourth largest investment bank in the USA , doing business in investment banking, equity and fixed-income sales and trading Lehman Brothers Holdings Inc. (former NYSE ticker...
into bankruptcy and led to the rushed sale of Merrill Lynch & Co. to Bank of America Corp.
According to a 2009 BrandAsset Valuator survey taken of 17,000 people nationwide, the firm's reputation suffered in 2008 and 2009, and rival Morgan Stanley was respected more than Goldman Sachs, a reversal of the sentiment in 2006. Goldman refused to comment on the findings.
TARP and Berkshire Hathaway investment
On September 23, 2008, Berkshire HathawayBerkshire Hathaway
Berkshire Hathaway Inc. is an American multinational conglomerate holding company headquartered in Omaha, Nebraska, United States, that oversees and manages a number of subsidiary companies. The company averaged an annual growth in book value of 20.3% to its shareholders for the last 44 years,...
agreed to purchase $5 billion in Goldman's preferred stock, and also received warrants
Warrant (finance)
In finance, a warrant is a security that entitles the holder to buy the underlying stock of the issuing company at a fixed exercise price until the expiry date....
to buy another $5 billion in Goldman's common stock
Common stock
Common stock is a form of corporate equity ownership, a type of security. It is called "common" to distinguish it from preferred stock. In the event of bankruptcy, common stock investors receive their funds after preferred stock holders, bondholders, creditors, etc...
, exercisable for a five-year term. Goldman also received a $10 billion preferred stock
Preferred stock
Preferred stock, also called preferred shares, preference shares, or simply preferreds, is a special equity security that has properties of both an equity and a debt instrument and is generally considered a hybrid instrument...
investment from the U.S. Treasury in October 2008, as part of the Troubled Asset Relief Program (TARP).
Andrew Cuomo
Andrew Cuomo
Andrew Mark Cuomo is the 56th and current Governor of New York, having assumed office on January 1, 2011. A member of the Democratic Party, he was the 64th New York State Attorney General, and was the 11th United States Secretary of Housing and Urban Development...
, then Attorney General of New York, questioned Goldman's decision to pay 953 employees bonuses of at least $1 million each after it received TARP funds in 2008. That same period, however, CEO Lloyd Blankfein and six other senior executives opted to forgo bonuses, stating they believed it was the right thing to do, in light of "the fact that we are part of an industry that's directly associated with the ongoing economic distress". Cuomo called the move "appropriate and prudent", and urged the executives of other banks to follow the firm's lead and refuse bonus payments.
In June 2009, Goldman Sachs repaid the U.S. Treasury’s TARP investment, with 23% interest (in the form of $318 million in preferred dividend
Preferred stock
Preferred stock, also called preferred shares, preference shares, or simply preferreds, is a special equity security that has properties of both an equity and a debt instrument and is generally considered a hybrid instrument...
payments and $1.418 billion in warrant redemptions). In December 2009, Goldman announced their top 30 executives will be paid year-end bonuses in restricted stock, with provisions, that must go unsold for five years.
Use of Federal Reserve's Emergency Liquidity Programs
During the 2008 Financial Crisis, the Federal Reserve introduced a number of short-term credit and liquidity facilities to help stabilize markets. Some of the transactions under these facilities provided liquidity to institutions whose disorderly failure could have severely stressed an already fragile financial system.Goldman Sachs was one of the heaviest users of these loan facilities, taking out numerous loans from March 18, 2008 – April 22, 2009. The Primary Dealer Credit Facility
Primary Dealer Credit Facility
On March 17, 2008, in response to the subprime mortgage crisis and the collapse of Bear Stearns, the Federal Reserve announced the creation of a new lending facility, the Primary Dealer Credit Facility...
(PDCF), the first Fed facility ever to provide overnight loans to investment banks, loaned Goldman Sachs a total of $589 billion against collateral such as corporate market instruments and mortgage-backed securities
Mortgage-backed security
A mortgage-backed security is an asset-backed security that represents a claim on the cash flows from mortgage loans through a process known as securitization.-Securitization:...
. The Term Securities Lending Facility
Term Securities Lending Facility
The Term Securities Lending Facility is a 28-day facility managed by the United States Federal Reserve that offers Treasury general collateral to the primary dealers in exchange for other program-eligible collateral...
(TSLF), which allows primary dealers to borrow liquid Treasury securities for one month in exchange for less liquid collateral, loaned Goldman Sachs a total of $193 billion.
Goldman Sachs's borrowings totaled $782 billion in hundreds of transactions over these months. This number is a total of all transactions over time and not the outstanding loan balance. The loans have been fully repaid in accordance with the terms of the facilities.
Corporate affairs
Arithmetic mean
In mathematics and statistics, the arithmetic mean, often referred to as simply the mean or average when the context is clear, is a method to derive the central tendency of a sample space...
of total compensation and is highly skewed upwards as several
hundred of the top recipients command the majority of the Bonus Pools, leaving the median that most employees receive well below this number. In Business Week's recent release of the Best Places to Launch a Career 2008, Goldman Sachs was ranked No.4 out of 119 total companies on the list. The current Chief Executive Officer is Lloyd C. Blankfein. The company ranks No.1 in Annual Net Income
Net income
Net income is the residual income of a firm after adding total revenue and gains and subtracting all expenses and losses for the reporting period. Net income can be distributed among holders of common stock as a dividend or held by the firm as an addition to retained earnings...
when compared with 86 peers in the Investment Services sector. Blankfein received a $67.9 million bonus in his first year. He chose to receive "some" cash unlike his predecessor, Paulson, who chose to take his bonus entirely in company
stock.
Goldman Sachs is divided into three businesses units: Investment Banking, Trading and Principal Investments, and Asset Management and Securities Services.
Investment banking
Investment bankingInvestment banking
An investment bank is a financial institution that assists individuals, corporations and governments in raising capital by underwriting and/or acting as the client's agent in the issuance of securities...
is divided into two divisions and includes Financial Advisory (mergers and acquisitions, investitures, corporate defense activities, restructuring
Restructuring
Restructuring is the corporate management term for the act of reorganizing the legal, ownership, operational, or other structures of a company for the purpose of making it more profitable, or better organized for its present needs...
and spin-offs) and Underwriting (public offerings and private placements of equity
Stock
The capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors...
, equity-related and debt instruments). Goldman Sachs is one of the leading M&A advisory firms, often topping the league tables in terms of transaction size. The firm gained a reputation as a white knight in the mergers and acquisitions sector by advising clients on how to avoid hostile takeovers, moves generally viewed as unfriendly to shareholders of targeted companies. Goldman Sachs, for a long time during the 1980s, was the only major investment bank with a strict policy against helping to initiate a hostile takeover, which increased the firm's reputation immensely among sitting management teams at the time. The investment banking segment accounts for around 17 percent of Goldman Sachs' revenues.
The firm has also been involved in both advising and brokering deals to privatize major highways by selling them to foreign investors. In addition to advising 4 state and local governments on privatization projects, including Indiana, Texas, and Chicago.
Trading & principal investments
Trading and Principal Investments is the largest of the three segments, and is the company's profit center. The segment is divided into three divisions and includes Fixed Income, Currency and Commodities (trading in interest rate and creditCredit (finance)
Credit is the trust which allows one party to provide resources to another party where that second party does not reimburse the first party immediately , but instead arranges either to repay or return those resources at a later date. The resources provided may be financial Credit is the trust...
products, mortgage-backed securities
Mortgage-backed security
A mortgage-backed security is an asset-backed security that represents a claim on the cash flows from mortgage loans through a process known as securitization.-Securitization:...
and loans, currencies and commodities, insurance-linked securities
Insurance-Linked Securities (ILS)
Insurance-linked securities are broadly defined as financial instruments whose values are driven by insurance loss events. Those such instruments that are linked to property losses due to natural catastrophes represent a unique asset class, the return from which is uncorrelated with that of the...
, structured and derivative products), Equities (trading in equities, equity-related products, equity derivatives, structured products and executing client trades in equities, options
Option (finance)
In finance, an option is a derivative financial instrument that specifies a contract between two parties for a future transaction on an asset at a reference price. The buyer of the option gains the right, but not the obligation, to engage in that transaction, while the seller incurs the...
, and futures contract
Futures contract
In finance, a futures contract is a standardized contract between two parties to exchange a specified asset of standardized quantity and quality for a price agreed today with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange...
s on world markets), and Principal Investments (merchant banking investments and funds). This segment consists of the revenues and profit gained from the Bank's trading activities, both on behalf of its clients (known as flow trading
Flow trading
In finance, flow trading occurs when a firm trades stocks, bonds, currencies, commodities, their derivatives, or other financial instruments, with funds from a client, rather than its own funds....
) and for its own account (known as proprietary trading
Proprietary trading
Proprietary trading occurs when a firm trades stocks, bonds, currencies, commodities, their derivatives, or other financial instruments, with the firm's own money as opposed to its customers' money, so as to make a profit for itself...
).
Most trading done by Goldman is not speculative, but rather an attempt to profit from bid-ask spreads
Bid-offer spread
The bid–offer spread for securities is the difference between the prices quoted for an immediate sale and an immediate purchase...
in the process of acting as a market maker
Market maker
A market maker is a company, or an individual, that quotes both a buy and a sell price in a financial instrument or commodity held in inventory, hoping to make a profit on the bid-offer spread, or turn. From a market microstructure theory standpoint, market makers are net sellers of an option to be...
. On average, around 68 percent of Goldman's revenues and profits are derived from trading. Upon its IPO, Goldman predicted that this segment would not grow as fast as its Investment Banking division and would be responsible for a shrinking proportion of earnings. The opposite has been true however, resulting in now-CEO Blankfein's appointment to President and Chief Operating Officer after John Thain
John Thain
John Alexander Thain is an American businessman, investment banker, and currently chairman and CEO of the CIT Group.Thain was the last chairman and chief executive officer of Merrill Lynch before its merger with Bank of America...
's departure to run the NYSE and John L. Thornton
John L. Thornton
John Lawson Thornton is Professor and Director of Global Leadership at Tsinghua University in Beijing. He is a former President and Co-COO of Goldman Sachs. In 1983, Thornton founded and developed Goldman Sachs' European mergers and acquisitions business. He served as co-CEO of Goldman Sachs...
's departure for an academic position in China.
Asset management and securities services
As the name suggests, the firm's Asset Management and Securities Services segment is divided into two components: Asset Management and Securities Services. The Asset Management division provides investment advisory and financial planning services and offers investment products (primarily through separately managed accounts and commingled vehicles) across all major asset classes to a diverse group of institutions and individuals worldwide. The unit primarily generates revenues in the form of management and incentive fees. The Securities Services division provides clearingClearing (finance)
In banking and finance, clearing denotes all activities from the time a commitment is made for a transaction until it is settled. Clearing is necessary because the speed of trades is much faster than the cycle time for completing the underlying transaction....
, financing, custody
Custodian bank
A Custodian bank, or simply custodian, is a specialized financial institution responsible for safeguarding a firm's or individual's financial assets and is not likely to engage in "traditional" commercial or consumer/retail banking such as mortgage or personal lending, branch banking, personal...
, securities lending, and reporting services to institutional clients, including hedge funds, mutual funds, and pension funds. The division generates revenues primarily in the form of interest rate spreads or fees.
In 2009, the Goldman Sachs Asset Management hedge fund was the 9th largest in the United States, with $20.58 billion under management. This was down from $32.5 billion in 2007, after client redemptions and weaker investment performance.
On September 14, 2011, Goldman Sachs stated it was shutting down the Global Alpha fund, once the firm's largest hedge fund. The announcement followed a reported decline in fund balances to less than $1.7 billion in June 2011 from $11 billion in 2007. The decline was caused by investors withdrawing from the fund following earlier substantial market losses. The firm said it expected most of the fund assets to be liquidated by mid-October 2011.
GS Capital Partners
GS Capital Partners is the private equity arm of Goldman Sachs. It has invested over $17 billion in the 20 years from 1986 to 2006. One of the most prominent funds is the GS Capital Partners V fund, which comprises over $8.5 billion of equityOwnership equity
In accounting and finance, equity is the residual claim or interest of the most junior class of investors in assets, after all liabilities are paid. If liability exceeds assets, negative equity exists...
. On April 23, 2007, Goldman closed GS Capital Partners VI with $20 billion in committed capital, $11 billion from qualified institutional and high net worth clients and $9 billion from the firm and its employees. GS Capital Partners VI is the current primary investment vehicle for Goldman Sachs to make large, privately negotiated equity investments.
Major private equity assets
- The Ayco Company, L.P. (Financial Advisory)
- Hawker BeechcraftHawker BeechcraftHawker Beechcraft Corporation is an aerospace manufacturing company that builds the Beechcraft and Hawker business jet lines of aircraft....
(Aerospace) - Cogentrix Energy (Energy)
- American Casino & Entertainment PropertiesAmerican Casino & Entertainment PropertiesAmerican Casino & Entertainment Properties is a casino holding company headquartered at the Stratosphere Las Vegas. ACEP was a wholly owned subsidiary of American Real Estate Partners before it was sold to Whitehall Street Real Estate Funds in February 2008...
(Casinos) - CH James Restaurant Holdings (Quick Service Restaurant)
- Coffeyville Resources LLCCoffeyville Resources LLCCoffeyville Resources LLC, formerly known as the COOP Refinery, is a company which owns an oil refinery in Coffeyville, Kansas. The refinery is owned and operated by Coffeyville Resources Refining & Marketing, LLC, The refinery employs 415 people and produces approximately of gasoline per day, and...
(Oil Refinery) - USI Holdings Corporation (Insurance & Finance)
- East Coast Power LLC (Energy)
- Queens Moat HousesQueens Moat HousesQueens Moat Houses plc was a British public limited company engaged primarily in the hotel business.It came to public attention after the suspension of its shares on 31 March 1993 consequent upon significant financial difficulties which precipitated a spectacular collapse. The company was...
(Hotels) - Sequoia Credit Consolidation (Finance)
- Shineway Industrial GroupShineway Industrial GroupShuanghui Group is one of the largest meat food processing in China, which offers high-temperature meat products, low-temperature meat products, fresh meat and frozen meat. It is the first meat processing company passing ISO9001...
(Meat Processing) - Equity Inns, Inc. (Hotels)
- ArcandorArcandorArcandor AG is a holding company located in Essen, Germany that oversees companies operating in the businesses of mail order and internet shopping, department stores and tourism services. It was created in 1999 through the merger of Karstadt Warenhaus AG, which was founded in 1920, and Quelle...
(former KarstadtQuelle property group – Retailer) - Medfinders Inc. (formerly NursefindersNurseFindersNurseFinders is a chain of temporary employment agencies around the United States that make assignments between physicians, nurses, caregivers, and other similar professionals and clients....
Inc. – Healthcare) - Latin Force Group, LLC (Media)
- Constellation EnergyConstellation EnergyConstellation Energy, headquartered in Baltimore, Maryland, is an energy producer, trader, and distributor. The company operates over 35 power plants in 11 states under its operating company Constellation Commodities Group and/or Constellation Generation Group...
Group - Archon Hospitality Japan (Hotels)
- CMC MarketsCMC MarketsCMC Markets is a UK based financial derivatives dealer. The company offers online trading in spread betting, Contract for difference and Foreign Exchange across world markets...
(Financial trading)
Predictions
In December 2005, four years after its report on the emerging "BRICBRIC
In economics, BRIC is a grouping acronym that refers to the countries of Brazil, Russia, India and China, which are all deemed to be at a similar stage of newly advanced economic development...
" economies (Brazil, Russia, India, and China), Goldman Sachs named its "Next Eleven
Next Eleven
The Next Eleven are eleven countries—Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, South Korea, Turkey, and Vietnam — identified by Goldman Sachs investment bank and Jim O'Neill as having a high potential of becoming, along with the BRICS, the world's largest...
" list of countries, using macroeconomic stability, political maturity, openness of trade and investment policies and quality of education as criteria: Bangladesh
Bangladesh
Bangladesh , officially the People's Republic of Bangladesh is a sovereign state located in South Asia. It is bordered by India on all sides except for a small border with Burma to the far southeast and by the Bay of Bengal to the south...
, Egypt, Indonesia
Indonesia
Indonesia , officially the Republic of Indonesia , is a country in Southeast Asia and Oceania. Indonesia is an archipelago comprising approximately 13,000 islands. It has 33 provinces with over 238 million people, and is the world's fourth most populous country. Indonesia is a republic, with an...
, Iran, Mexico
Mexico
The United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...
, Nigeria, Pakistan
Pakistan
Pakistan , officially the Islamic Republic of Pakistan is a sovereign state in South Asia. It has a coastline along the Arabian Sea and the Gulf of Oman in the south and is bordered by Afghanistan and Iran in the west, India in the east and China in the far northeast. In the north, Tajikistan...
, the Philippines
Philippines
The Philippines , officially known as the Republic of the Philippines , is a country in Southeast Asia in the western Pacific Ocean. To its north across the Luzon Strait lies Taiwan. West across the South China Sea sits Vietnam...
, Turkey, South Korea
South Korea
The Republic of Korea , , is a sovereign state in East Asia, located on the southern portion of the Korean Peninsula. It is neighbored by the People's Republic of China to the west, Japan to the east, North Korea to the north, and the East China Sea and Republic of China to the south...
and Vietnam
Vietnam
Vietnam – sometimes spelled Viet Nam , officially the Socialist Republic of Vietnam – is the easternmost country on the Indochina Peninsula in Southeast Asia. It is bordered by China to the north, Laos to the northwest, Cambodia to the southwest, and the South China Sea –...
.
Corporate citizenship
Goldman Sachs has received favorable press coverage for conducting business and implementing internal policies related to reversing global climate change. According to the company website, the Goldman Sachs Foundation has given $114 million in grants since 1999, with the goal of promoting youth education worldwide.The company also has been on Fortune Magazine's 100 Best Companies to Work For list since the list was launched in 1998, with emphasis placed on its support for employee philanthropic efforts. In November 2007, Goldman Sachs established a donor advised fund called Goldman Sachs Gives that donates to charitable organizations around the world, while increasing their maximum employee donation match to $20,000. The firm's Community TeamWorks is an annual, global volunteering initiative that in 2007 gave over 20,000 Goldman employees a day off work from May through August to volunteer in a team-based project organized with a local nonprofit organization.
In March 2008, Goldman launched the 10,000 Women
10,000 Women
10,000 Women is a five year program organised by Goldman Sachs with the goal of training 10,000 women from predominantly developing countries in business and management. The program was announced on March 5, 2008 at Columbia University...
initiative to train 10,000 women from predominantly developing countries in business and management.
In November 2009, Goldman pledged $500 million to aid small businesses in their newly created 10,000 Small Businesses
10,000 Small Businesses
10,000 Small Businesses is a philanthropic initiative launched by Goldman Sachs in November 2009 that pledges $500 million in various aid to small businesses. The initiative aims to provide 10,000 small businesses with assistance — ranging from business and management education and mentoring, to...
initiative. The initiative aims to provide 10,000 small businesses with assistance – ranging from business and management education and mentoring to lending and philanthropic support. The networking will be
offered through partnerships with national and local business organizations, as well as employees of Goldman Sachs.
In addition to Goldman CEO Lloyd Blankfein, Berkshire Hathaway
Berkshire Hathaway
Berkshire Hathaway Inc. is an American multinational conglomerate holding company headquartered in Omaha, Nebraska, United States, that oversees and manages a number of subsidiary companies. The company averaged an annual growth in book value of 20.3% to its shareholders for the last 44 years,...
's Warren Buffet and Harvard Business School
Harvard Business School
Harvard Business School is the graduate business school of Harvard University in Boston, Massachusetts, United States and is widely recognized as one of the top business schools in the world. The school offers the world's largest full-time MBA program, doctoral programs, and many executive...
professor Michael Porter
Michael Porter
Michael Eugene Porter is the Bishop William Lawrence University Professor at Harvard Business School. He is a leading authority on company strategy and the competitiveness of nations and regions. Michael Porter’s work is recognized in many governments, corporations and academic circles globally...
will chair the program's advisory council.
Goldman Sachs employees are known to be highly loyal to their organization.
Tax Rate
Goldman Sachs expected in December 2008 to pay $14 million in taxes worldwide for 2008 compared with $6 billion the previous year, after making $2.3 billion profit and paying $10.9 billion in employee pay and benefits. The company’s effective tax rate dropped to 1% from 34.1% in 2007, due to tax credits and, according to Goldman Sachs, "changes in geographic earnings mix" thus reducing the company's tax obligation. Many critics argue that the reduction in Goldman Sach's tax rate was achieved by shifting its earnings to subsidiaries in low- or no-tax nations. Goldman Sachs had 28 such subsidiaries at the time, including 15 in the Cayman Islands. According to Representative Lloyd DoggettLloyd Doggett
Lloyd Alton Doggett II is the U.S. Representative for , serving since 2005. He previously represented from 1995 to 2005. He is a member of the Democratic Party...
(D-TX), "with the right hand out begging for bailout money, the left is hiding it offshore."
Involvement in the European sovereign debt crisis
Goldman is being criticized for its involvement in the 2010 European sovereign debt crisis. Goldman Sachs is reported to have systematically helped the Greek government mask the true facts concerning its national debt between the years 1998 and 2009. In September 2009, Goldman Sachs, among others, created a special credit default swapCredit default swap
A credit default swap is similar to a traditional insurance policy, in as much as it obliges the seller of the CDS to compensate the buyer in the event of loan default...
(CDS) index to cover of high risk of Greece's national debt. The interest-rates of Greek national bonds have soared to a very high level, leading the Greek economy very close to bankruptcy in March and May 2010 and again in June 2011. Lucas Papademos
Lucas Papademos
Lucas Papademos is a Greek economist who has been appointed as Prime Minister of Greece since 11 November 2011.Previously, he was Governor of the Bank of Greece from 1994 to 2002 and Vice President of the European Central Bank from 2002 to 2010...
, Greece's new prime minister, ran the Central Bank of Greece at the time of the controversial derivates deals with Goldman Sachs that enabled Greece to hide the size of its debt. Petros Christodoufou, head of Greece's debt management agency began his carreer at Goldman Sachs. Mario Monti
Mario Monti
Mario Monti is an Italian economist and academic who is Prime Minister of Italy, as well as Minister of Economy and Finance, since November 2011. Monti served as a European Commissioner from 1995 to 2004, with responsibility for the Internal Market, Services, Customs and Taxation from 1995 to 1999...
, Italy's new prime minister and finance minister, who heads the new government that took over after Berlusconi's resignation, is an international adviser to Goldman Sachs. So is Otmar Issing
Otmar Issing
Otmar Issing is a German economist, presintent of the Center for Financial Studies and former member of the board of the Deutsche Bundesbank and of the Executive Board of the European Central Bank . He is advisor for Goldman Sachs...
, former board member of the Bundesbank and the Executive Board of the European Bank. Mario Draghi
Mario Draghi
Mario Draghi is an Italian banker and economist who succeeded Jean-Claude Trichet as President of the European Central Bank on 1 November 2011...
, the new head of the European Central Bank
European Central Bank
The European Central Bank is the institution of the European Union that administers the monetary policy of the 17 EU Eurozone member states. It is thus one of the world's most important central banks. The bank was established by the Treaty of Amsterdam in 1998, and is headquartered in Frankfurt,...
, is the former managing director of Goldman Sachs International. Antonio Borges
António Borges
António Borges d'Almeida was a Portuguese horse rider. He competed in the 1924 Summer Olympics.-Career:...
, formerly head of the IMF's European Department is a former vice chairman of Goldman Sachs International. Peter Sutherland
Peter Sutherland
Peter Denis Sutherland, KCMG is an Irish international businessman and former Attorney General of Ireland, associated with the Fine Gael party . He is a barrister by profession, and is also Senior Counsel at the Irish Bar...
, former Attorney General of Ireland is a non-executive director of Goldman Sachs International. Karel van Miert
Karel Van Miert
Karel Van Miert was a socialist Flemish politician.He was born in Oud-Turnhout. He studied at Ghent University and gained a degree in diplomatic sciences. In 1976 he became adjunct-national secretary of the – at that time – unitary Belgian socialist party...
, former EU Competition Commissioner is an ex-international adviser to Goldman Sachs. These ties between Goldman Sachs and European leaders is an ongoing source of controversy.
California bonds
On November 11, 2008, the Los Angeles TimesLos Angeles Times
The Los Angeles Times is a daily newspaper published in Los Angeles, California, since 1881. It was the second-largest metropolitan newspaper in circulation in the United States in 2008 and the fourth most widely distributed newspaper in the country....
reported that Goldman Sachs, which earned $25M from underwriting California bonds, had advised other clients to short those bonds. While some journalists criticized the contradictory actions, others pointed out that the opposite investment decisions undertaken by the underwriting side and the trading side of the bank were normal and in line with regulations regarding Chinese walls.
Personnel "revolving-door" with U.S. government
During 2008 Goldman Sachs received criticism for an apparent revolving doorRevolving door (politics)
The revolving door is the movement of personnel between roles as legislators and regulators and the industries affected by the legislation and regulation and on within lobbying companies. In some cases the roles are performed in sequence but in certain circumstances may be performed at the same time...
relationship, in which its employees and consultants have moved in and out of high level U.S. Government positions, creating the potential for conflicts of interest. Former Treasury Secretary Paulson was a former CEO of Goldman Sachs. Additional controversy attended the selection of former Goldman Sachs lobbyist Mark Patterson as chief of staff to Treasury Secretary Timothy Geithner, despite President Barack Obama
Barack Obama
Barack Hussein Obama II is the 44th and current President of the United States. He is the first African American to hold the office. Obama previously served as a United States Senator from Illinois, from January 2005 until he resigned following his victory in the 2008 presidential election.Born in...
's campaign promise that he would limit the influence of lobbyists in his administration. In February 2011, the Washington Examiner
Washington Examiner
The Washington Examiner is a free daily newspaper published in Springfield, Virginia, and distributed in the Washington, D.C. metropolitan area. It is owned by Denver billionaire Philip Anschutz....
reported that Goldman Sachs was "the company from which Obama raised the most money in 2008" and that its "CEO Lloyd Blankfein
Lloyd Blankfein
Lloyd Craig Blankfein is an American business executive. He is currently the CEO and Chairman of Goldman Sachs. He has been in this position since the May 31, 2006 nomination of former CEO Henry Paulson as Secretary of the Treasury under George W...
has visited the White House 10 times."
Insider trading cases
In 1986, David Brown was convicted of passing inside information to Ivan BoeskyIvan Boesky
Ivan Frederick Boesky is an American stock trader who is notable for his prominent role in a Wall Street insider trading scandal that occurred in the United States in the mid-1980s.-Life and career:...
on a takeover deal. Robert Freeman, who was a senior Partner, who was the Head of Risk Arbitrage, and who was a protégé of Robert Rubin
Robert Rubin
Robert Edward Rubin served as the 70th United States Secretary of the Treasury during both the first and second Clinton administrations. Before his government service, he spent 26 years at Goldman Sachs eventually serving as a member of the Board, and Co-Chairman from 1990-1992...
, was also convicted of insider trading, for his own account and for the firm's account.
In April, 2010, Goldman director Rajat Gupta
Rajat Gupta
Rajat Kumar Gupta was the managing director of management consultancy McKinsey & Company from 1994 to 2003 and a business leader in India and the United States...
was named in an insider-trading case. It was said Gupta had "tipped off a hedge-fund billionaire", Raj Rajaratnam
Raj Rajaratnam
Raj Rajaratnam is an American former hedge fund manager and founder of the Galleon Group, a New York-based hedge fund management firm. On October 16, 2009, he was arrested by the FBI on allegations of insider trading, which also caused the Galleon Group to close. He stood trial in U.S. v...
of Galleon Group
Galleon Group
Galleon Group was one of the largest hedge fund management firms in the world, managing over $7 billion, before closing in October 2009. The firm was at the center of a 2009 insider trading scandal that resulted in investors pulling capital from the firm rapidly...
, about the $5 billion Berkshire Hathaway investment in Goldman in September, 2008. According to the report, Gupta had told Goldman the month before his involvement became public that he wouldn't seek re-election as a director. In early 2011, with the delayed Rajaratnam criminal trial about to begin, the United States Securities and Exchange Commission
United States Securities and Exchange Commission
The U.S. Securities and Exchange Commission is a federal agency which holds primary responsibility for enforcing the federal securities laws and regulating the securities industry, the nation's stock and options exchanges, and other electronic securities markets in the United States...
(SEC) announced civil charges against Gupta covering the Berkshire investment as well as confidential quarterly earnings information from Goldman and Procter & Gamble
Procter & Gamble
Procter & Gamble is a Fortune 500 American multinational corporation headquartered in downtown Cincinnati, Ohio and manufactures a wide range of consumer goods....
(P&G). Gupta was board member at P&G until voluntarily resigning the day of the SEC announcement, after the charges were announced. "Gupta was an investor in some of the Galleon hedge funds when he passed the information along, and he had other business interests with Rajaratnam that were potentially lucrative.... Rajaratnam used the information from Gupta to illegally profit in hedge fund trades.... The information on Goldman made Rajaratnam's funds $17 million richer.... The Proctor & Gamble data created illegal profits of more than $570,000 for Galleon funds managed by others, the SEC said." Gupta was said to have "vigorously denied the SEC accusations". He is also a board member of AMR Corp.
AMR Corp.
AMR Corporation is a commercial aviation business and airline holding company based in Fort Worth, Texas, United States. Formed in 1982, as part of American Airlines's non-bankruptcy reorganization into a Delaware corporation, its name derives from American Airlines's ticker symbol on the New York...
.
First Quarter 2009 and December 2008 financial results
In April 2009, there was controversy that Goldman Sachs had "puffed up" its Q1 earnings by creating a December "orphan month" into which it shifted large writedowns. In its first full quarter as a bank holding company, the firm reported a $780M net loss for the single month of December alongside Q1 net earnings of $1.81B (Jan–Mar)The accounting change to a calendar fiscal year, which created the stub month, was required when the firm converted to a bank holding company and declared in Item 5.03 of its Form 8-K
Form 8-K
Form 8-K is a very broad form used to notify investors of any material event that is important to shareholders or the United States Securities and Exchange Commission. This is one of the most common types of forms filed with the SEC...
U.S. Securities and Exchange Commission (SEC) filing of December 15, 2008. The December loss also included a $850M writedown on loans to bankrupt chemical maker LyondellBasell, as reported in late December (the chemical maker formally declared bankruptcy on January 6 but the loan would have been marked-to-market – it became clear in mid/late-December that Lyondell would not be able to meet its debt obligations).
Most financial analysts and the mainstream financial press (Bloomberg L.P.
Bloomberg L.P.
Bloomberg L.P. is an American privately held financial software, media, and data company. Bloomberg makes up one third of the $16 billion global financial data market with estimated revenue of $6.9 billion. Bloomberg L.P...
, Reuters
Reuters
Reuters is a news agency headquartered in New York City. Until 2008 the Reuters news agency formed part of a British independent company, Reuters Group plc, which was also a provider of financial market data...
, etc), aware of the accounting change and deteriorating market conditions into December, were unsurprised by the December loss (Merrill Lynch took at least $8.1B of losses in the same period). However, their lack of reaction and reporting of what was a widely expected result may have contributed to the surprise attributing this as a sign that the firm was trying to hide losses in December. On the contrary, the results of December 2008 were discussed up front and in detail by CFO David Viniar
David Viniar
David A. Viniar has been Executive V.P. and CFO at Goldman Sachs since 1999. He is Cuban-American with both of his parents being born in Cuba.-Biography:...
in the first few minutes of the firm's Q1 2009 conference call, and were fully declared on page 10 of its earnings release document.
On April 22, 2009, Morgan Stanley
Morgan Stanley
Morgan Stanley is a global financial services firm headquartered in New York City serving a diversified group of corporations, governments, financial institutions, and individuals. Morgan Stanley also operates in 36 countries around the world, with over 600 offices and a workforce of over 60,000....
also reported a $1.3B net loss for the single month of December, alongside a $177M loss for the first quarter (Jan–Mar). However, whereas Goldman Sachs' first-quarter earnings (Jan–Mar) were well-above forecasts (which led to the speculation that the firm may have 'conveniently' shifted losses into December), Morgan Stanley's results for the same Jan–Mar period were below consensus estimates. This, in addition to Morgan Stanley's losses in December, would appear to support Goldman's rejection of the notion that they deliberately shifted losses into December. Like Goldman Sachs, Morgan Stanley converted to a bank holding company after the bankruptcy of Lehman Brothers
Lehman Brothers
Lehman Brothers Holdings Inc. was a global financial services firm. Before declaring bankruptcy in 2008, Lehman was the fourth largest investment bank in the USA , doing business in investment banking, equity and fixed-income sales and trading Lehman Brothers Holdings Inc. (former NYSE ticker...
in September 2008.
At the end of 2009, the firm was on track to complete its most profitable year since its founding.
Involvement with the bailout of AIG
American International GroupAmerican International Group
American International Group, Inc. or AIG is an American multinational insurance corporation. Its corporate headquarters is located in the American International Building in New York City. The British headquarters office is on Fenchurch Street in London, continental Europe operations are based in...
(AIG) was bailed out by the US government in September 2008 after suffering a liquidity crisis
Liquidity crisis
In financial economics, liquidity is a catch-all term that may refer to several different yet closely related concepts. Among other things, it may refer to Asset Market liquidity In financial economics, liquidity is a catch-all term that may refer to several different yet closely related...
, whereby the Federal Reserve initially lent $85 billion to AIG to allow the firm to meet its collateral and cash obligations.
In March 2009, it was reported that, in 2008, Goldman Sachs, alongside other major US and international financial institutions, had received billions of dollars during the unwind of credit default swap (CDS) contracts purchased from AIG, including $12.9bn from funds provided by the US Federal Reserve to bail out AIG. (As of April, 2009, US Government loans to AIG totaled over $180 billion.) The money was used to repay customers of its security-lending program and was paid as collateral to counterparties under credit insurance contracts purchased from AIG. However, due to the size and nature of the payouts there was considerable controversy in the media and amongst some politicians as to whether banks, including Goldman Sachs, may have benefited materially from the bailout and if they had been overpaid., The New York State Attorney General
New York State Attorney General
The New York State Attorney General is the chief legal officer of the State of New York. The office has been in existence in some form since 1626, under the Dutch colonial government of New York.The current Attorney General is Eric Schneiderman...
Andrew Cuomo
Andrew Cuomo
Andrew Mark Cuomo is the 56th and current Governor of New York, having assumed office on January 1, 2011. A member of the Democratic Party, he was the 64th New York State Attorney General, and was the 11th United States Secretary of Housing and Urban Development...
announced in March 2009 that he was investigating whether AIG's trading counterparties improperly received government money.
Firm's response to criticism of AIG payments
Goldman Sachs has maintained that its net exposure to AIG was 'not material', and that the firm was protected by hedgesHedge (finance)
A hedge is an investment position intended to offset potential losses that may be incurred by a companion investment.A hedge can be constructed from many types of financial instruments, including stocks, exchange-traded funds, insurance, forward contracts, swaps, options, many types of...
(in the form of CDSs with other counterparties) and $7.5B of collateral
Collateral (finance)
In lending agreements, collateral is a borrower's pledge of specific property to a lender, to secure repayment of a loan.The collateral serves as protection for a lender against a borrower's default - that is, any borrower failing to pay the principal and interest under the terms of a loan obligation...
. The firm stated the cost of these hedges to be over $100M. According to Goldman, both the collateral and CDSs would have protected the bank from incurring an economic loss in the event of an AIG bankruptcy (however, because AIG was bailed out and not allowed to fail, these hedges did not pay out.) CFO David Viniar
David Viniar
David A. Viniar has been Executive V.P. and CFO at Goldman Sachs since 1999. He is Cuban-American with both of his parents being born in Cuba.-Biography:...
stated that profits related to AIG in Q1 2009 "rounded to zero", and profits in December were not significant. He went on to say that he was "mystified" by the interest the government and investors have shown in the bank's trading relationship with AIG.
Considerable speculation remains that Goldman's hedges against their AIG exposure would not have paid out if AIG was allowed to fail. According to a report by the United States Office of the Inspector General of TARP, if AIG had collapsed, it would have made it difficult for Goldman to liquidate its trading positions with AIG, even at discounts, and it also would have put pressure on other counterparties that "might have made it difficult for Goldman Sachs to collect on the credit protection it had purchased against an AIG default." Finally, the report said, an AIG default would have forced Goldman Sachs to bear the risk of declines in the value of billions of dollars in collateral debt obligations.
Goldman argues that CDSs are marked to market (i.e. valued at their current market price) and their positions netted between counterparties daily. Thus, as the cost of insuring AIG's obligations against default rose substantially in the lead-up to its bailout, the sellers of the CDS contracts had to post more collateral
Collateral (finance)
In lending agreements, collateral is a borrower's pledge of specific property to a lender, to secure repayment of a loan.The collateral serves as protection for a lender against a borrower's default - that is, any borrower failing to pay the principal and interest under the terms of a loan obligation...
to Goldman Sachs. The firm claims this meant its hedges were effective and the firm would have been protected against an AIG bankruptcy and the risk of knock-on defaults, had AIG been allowed to fail. However, in practice, the collateral would not protect fully against losses both because protection sellers would not be required to post collateral that covered the complete loss during a bankruptcy and because the value of the collateral would be highly uncertain following the repercussions of an AIG bankruptcy. As with the bankruptcy of Lehman Brothers
Lehman Brothers
Lehman Brothers Holdings Inc. was a global financial services firm. Before declaring bankruptcy in 2008, Lehman was the fourth largest investment bank in the USA , doing business in investment banking, equity and fixed-income sales and trading Lehman Brothers Holdings Inc. (former NYSE ticker...
, wider and longer-term systemic and economic turmoil brought on by an AIG default would probably have affected the firm and all other market participants.
Final AIG meetings on September 15 at the New York Federal Reserve
Some have said, incorrectly according to others, that Goldman Sachs received preferential treatment from the government by being the only Wall Street firm to have participated in the crucial September meetings at the New York Fed, which decided AIG's fate. Much of this has stemmed from an inaccurate but often quoted New York Times article. The article was later corrected to state that Blankfein, CEO of Goldman Sachs, was "one of the Wall Street chief executives at the meeting" (emphasis added). BloombergBloomberg L.P.
Bloomberg L.P. is an American privately held financial software, media, and data company. Bloomberg makes up one third of the $16 billion global financial data market with estimated revenue of $6.9 billion. Bloomberg L.P...
has also reported that representatives from other firms were indeed present at the September AIG meetings. Furthermore, Goldman Sachs CFO David Viniar
David Viniar
David A. Viniar has been Executive V.P. and CFO at Goldman Sachs since 1999. He is Cuban-American with both of his parents being born in Cuba.-Biography:...
has stated that CEO Blankfein had never "met" with his predecessor and then-US Treasury Secretary Henry Paulson to discuss AIG; However, there were frequent phone calls between the two of them. Paulson was not present at the September meetings at the New York Fed. It is also a lesser known fact that Morgan Stanley
Morgan Stanley
Morgan Stanley is a global financial services firm headquartered in New York City serving a diversified group of corporations, governments, financial institutions, and individuals. Morgan Stanley also operates in 36 countries around the world, with over 600 offices and a workforce of over 60,000....
was hired by the Federal Reserve to advise them on the AIG bailout.
According to the New York Times, Paulson spoke with the CEO of Goldman Sachs two dozen times during the week of the bailout, though he obtained an ethics waiver before doing so. While it is common for regulators to be in contact with market participants to gather valuable industry intelligence, particularly in a crisis, the Times noted he spoke with Goldman's Blankfein more frequently than with other large banks. Federal officials say that although Paulson was involved in decisions to rescue A.I.G, it was the Federal Reserve that played the lead role in shaping and financing the A.I.G. bailout.
Former New York Fed Chairman's ties to the firm
Stephen FriedmanStephen Friedman (PFIAB)
Stephen Friedman is the former Chairman of the United States President's Foreign Intelligence Advisory Board. He was nominated on October 27, 2005 to replace Brent Scowcroft in the position.-Life and career:...
, a former director of Goldman Sachs, was named Chairman of the Federal Reserve Bank of New York in January 2008. Although he had retired from Goldman in 1994, Friedman continued to own stock in the firm. Goldman's conversion from a securities firm to a bank holding company in September 2008 meant it was now regulated by the Fed and not the SEC. When it became apparent that Timothy Geithner, then president of the New York Fed, would leave his role there to become Treasury Secretary, Friedman was granted a temporary one-year waiver of a rule that forbids "class C" directors of the Fed from direct interest with those it regulates. Friedman agreed to remain on the board until the end of 2009 to provide continuity in the wake of the turmoil caused by Lehman Brothers' bankruptcy. Had the waiver not been granted, the New York Fed would have lost both its president and its chairman (or Friedman would have had to divest his Goldman shares). This would have been highly disruptive for the New York Fed's role in the capital markets, and Friedman later said he agreed to stay on the NY Fed board out of a sense of public duty, but that his decision was "being mischaracterised as improper".
Media reports in May 2009 concerning Friedman's involvement with Goldman, and in particular, his purchase of the firm's stock when it traded at historical lows in the fourth quarter of 2008, fueled controversy and criticism over what was seen as a conflict of interest in Friedman's new role as supervisor and regulator to Goldman Sachs. These events prompted his resignation on May 7, 2009. Although Friedman's purchases of Goldman stock did not violate any Fed rule, statute, or policy, he said that the Fed did not need this distraction. He also stated his purchases, made while approval of a waiver was pending, were motivated by a desire to demonstrate confidence in the company during a time of market distress.
$60 million settlement for Massachusetts subprime mortgages
On May 10, 2009, the Goldman Sachs Group agreed to pay up to $60 million to end an investigation by the Massachusetts attorney general’s office into whether the firm helped promote unfair home loans in the state. The settlement will be used to reduce the mortgage payments of 714 Massachusetts residents who had secured subprime mortgages funded by Goldman Sachs. Michael DuVally, a spokesman for Goldman, said it was “pleased to have resolved this matter,” and declined to comment further. This settlement may open the door to state government actions against Goldman throughout the United States aimed at securing compensation for predatory mortgage lending practices.Abacus mortgage-backed CDOs
According to a 2009 New York Times story by Morgenson and Story, Goldman Sachs created collateralized debt obligations (CDOs), sold them to investors, and then bet short against them. Jonathan M. Egol was named as a 'prime mover' behind the products, called 'Abacus' deals, worth billions. A Goldman worker named Tetsuya IshikawaTetsuya ishikawa
Tetsuya Ishikawa is a Japanese British author, financial journalist and a banker with Goldman Sachs. He was involved in selling collateralized debt obligations called Abacus-2007AC1 to the bank's clients while simultaneously betting agains those complex securities. He later wrote a book published...
was involved in these deals and later wrote a novel called How I Caused the Credit Crunch. Goldman did 25 Abacus deals from 2004–2008. The article claims Goldman tried to pressure Moody's
Moody's
Moody's Corporation is the holding company for Moody's Analytics and Moody's Investors Service, a credit rating agency which performs international financial research and analysis on commercial and government entities. The company also ranks the credit-worthiness of borrowers using a standardized...
to rate its products higher than they should have been.
The article also claimed that many mortgage backed CDOs (Abacus, and others) sold by Goldman performed very poorly. It uses the example of the Hudson Mezzanine CDO, which Goldman bet against, but also sold to investors. It also claims that various rules regarding CDO-default pay outs were modified to favor short sellers in 2005.
Goldman claimed that it was simply hedging, not expecting the CDOs to fail. It also said that its investors knew it was betting against the products it was selling to them.
Goldman and one of its traders, Fabrice Tourre, were later sued by the SEC over circumstances surrounding one of these CDOs, Abacus 2007-AC1. (See below in this article) In late 2010 Tourre asked for dismissal of the suit against him based on the repercussions of the Morrison v. National Australia Bank Ltd
Morrison v. National Australia Bank Ltd
Morrison v. National Australia Bank Ltd is a US Supreme Court case concerning the extraterritorial effect of US securities legislation. Its effect was to bar all federal securities fraud suits in the US for securities traded on a foreign stock exchange...
Supreme Court case, claiming his deals were outside the US and thus not subject to certain US laws.
See also: Merrill Lynch:CDO controversies, Magnetar Capital
Magnetar Capital
Magnetar Capital is a hedge fund based in Evanston, Illinois. Among its many activities, the firm was actively involved in the collateralized debt obligation market during the 2006–2007 period...
Goldman Sachs Commodity Index and the 2005–2008 Food Bubble
Goldman Sachs' creation of the Goldman Sachs Commodity Index has been implicated by some in the 2007–2008 world food price crisis2007–2008 world food price crisis
World food prices increased dramatically in 2007 and the 1st and 2nd quarter of 2008 creating a global crisis and causing political and economical instability and social unrest in both poor and developed nations. Systemic causes for the worldwide increases in food prices continue to be the subject...
. In a 2010 article in Harper's magazine, Frederick Kaufman magazine accused Goldman Sachs of profiting while many people went hungry or even starved. He argued that Goldman's creation of the commodity index helped passive investors (pension funds, mutual funds and others) enter the markets, which disturbed the normal relationship between Supply and Demand
Supply and demand
Supply and demand is an economic model of price determination in a market. It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers will equal the quantity supplied by producers , resulting in an...
and price levels. He argues that the result was a 'contango
Contango
Contango is the market condition wherein the price of a forward or futures contract is trading above the expected spot price at contract maturity. The resulting futures or forward curve would typically be upward sloping , since contracts for further dates would typically trade at even higher prices...
' wheat market on the Chicago Mercantile Exchange, which caused prices of wheat to rise much higher than normal, defeating the purpose of the exchanges (price stabilization) in the first place.
In a June 2010 article in The Economist
The Economist
The Economist is an English-language weekly news and international affairs publication owned by The Economist Newspaper Ltd. and edited in offices in the City of Westminster, London, England. Continuous publication began under founder James Wilson in September 1843...
, the argument is made that index-tracking funds (of which Goldman Sachs Commodity Index was one) did not cause the bubble. It describes a report by the Organisation for Economic Co-operation and Development
Organisation for Economic Co-operation and Development
The Organisation for Economic Co-operation and Development is an international economic organisation of 34 countries founded in 1961 to stimulate economic progress and world trade...
that used data from the Commodity Futures Trading Commission
Commodity Futures Trading Commission
The U.S. Commodity Futures Trading Commission is an independent agency of the United States government that regulates futures and option markets....
to make the case. For example the report points out that even commodities without futures markets also saw price rises during the period.
SEC civil fraud lawsuit, filed in April 2010
On April 16, 2010, the Securities and Exchange Commission (SEC) announced that it was suing Goldman Sachs and one of its employees, Fabrice Tourre. The SEC alleged that Goldman materially misstated and omitted facts in disclosure documents for a synthetic CDOSynthetic CDO
A Synthetic CDO is a complex financial security used to speculate or manage the risk that an obligation will not be paid...
product it originated called Abacus 2007-AC1. Goldman was paid a fee of approximately $15 million for its work in the deal. The allegation is that Goldman misrepresented
Misrepresentation
Misrepresentation is a contract law concept. It means a false statement of fact made by one party to another party, which has the effect of inducing that party into the contract. For example, under certain circumstances, false statements or promises made by a seller of goods regarding the quality...
to investors that an independent selection agent, ACA, had reviewed the mortgage package underlying the credit default obligations, and that Goldman failed to disclose to ACA that a hedge fund, Paulson & Co.
Paulson & Co.
Paulson & Co. Inc. is a hedge fund sponsor owned by its employees and founded in 1994 by John Paulson.-Overview:Paulson & Co. Inc. is an employee-owned, hedge fund headquartered in New York, New York...
, that sought to short the package, had helped select underlying mortgages for the package against which it planned to bet. The SEC further alleged that "Tourre also misled ACA into believing that Paulson invested approximately $200 million in the equity of ABACUS 2007-ACI (a long position) and, accordingly, that Paulson's interests in the collateral section [sic] process were aligned with ACA's when in reality Paulson's interests were sharply conflicting." Goldman Sachs stated that the firm never represented to ACA that Paulson was to be a long investor, and that as normal business practice, market makers do not disclose the identities of a buyer to a seller and vice versa.
The complaint states that Paulson made a $1 billion profit from the short investments, while purchasers of the materials lost the same amount. The two main investors who lost money were ABN Amro and IKB Deutsche Industriebank
IKB Deutsche Industriebank
IKB Deutsche Industriebank is a bank based in Düsseldorf, Germany.It is specialized in lending to small and medium-sized companies.In August 2007, it had to be bailed out due to bad losses in the subprime market meltdown....
. IKB lost $150,000,000 within months on the purchase. ABN Amro lost $840,909,090. Goldman stated the firm also lost $90 million and did not structure a portfolio that was designed to lose money. After the SEC announced the suit during the April 16, 2010 trading day, Goldman's Sachs's stock fell 13% to close at 160.70 from 184.27 on volume of over 102,000,000 shares (vs. a 52 week average of 13,000,000 shares). The firm's shares lost $10 billion in market value during the trading session. On April 30, 2010, shares tumbled further on news that the Manhattan office of the US Attorney General launched a criminal probe into Goldman Sachs, sending the stock down more than 15 points, or nearly ten percent to $145.
Goldman issued a statement on the same day the suit was filed, saying the SEC's charges were "unfounded in law and fact" and giving specific reasons as to why. The firm stated it had provided extensive disclosure to the long investors in the CDO, that the firm also lost money, that ACA selected the portfolio without the firm suggesting Paulson was to be a long investor, and that ACA was itself the largest purchaser of the Abacus pool, investing $951 million. Goldman also stated that any investor losses resulted from the overall negative performance of the entire sector, rather than from a particular security in the CDO. Goldman issued an additional public comment in response to the suit on April 19, 2010, raising additional points in their favor. While some have called these statements misleading, others believe Goldman has a strong defense or that the SEC has a weak case.
Experts on securities law contacted by The Wall Street Journal
The Wall Street Journal
The Wall Street Journal is an American English-language international daily newspaper. It is published in New York City by Dow Jones & Company, a division of News Corporation, along with the Asian and European editions of the Journal....
believed the success or failure of the suit would depend on whether the facts not disclosed by Goldman were material. Some, such as James Cox, a Duke University
Duke University School of Law
The Duke University School of Law is the law school and a constituent academic unit of Duke University, Durham, North Carolina, United States. One of Duke's 10 schools and colleges, the School of Law began as the Trinity College School of Law in 1868. In 1924, following the renaming of Trinity...
law professor, believed the suit had merit. Cox opined that Goldman was aware of the relevance of Paulson's involvement and took steps to downplay it. Others, including Wayne State University
Wayne State University Law School
Wayne State University Law School is located in the City of Detroit’s Cultural Center, and is one of the schools of Wayne State University. It is one of two public law schools in the state of Michigan. The Law School has educated and trained lawyers since 1927, and its 10,000+ alumni serve as...
law professor Peter Henning, noted that the major purchasers were sophisticated investors, capable of accurately assessing the risks involved, even without knowledge of the part played by Paulson.
On July 15, 2010, Goldman agreed to pay $550 million – $300 million to the U.S. government and $250 million to investors – in a settlement with the SEC. The company also agreed to change some of its business practices regarding mortgage investments, including the way it designs marketing materials. The SEC called the fine the largest commission penalty for a Wall Street firm. The company did not admit or deny wrongdoing. The settlement does not cover Tourre.
On April 14, 2011, the United States Senate’s Permanent Subcommittee on Investigations released a 635-page report entitled, Wall Street and the Financial Crisis: Anatomy of a Financial Collapse
Wall Street and the Financial Crisis: Anatomy of a Financial Collapse
Wall Street and the Financial Crisis: Anatomy of a Financial Collapse is a report issued on April 13, 2011 by the United States Senate Permanent Subcommittee on Investigations. The 639 page report was issued under the chairmanship of Senators Carl Levin and Tom Coburn, and is colloquially known as...
which described some of the causes of the financial crisis. The report alleged that Goldman Sachs may have misled investors and profited from the collapse of the mortgage market at the expense of its clients. Senator Carl Levin (D-Michigan), Chairman of the Subcommittee, said he would refer the report to the Department of Justice for further investigation.
On June 2, 2011, following an "exploratory" meeting with the Manhattan district attorney, Goldman was subpoenaed for relevant information. Goldman is expected to accept a deferred-prosecution agreement if charges are filed.
List of officers and directors
As of April 23, 2011| Name | Nationality | Current Position | Since | Total Annual Compensation | Long-Term Incentive Plans | All Other | Fiscal Year Total | Options | Value of Options |
|---|---|---|---|---|---|---|---|---|---|
| Lloyd C. Blankfein Lloyd Blankfein Lloyd Craig Blankfein is an American business executive. He is currently the CEO and Chairman of Goldman Sachs. He has been in this position since the May 31, 2006 nomination of former CEO Henry Paulson as Secretary of the Treasury under George W... |
 United States |
Chairman of the Board & CEO | 2006 | $600,000.00 | – | $235,943.00 | $1,113,771.00 | 837,127 | $63,215,422.00 |
| David A. Viniar David Viniar David A. Viniar has been Executive V.P. and CFO at Goldman Sachs since 1999. He is Cuban-American with both of his parents being born in Cuba.-Biography:... |
United States |
CFO & Executive Vice President President A president is a leader of an organization, company, trade union, university, or country.Etymologically, a president is one who presides, who sits in leadership... |
1999 | $600,000.00 | – | $222,492.00 | $1,100,320.00 | 506,445 | $34,942,903.00 |
| Gary D. Cohn Gary Cohn Gary D. Cohn is President and COO of investment banking and securities firm Goldman Sachs.-Personal life:He and his wife, Lisa, grew up in Shaker Heights, Ohio and currently reside in New York City. When he graduated from American University, his first job was for U.S... |
United States |
President, COO & Director Board of directors A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors... |
2006 | $600,000.00 | – | $163,841.00 | $3,661,729.00 | 828,259 | $61,033,100.00 |
| John S. Weinberg | United States |
Vice Chairman | 2006 | $600,000.00 | – | $ 79,736.00 | $26,002,896.00 | 430,905 | $30,624,806.00 |
| Michael J. Evans | United States |
Vice Chairman & Chairman of Goldman Sachs, Asia | 2008 | $600,000.00 | – | $2,250,850.00 | $5,308,735.00 | – | – |
| Michael Sherwood | Vice Chairman, Co-CEO – International | 2008 | – | – | – | – | – | – | |
| Alan Cohen | United States |
Executive Vice President, Global Head – Compliance | 2004 | – | – | – | – | – | – |
| Gregory Palm | United States |
Executive Vice President, General Counsel General Counsel A general counsel is the chief lawyer of a legal department, usually in a corporation or government department. The term is most used in the United States... , Co-Head – Legal Department |
1999 | – | – | – | – | – | – |
| Esta Stecher | United States |
Executive Vice President, General Counsel, Co-Head – Legal Department | 2000 | – | – | – | – | – | – |
| John F.W. Rogers John F.W. Rogers John F.W. Rogers is a partner at Goldman Sachs. He was Chief of Staff at Goldman to CEOs Jon S. Corzine and Henry Paulson. He is said to have been current United States Treasury Secretary Paulson's closest advisor while at Goldman, as well as a member of United States Secretary of State James... |
United States |
Executive Vice President, Chief of Staff and Secretary to the Board | 2001 | – | – | – | – | – | – |
| Edith W. Cooper | United States |
Executive Vice President and Global Head of Human Capital Management | 2008 | – | – | – | – | – | – |
| John H. Bryan John H. Bryan John Henry Bryan, Jr. is the former CEO of the Sara Lee Corporation.A graduate of Rhodes College in Memphis, Tennessee and Darden Graduate School of Business Administration, he is also affiliated with the French Legion of Honor, the World Economic Forum, and was a Member of the Board for Sara Lee,... |
United States |
Director Board of directors A board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors... |
1999 | – | – | – | – | – | – |
| Claes Dahlbäck |  Sweden |
Director | 2003 | – | – | – | – | – | – |
| Stephen Friedman Stephen Friedman (PFIAB) Stephen Friedman is the former Chairman of the United States President's Foreign Intelligence Advisory Board. He was nominated on October 27, 2005 to replace Brent Scowcroft in the position.-Life and career:... |
United States |
Director | 2005 | – | – | – | – | – | – |
| William W. George | United States |
Director | 2002 | – | – | – | – | – | – |
| James A. Johnson James A. Johnson (businessman) James A. Johnson is a United States Democratic Party political figure, and the former CEO of Fannie Mae. He was the campaign manager for Walter Mondale's failed 1984 presidential bid and chaired the vice presidential selection committee for the presidential campaign of John Kerry... |
United States |
Director | 1999 | – | – | – | – | – | – |
| Lois D. Juliber Lois Juliber Lois D. Juliber has been a director of DuPont since 1995. Juliber is a retired vice chairman of Colgate-Palmolive Company.Juliber graduated from Wellesley College in 1971 and received an MBA from Harvard Business School in 1973. She worked for General Foods for 15 years, ending her career as VP. ... |
United States |
Director | 2004 | – | – | – | – | – | – |
| Lakshmi N. Mittal Lakshmi Mittal Lakshmi Narayan Mittal is an Indian steel magnate. He is the chairman and chief executive officer of ArcelorMittal, the world’s largest steelmaking company.... |
 India |
Director | 2008 | – | – | – | – | – | – |
| James J. Schiro | United States |
Director | 2009 | – | – | – | – | – | – |
| H. Lee Scott,Jr. | United States |
Director | 2010 | – | – | – | – | – | – |
Worldwide Headquarters
Goldman Sachs’ global headquarters is located in New York, its European headquarters in London and its Asian headquarters (ex-Japan) are based in Hong Kong. The largest other non-headquarters major offices worldwide are in TokyoTokyo
, ; officially , is one of the 47 prefectures of Japan. Tokyo is the capital of Japan, the center of the Greater Tokyo Area, and the largest metropolitan area of Japan. It is the seat of the Japanese government and the Imperial Palace, and the home of the Japanese Imperial Family...
, Bangalore
Bangalore
Bengaluru , formerly called Bengaluru is the capital of the Indian state of Karnataka. Bangalore is nicknamed the Garden City and was once called a pensioner's paradise. Located on the Deccan Plateau in the south-eastern part of Karnataka, Bangalore is India's third most populous city and...
, and Salt Lake City. Salt Lake City is currently Goldman Sachs' fastest growing office worldwide.
Alumni
Former employees of Goldman Sachs Group, Inc.:- Bradley AbelowBradley AbelowBradley Abelow is an American businessman and political leader who formerly served as Chief of Staff to the Governor of New Jersey in the Cabinet of Gov. Jon Corzine. Prior to entering Governor Corzine's Cabinet as State Treasurer, he was a top executive for the Wall Street firm of Goldman Sachs...
– Former Chief of Staff and Treasurer of New Jersey under Jon Corzine - Guy AdamiGuy AdamiGuy Adami is a TV personality, author, financial analyst, & a professional investor. He is one of the original "Fast Money Five" on the show Fast Money . In 2008 he joined optionMONSTER with Pete Najarian and Jon Najarian as the lead analyst for equities research. He also came on board as managing...
– CNBCCNBCCNBC is a satellite and cable television business news channel in the U.S., owned and operated by NBCUniversal. The network and its international spinoffs cover business headlines and provide live coverage of financial markets. The combined reach of CNBC and its siblings is 390 million viewers...
's Fast Money - Olusegun Olutoyin AgangaOlusegun Olutoyin AgangaOlusegun Olutoyin Aganga was appointed Minister of Finance from 6 April 2010 to June 2011.He was educated at the University of Ibadan, Nigeria where he obtained a B.Sc Degree in Biological Sciences in 1977 and the University of Oxford, United Kingdom where he obtained a degree in Theology in 2000...
– Former Nigerian Finance Minister, current Nigerian Minister for Trade and Investments - Sergey AleynikovSergey AleynikovSergey Aleynikov is a former Goldman Sachs computer programmer. He was convicted of stealing computer code that Goldman Sachs used to perform proprietary trading...
– Programmer. Convicted in stealing code and serves 8 years in prison. - Chetan BhagatChetan BhagatChetan Bhagat , is an Indian author, columnist, and speaker. Bhagat is the author of five bestselling novels, Five Point Someone , One Night @ the Call Center , The 3 Mistakes of My Life , 2 States & Revolution 2020: Love, Corruption, Ambition...
– Author - Fischer BlackFischer BlackFischer Sheffey Black was an American economist, best known as one of the authors of the famous Black–Scholes equation.-Background:...
– Co-author of the Black–Scholes equation and the Black–Derman–Toy model - Joshua Bolten – Former White House Chief of StaffWhite House Chief of StaffThe White House Chief of Staff is the highest ranking member of the Executive Office of the President of the United States and a senior aide to the President.The current White House Chief of Staff is Bill Daley.-History:...
- Erin BurnettErin BurnettErin Isabelle Burnett is the anchor of CNN’s Erin Burnett OutFront. She was the co-anchor of CNBC's Squawk on the Street program and the host of CNBC's Street Signs program...
– CNBCCNBCCNBC is a satellite and cable television business news channel in the U.S., owned and operated by NBCUniversal. The network and its international spinoffs cover business headlines and provide live coverage of financial markets. The combined reach of CNBC and its siblings is 390 million viewers...
host - Mark CarneyMark CarneyMark J. Carney is the eighth and current governor of the Bank of Canada and the Chairman of the Financial Stability Board, an institution of the G20 based in Basel, Switzerland. These appointments were on October 4, 2007 , and on November 4, 2011...
– Governor of the Bank of CanadaBank of CanadaThe Bank of Canada is Canada's central bank and "lender of last resort". The Bank was created by an Act of Parliament on July 3, 1934 as a privately owned corporation. In 1938, the Bank became a Crown corporation belonging to the Government of Canada... - Michael CohrsMichael CohrsMichael Cohrs is an American financier. He was Co-head of Investment Banking and head of Global Banking at Deutsche Bank. He was also a member of the Group Executive Committee and the Management Board.Cohrs holds a B.A...
– Member of Court and the Financial Policy Committee at the Bank of England - Jon CorzineJon CorzineJon Stevens Corzine is the former CEO of Goldman Sachs and of MF Global, and a one time American politician, who served as the 54th Governor of New Jersey from 2006 to 2010. A Democrat, Corzine served five years of a six-year U.S. Senate term representing New Jersey before being elected Governor...
– CEO of MF Global, IncMF GlobalMF Global , formerly known as Man Financial, was a major global financial derivatives broker. MF Global provided exchange-traded derivatives, such as futures and options as well as over-the-counter products such as contracts for difference , foreign exchange and spread betting. MF Global was...
., former Governor of New JerseyGovernor of New JerseyThe Office of the Governor of New Jersey is the executive branch for the U.S. state of New Jersey. The office of Governor is an elected position, for which elected officials serve four year terms. While individual politicians may serve as many terms as they can be elected to, Governors cannot be...
(2006–2010) - Jim Cramer – Founder of TheStreet.com, best selling author, and host of Mad Money on CNBCCNBCCNBC is a satellite and cable television business news channel in the U.S., owned and operated by NBCUniversal. The network and its international spinoffs cover business headlines and provide live coverage of financial markets. The combined reach of CNBC and its siblings is 390 million viewers...
- Emanuel DermanEmanuel DermanEmanuel Derman is a South African-born academic, businessman and writer. He is best known as a quantitative analyst, and author of the book My Life as A Quant: Reflections on Physics and Finance....
– Co-developer of the Black–Derman–Toy model - Mario DraghiMario DraghiMario Draghi is an Italian banker and economist who succeeded Jean-Claude Trichet as President of the European Central Bank on 1 November 2011...
– Governor of the European Central BankEuropean Central BankThe European Central Bank is the institution of the European Union that administers the monetary policy of the 17 EU Eurozone member states. It is thus one of the world's most important central banks. The bank was established by the Treaty of Amsterdam in 1998, and is headquartered in Frankfurt,...
(2011–present) - William C. Dudley – President of the Federal Reserve Bank of New YorkFederal Reserve Bank of New YorkThe Federal Reserve Bank of New York is one of the 12 Federal Reserve Banks of the United States. It is located at 33 Liberty Street, New York, NY. It is responsible for the Second District of the Federal Reserve System, which encompasses New York state, the 12 northern counties of New Jersey,...
- Michael D. FascitelliMichael D. FascitelliMichael D. Fascitelli is CEO, President and a Trustee of the Board of Vornado Realty Trust. He also is President and a Trustee of Alexander's Inc. and on the Board of Toys "R" Us....
– President & Trustee of Vornado Realty TrustVornado Realty TrustVornado Realty Trust is a New York based real estate investment trust. It is the inheritor of real estate formerly controlled by companies including Two Guys and Alexander's.- History :... - Henry H. FowlerHenry H. FowlerHenry Hammill Fowler was an American lawyer and politician.Born in Roanoke, Virginia, he graduated from Roanoke College in 1929 and received his law degree from Yale Law School in 1932....
– Former United States Secretary of the TreasuryUnited States Secretary of the TreasuryThe Secretary of the Treasury of the United States is the head of the United States Department of the Treasury, which is concerned with financial and monetary matters, and, until 2003, also with some issues of national security and defense. This position in the Federal Government of the United...
(1965–1969) - Charlie HaasCharlie HaasCharles "Charlie" Doyle Haas II is an American professional wrestler and former collegiate amateur wrestler. He competes on the independent circuit, and is signed to Ring of Honor , where he is one-half of the reigning ROH World Tag Team Champions with Shelton Benjamin...
– Wrestler, who is working for World Wrestling EntertainmentWorld Wrestling EntertainmentWorld Wrestling Entertainment, Inc. is an American publicly traded, privately controlled entertainment company dealing primarily in professional wrestling, with major revenue sources also coming from film, music, product licensing, and direct product sales... - Guy HandsGuy HandsGuy Hands , is an English financier and investor. He is most notable as the founder and chairman of Terra Firma Capital Partners, one of the largest private equity firms in Europe. Hands also previously served as Chairman of the U.K...
– CEO of Terra Firma Capital PartnersTerra Firma Capital PartnersTerra Firma Capital Partners Ltd is a leading U.K.-based private equity firm, best known for its failed investment in British music company EMI. Financier Guy Hands founded the firm in 2002 through the spin-off of Nomura Principal Finance Group... - Reuben Jeffery IIIReuben Jeffery IIIReuben Jeffery III is the former United States Under Secretary of State for Economic, Business, and Agricultural Affairs, having been appointed to that position by United States President George W. Bush in June 2007....
– Under Secretary of State for Economic, Business, and Agricultural Affairs (2007– ) - Neel KashkariNeel KashkariNeel T. Kashkari was the Interim Assistant Secretary of the Treasury for Financial Stability in the United States Department of the Treasury. While in this role, he led the Office of Financial Stability, the office set up to buy troubled financial assets from U.S. financial firms under the $700...
– Former Assistant Secretary of the Treasury for Financial Stability - Edward LampertEdward LampertEdward S. "Eddie" Lampert is an American businessman and investor. He is the chairman of Sears Holdings Corporation and founder, chairman, and CEO of ESL Investments. Until May, 2007 he was a director of AutoNation, Inc. He previously served as a director of AutoZone, Inc...
– Hedge Fund Manager of ESL InvestmentsESL InvestmentsESL Investments is a privately owned hedge fund based in Greenwich, Connecticut and estimated to be worth over $9 billion as of 2004. ESL Investments are not associated with ESL International, the stock market investment technology company. The fund is managed by Edward Lampert, who found it in...
. Brought K-Mart out of Bankruptcy in 2003 - Scott MeadScott MeadScott Mead is a photographer, financier and philanthropist. He is co-founder of Richmond Park Partners, a private merchant bank in London. He was formerly a partner and managing director of Goldman Sachs ....
– Photographer and an Investment Banker - Mario MontiMario MontiMario Monti is an Italian economist and academic who is Prime Minister of Italy, as well as Minister of Economy and Finance, since November 2011. Monti served as a European Commissioner from 1995 to 2004, with responsibility for the Internal Market, Services, Customs and Taxation from 1995 to 1999...
– Prime Minister of ItalyPrime minister of ItalyThe Prime Minister of Italy is the head of government of the Italian Republic...
and Minister of Economy and Finance since November 2011 - R. Scott MorrisR. Scott MorrisR. Scott Morris is an American author, financial engineer and quantitative consultant. He is president of Morris Consulting, LLC, and served as CEO of the Boston Options Exchange from 2006-08. He has also served as Managing Director of Goldman Sachs and Partner at Hull Trading Company.-Education...
– Former CEO of Boston Options ExchangeBoston Options ExchangeBoston Options Exchange Group, LLC is an automated stock exchange owned and operated by the TMX Group. As an equity options market, it provides electronic order matching services to stock brokers and traders.- Overview :... - Dambisa MoyoDambisa MoyoDr. Dambisa Moyo is an international economist and New York Times best-selling author of both Dead Aid: Why Aid is Not Working and How There is a Better Way For Africa, published in 2009, and How the West Was Lost: Fifty Years of Economic Folly - And the Stark Choices that Lie Ahead, published in...
– Zambian economist and author of Dead Aid: Why Aid is Not Working and How There is a Better Way For Africa - Ashwin NavinAshwin NavinAshwin Navin was the President and Co-Founder of BitTorrent, Inc. He joined Bram Cohen, the inventor of BitTorrent, in 2004 and reportedly handled business and company-related matters while Cohen focused on engineering and product development...
– President and co-founder of BitTorrent, Inc. - Henry PaulsonHenry PaulsonHenry Merritt "Hank" Paulson, Jr. is an American banker who served as the 74th United States Secretary of the Treasury. He previously served as the Chairman and Chief Executive Officer of Goldman Sachs.-Early life and family:...
– Former United States Secretary of the TreasuryUnited States Secretary of the TreasuryThe Secretary of the Treasury of the United States is the head of the United States Department of the Treasury, which is concerned with financial and monetary matters, and, until 2003, also with some issues of national security and defense. This position in the Federal Government of the United...
(2006–2009) - Romano ProdiRomano ProdiRomano Prodi is an Italian politician and statesman. He served as the Prime Minister of Italy, from 17 May 1996 to 21 October 1998 and from 17 May 2006 to 8 May 2008...
– Prime Minister of ItalyPrime minister of ItalyThe Prime Minister of Italy is the head of government of the Italian Republic...
(1996–1998, 2006–2008) and President of the European CommissionPresident of the European CommissionThe President of the European Commission is the head of the European Commission ― the executive branch of the :European Union ― the most powerful officeholder in the EU. The President is responsible for allocating portfolios to members of the Commission and can reshuffle or dismiss them if needed...
(1999–2004) - Robert RubinRobert RubinRobert Edward Rubin served as the 70th United States Secretary of the Treasury during both the first and second Clinton administrations. Before his government service, he spent 26 years at Goldman Sachs eventually serving as a member of the Board, and Co-Chairman from 1990-1992...
– Former United States TreasuryUnited States Department of the TreasuryThe Department of the Treasury is an executive department and the treasury of the United States federal government. It was established by an Act of Congress in 1789 to manage government revenue...
Secretary, ex-Chairman of CitigroupCitigroupCitigroup Inc. or Citi is an American multinational financial services corporation headquartered in Manhattan, New York City, New York, United States. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate... - Robert SteelRobert K. SteelRobert King "Bob" Steel is an American business leader and an expert on financial institutions and markets. In June 2010, he was named Deputy Mayor for Economic Development by New York City Mayor Michael Bloomberg...
– Former Chairman and President, WachoviaWachoviaWachovia was a diversified financial services company based in Charlotte, North Carolina. Before its acquisition by Wells Fargo in 2008, Wachovia was the fourth-largest bank holding company in the United States based on total assets... - John ThainJohn ThainJohn Alexander Thain is an American businessman, investment banker, and currently chairman and CEO of the CIT Group.Thain was the last chairman and chief executive officer of Merrill Lynch before its merger with Bank of America...
– Former Chairman and CEO, Merrill LynchMerrill LynchMerrill Lynch is the wealth management division of Bank of America. With over 15,000 financial advisors and $2.2 trillion in client assets it is the world's largest brokerage. Formerly known as Merrill Lynch & Co., Inc., prior to 2009 the firm was publicly owned and traded on the New York...
, and former chairman of the NYSE - Massimo Tononi – Italian deputy treasury chief (2006–2008)
- Malcolm TurnbullMalcolm TurnbullMalcolm Bligh Turnbull is an Australian politician. He has been a member of the Australian House of Representatives since 2004, and was Leader of the Opposition and parliamentary leader of the Liberal Party from 16 September 2008 to 1 December 2009.Turnbull has represented the Division...
– Australian politician, former federal leader of the Liberal Party of AustraliaLiberal Party of AustraliaThe Liberal Party of Australia is an Australian political party.Founded a year after the 1943 federal election to replace the United Australia Party, the centre-right Liberal Party typically competes with the centre-left Australian Labor Party for political office... - George Herbert Walker IVGeorge Herbert Walker IVGeorge Herbert Walker IV is the Chairman and CEO of Neuberger Berman. Formerly a Partner and Managing Director at Goldman Sachs, Walker was recruited to rival investment bank, Lehman Brothers, to head its Investment Management Division, of which Neuberger was a part...
– Managing director at Neuberger BermanNeuberger BermanNeuberger Berman Group LLC, through its subsidiaries is an investment management firm that provides financial services for high net worth individuals and institutional investors. With approximately $200 billion in asset under management, it is among the largest private employee-controlled asset...
and member of the Bush familyBush familyThe Bush family is a prominent American family. Along with many members who have been successful bankers and businessmen, across three generations the family includes two U.S. Senators, one Supreme Court Justice, two Governors, one Vice President and two Presidents... - Robert ZoellickRobert ZoellickRobert Bruce Zoellick is the eleventh president of the World Bank, a position he has held since July 1, 2007. He was previously a managing director of Goldman Sachs, United States Deputy Secretary of State and U.S. Trade Representative, from February 7, 2001 until February 22, 2005.President...
– United States Trade RepresentativeOffice of the United States Trade RepresentativeThe Office of the United States Trade Representative is the United States government agency responsible for developing and recommending United States trade policy to the president of the United States, conducting trade negotiations at bilateral and multilateral levels, and coordinating trade...
(2001–2005), Deputy Secretary of State (2005–2006), World BankWorld BankThe World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
President
Further reading
- William D. CohanWilliam D. CohanWilliam D. Cohan is a contributing editor at Fortune, and award-winning former investigative newspaper reporter based in Raleigh, North Carolina, who worked on Wall Street for seventeen years. He spent six years at Lazard Frères in New York and later became a managing director at JP Morgan Chase....
(2011). Money and Power: How Goldman Sachs Came to Rule the WorldMoney and PowerMoney and Power: How Goldman Sachs Came to Rule the World is a 2011 book written by William D. Cohan. It chronicles the history of Goldman Sachs, from its founding to the subprime mortgage crisis of 2008....
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External links
- Profile at BloombergBloomberg L.P.Bloomberg L.P. is an American privately held financial software, media, and data company. Bloomberg makes up one third of the $16 billion global financial data market with estimated revenue of $6.9 billion. Bloomberg L.P...
- Goldman Sachs at The Financial Times
- Business profile at The New York TimesThe New York TimesThe New York Times is an American daily newspaper founded and continuously published in New York City since 1851. The New York Times has won 106 Pulitzer Prizes, the most of any news organization...
- Campaign contributions at OpenSecrets.org