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Goldman Sachs

Goldman Sachs
Goldman Sachs Group, Inc.

Type Founded Founder(s) Headquarters Area served Key people Industry Products

Public (NYSE: GS) 1869 Marcus Goldman New York, USA Worldwide Lloyd C. Blankfein
(Chairman) & (CEO)

centers and acts as a financial advisor and money manager for corporations, governments, and wealthy families around the world. Goldman offers its clients mergers & acquisitions advice, underwriting services, asset management, and engages in proprietary trading, and private equity deals. It is a primary dealer in the U.S. Treasury securities market. Former Goldman Sachs employees such as Henry Paulson and Robert Rubin have held high positions in the federal government, regardless of which party was in the White House.

History
1869 - 1930
Goldman Sachs was founded in 1869 by German Jewish immigrant Marcus Goldman.[2] In 1882, Goldmans son-in-law Samuel Sachs joined the firm which prompted the name change to Goldman Sachs.[7] 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 in 1896. In the early 20th century, Goldman was a player in establishing the initial public offering 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 with characteristics similar to that of a Ponzi scheme. The fund failed as a result of the Stock Market Crash of 1929, hurting the firms reputation for several years afterward.[3] For this case and others like Blue Ridge Corporation [8] and Shenandoah Corporation [9] John Kenneth Galbraith wrote: The Autumn of 1929 was, perhaps, the first occasion when men succeeded on a large scale in swindling themselves. [10]

Financial Services Investment Banking Prime brokerage Asset Management Commercial Banking US $ 53.579 billion (2008) US $ 2.336 billion (2008) US $ 2.322 billion (2008) US $ 884.547 billion (2008) US $ 64.369 billion (2008) 27,898 (Q1 2009) GS.com

Revenue Operating income Net income Total assets Total equity Employees Website

The Goldman Sachs Group, Inc., or simply Goldman Sachs (NYSE: GS), is a bank holding company that engages in investment banking, securities services and investment management. Goldman Sachs was founded in 1869, and is headquartered in the Lower Manhattan area of New York City at 85 Broad Street but has its secondary office at 30 Hudson Street, Jersey City, New Jersey.[1] The firm has offices in all global financial

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Goldman Sachs
during its attempts to defend Electric Storage Battery against a hostile takeover bid from International Nickel and Goldmans rival Morgan Stanley.[5] This action would boost the firms reputation as an investment advisor because it pledged to no longer participate in hostile takeovers. John 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[6] that are still used to this day.

1930 - 1980
In 1930, Sidney Weinberg assumed the role of senior partner and shifted Goldmans focus away from trading and towards investment banking. It was Weinbergs actions that helped to restore some of Goldmans tarnished reputation. On the back of Weinberg, Goldman was lead advisor on the Ford Motor Companys IPO in 1956, which at the time was a major coup on Wall Street. Under Weinbergs 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 Weinbergs 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 Goldmans trading franchise once again. It is Levy who is credited with Goldmans famous philosophy of being "long-term greedy," which implies that as long as money is made over the long term, trading losses in the short term are not to be worried about. That same year, Weinberg retired from the firm. Another financial crisis for the firm occurred in 1970, when the Penn Central Railroad 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 ratings being created for every issuer of commercial paper today by several credit rating services.[4] 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

1980 - 1999
In the 1980s, 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 Blankfein, 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 collapse 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 funds 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 exchanges. 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-

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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. The firm joined David Rockefeller and partners in a 50-50 join 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.

Goldman Sachs
Its sizable profits made during the 2007 Subprime mortgage financial crisis led the New York Times to proclaim that Goldman Sachs is without peer in the world of finance.[9] The firms viability was later called into question as the crisis intensified in September 2008. In May 2006, Henry Paulson left the firm to serve as U.S. Treasury Secretary, and Lloyd Blankfein was promoted to Chairman and Chief Executive Officer. Former Goldman employees head 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. In January 2007, Goldman Sachs acquired the Entertainment and Production sector of Canadian film/television company Alliance Atlantis, as well as the CSI: Crime Scene Investigation franchise. Distribution rights went to CBS. On September 21, 2008, Goldman Sachs received Federal Reserve approval to transition from an investment bank to a bank holding company. [10] On September 22, 2008, the last two major investment banks in the United States, Morgan Stanley and Goldman Sachs, both confirmed that they would become traditional bank holding companies, bringing an end to the era of investment banking on Wall Street. [11] The Federal Reserves 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 Holdings Inc. into bankruptcy and led to the rushed sale of Merrill Lynch & Co. to Bank of America Corp. [12]
[13]

1999 - present
One of the largest events in the firms 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.[7] 22% of the company is held by non-partner employees, and 18% is held by retired Goldman partners and two longtime investors, Sumitomo Bank Ltd. and Hawaiis Kamehameha Activities Assn (the investing arm of Kamehameha Schools). This leaves approximately 12% of the company as being held by the public. With the firms 1999 IPO, Henry Paulson became Chairman and Chief Executive Officer of the firm. In 1999 Goldman acquired Hull Trading Company, one of the worlds premier marketmaking 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. It merged with JBWere, the Australian investment bank and opened a full-service brokerdealer in Brazil. 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 CSI franchise. The firm is also heavily involved in energy trading, including the oil speculation market, on both a principal and agent basis.[8]

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 insurance arrangements purchased from AIG, including $12.9bn from funds provided by the US Federal Reserve to bail out AIG.[14] [15]

Corporate affairs
As of 2006, Goldman Sachs employed 23,467 people worldwide. It reported earnings of US$9.34 billion and record earnings per share of $19.69.[16] It was reported that the average total compensation per employee in

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Goldman Sachs
former adviser to the Chicago mayors office, it was a Goldman Sachs representative who first pitched the city on the idea of leasing out the Skyway. Goldman Sachs has played a major role in advising states on how to structure privatization dealseven while positioning itself to invest in the toll road market. Conflicts of interest in such transactions are difficult to quantify. [20] Goldman Sachs is divided into three businesses.[21]

Investment banking
Investment Banking is divided into two divisions and includes Financial Advisory (mergers and acquisitions, investitures, corporate defense activities, restructurings and spinoffs) and Underwriting (public offerings and private placements of equity, equity-related and debt instruments). Goldman Sachs is one of the leading investment banks, appearing in league tables. In mergers and acquisitions, it gained fame historically 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 Goldmans reputation immensely among sitting management teams at the time. The investment banking segment accounts for around 17 percent of Goldman Sachs revenues.[22]

Goldman Sachs Tower in Jersey City 2006 was US$622,000.[17] However, this number represents the arithmetic mean of total compensation and is highly skewed upwards as several hundred of the top earners command the majority of the Bonus Pools, leaving the median that most employees earn well below this number.[18] In Business Weeks recent release of the Best Places to Launch a Career 2008, Goldman Sachs was ranked #4 out of 119 total companies on the list. [11] The current Chief Executive Officer is Lloyd C. Blankfein. The company ranks #1 in Annual Net Income when compared with 86 peers in the Investment Services sector. Blankfein earned a $67.9 million bonus in his first year. He chose to receive "some" cash unlike present United States Secretary of the Treasury Henry Paulson, his predecessor who chose to take his bonus entirely in company stock.[19] Recently Goldman Sachs has been increasingly involved in both advising and brokering deals to privatize major highways by selling them off to foreign investors. In addition to advising Indiana on the Toll Road deal, Goldman Sachs has worked with Texas governor Rick Perrys administration on privatization projects, and according to John Schmidt, the

Trading & Principal Investments

Trading and Principal Investments is the largest of the three segments, and is the companys profit center.[23] The segment is divided into three divisions and includes Fixed Income, Currency and Commodities (trading in interest rate and credit products, mortgage-backed securities and loans, currencies and commodities, structured and derivative products), Equities (trading in equities, equity-related products, equity derivatives, structured products and executing client trades in equities, options, and Futures contracts on world markets), and Principal Investments (merchant banking investments and funds). This segment consists of the revenues and profit gained from the Banks trading activities, both on behalf of its clients (known as flow trading) and for its own account (known as proprietary trading).

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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. Around 68 percent of Goldmans revenues and profits are derived from this area.[23] 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 Lloyd Blankfeins appointment to President and Chief Operating Officer after John Thains departure to run the NYSE and John L. Thorntons departure for an academic position in China.

Goldman Sachs
Capital Partners V fund, which comprises over $8.5 billion of equity.[28] 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.[29]

Major Assets (GS Group)

The Ayco Company, L.P. (Financial Advisory) Cogentrix Energy (Energy) American Casino & Entertainment Properties (Casinos) Coffeyville Resources LLC (Oil Refinery) Myers Industries, Inc. (Plastic & Rubber) USI Holdings Corporation (Insurance & Finance) East Coast Power LLC (Energy) Queens Moat Houses (Hotels) Sequoia Credit Consolidation (Finance) Shineway Group (Meat Processing) Equity Inns, Inc. (Hotels) KarstadtQuelle property group (Retailer) Nursefinders Inc. (Healthcare) Latin Force Group, LLC (Media)

Asset management and securities services

Asset Management and Securities Services is a rapidly growing business for Goldman as it gains market share. It is separated into two divisions, and includes Asset Management, which provides large institutions and very wealthy individuals with investment advisory, financial planning services (Private Wealth Management & AYCO), and the management of mutual funds, as well as the so-called alternative investments (hedge funds, funds of funds, infrastructure funds, real estate funds, and private equity funds). The Securities Services division provides prime brokerage, financing services, and securities lending to mutual funds, hedge funds, pension funds, foundations, and High net worth individuals. This segment accounts for around 19 percent of Goldmans earnings. David Blood is the former CEO of Goldman Sachs Asset Management. In 2006, the Goldman Sachs Asset Management hedge fund was the largest in the United States with $29.5 billion under management.[24] As of 2007, the fund was valued at $32.5 billion, the second-largest fund hedge fund after competitor JP Morgans $33.1 billion fund.[25][26] In August 2007, it emerged that Goldman had to spend $2 billion to rescue its own Global Equity Opportunities hedge fund from "significant market dislocation".[27]

Predictions
In December 2005, four years after its report on the emerging "BRIC" economies (Brazil, Russia, India, and China), Goldman Sachs named its "Next Eleven"[30] list of countries, using macroeconomic stability, political maturity, openness of trade and investment policies and quality of education as criteria: Bangladesh, Egypt, Indonesia, Iran, South Korea, Mexico, Nigeria, Pakistan, the Philippines, Turkey and Vietnam.[31]

Corporate citizenship
Goldman Sachs has received favorable press coverage for conducting business and implementing internal policies related to reversing global climate change.[32] According to the company web site, the Goldman Sachs Foundation has given $94 million in grants since 1999, with the goal of promoting youth education worldwide.[33] The company also has been on Fortune Magazines 100 Best Companies to Work For list since the list was launched in 1998.[34]

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

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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.[35] In March 2008, Goldman launched the 10,000 Women initiative to train 10,000 women from predominantly developing countries in business and management.

Goldman Sachs
criticism for an apparent revolving-door relationship in which its employees and consultants have moved in and out of powerful US Government positions, where there may exist the potential for a conflict of interest. Former Treasury Secretary Hank Paulson was a former CEO of Goldman Sachs. The current chief economic adviser to President Obama, Lawrence Summers, was noted for receiving $5.2 million from hedge fund D.E. Shaw in 2008 and speaking fees (ranging from $45 thousand to $135 thousand per event) from banks including Goldman Sachs, JPMorgan Chase, Citigroup, Lehman Brothers and Merrill Lynch[41] at a time when he was expected to become the most influential financial official in the U.S. Government.[42] Former bank regulator William_K._Black, appearing on Bill Moyers Journal on April 3, 2009, accused the financial industry of massive fraud, citing the role Tim Geithner played before being promoted to Treasury Secretary as well as the successful efforts of Alan Greenspan, former Goldman CEO Robert Rubin (Geithners mentor) and Larry Summers in the late 1990s to block regulation of the financial derivatives market.[43] According to Brooksley Born, former head of the Commodity Futures Trading Commission, Summers, Rubin and Greenspan blocked her efforts to regulate the derivatives market, on the grounds that the financial industry were objecting.[44] Born was then succeeded as head of the CFTC by former Goldman Sachs executive Gary Gensler, who stated that he "should have done more to rein in exotic financial instruments that have battered global markets". [45] Additional controversy attended the selection of former Goldman Sachs lobbyist Mark Patterson as chief of staff to Treasury Secretary Geithner, despite President Obamas pledge to limit the influence of lobbyists in his administration.[46]

Investments
Investment Year Company Description Ref.

unkown Is a Hospitality Archon Company owned Hospitality and operated by Goldman Sachs, it features Hilton, Marriott, Wyndham and InterContinental hotel brands.

Criticism and Controversy

In 1986, David Brown was convicted of passing inside information to Ivan Boesky on a takeover deal.[36] Robert Freeman, who was a senior Partner, the Head of Risk Arbitrage, and a protg of Robert Rubin, was also convicted of insider trading, with his own account and with the firms.[37] On November 11, 2008, the Los Angeles Times reported that Goldman Sachs, which earned $25 M from underwriting California bonds, had advised other clients to "short" those bonds.[38] Shorting is essentially betting that the state will default on the bonds, which serves to drive up the cost of the issue to the state. In April 2009, Goldman Sachs hired a law firm to pursue the founder of GoldmanSachs666.com for trademark violation.[39] The site has published negative articles and conspiracy theories on the firm and their alleged involvement in the global financial crisis. The site owner discloses that he has a short position Goldman stock and therefore profits if the stock declines.[40] During 2008 Goldman Sachs came under

First Quarter 2009 and December 2008 Financial Results

In April 2009, there was controversy in certain areas of the internet media, which alleged that Goldman Sachs had puffed up its Q1 earnings by creating a December orphan month into which it shifted large writedowns [47]. In its first full quarter as a bank holding company, the firm reported a USD 780M net loss for the single month of December

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alongside Q1 net earnings of USD 1.81B (JanMar)[48][49] 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 SEC filing of December 15, 2008[50]. The December loss also included a USD 850M writedown on loans to bankrupt chemical maker LyondellBasell, as reported in late December (the chemical maker formally declared bankruptcy on January 6th 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).[51][52] Most financial analysts and the mainstream financial press (Bloomberg, Reuters, etc), aware of the accounting change and deteriorating market conditions into December, were unsurprised by the December loss (Merrill Lynch took at least USD 8.1B of losses in the same period[53]). However, their lack of reaction and reporting of what was a widely expected result may have contributed to the surprise shown by some members of the internet press, who attributed 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 firms Q1 2009 conference call, and were fully declared on page 10 of its earnings release document.[54][55] On 22 April 2009, Morgan Stanley also reported [56] a USD 1.3B net loss for the single month of December, alongside a USD 177M loss for the first quarter (Jan-Mar).[57] However, whereas Goldman Sachs firstquarter earnings (Jan-Mar) were well-above forecasts[58] (which led to the speculation that the firm may have conveniently shifted losses into December), Morgan Stanleys results for the same Jan-Mar period were below consensus estimates.[59] This, in addition to Morgan Stanleys losses in December, would appear to support Goldmans rejection of the notion that they deliberately shifted losses into December.[49] Like Goldman Sachs, Morgan Stanley converted to a bank holding company after the bankruptcy of Lehman Brothers in September 2008.

Goldman Sachs

Involvement with the bailout of AIG

American International Group was bailed out by the US government in September 2008 after suffering a crisis in liquidity, whereby the Federal Reserve lent USD 85B (initially) to AIG to allow the firm to meet its collateral and cash obligations. In the ensuing months as AIGs obligations to counterparties were being unwound, Goldman Sachs was the largest single recipient of this money (USD 12.9B), although similar payments were also made to Socit Gnrale and Deutsche Bank (USD ~12B each), Barclays (USD 8.5B), Merrill Lynch (USD 6.8B), and other major US and international financial institutions.[60] (As of April, 2009, US Government loans to AIG totaled over $180 billion.) This money was owed to counterparties under legally-binding 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.[61], [62] The New York State Attorney General Andrew Cuomo announced in March 2009 that he was investigating whether AIGs trading counterparties improperly received government money.[63]

Possibility of economic loss in an AIG bankruptcy

Goldman Sachs has maintained that its net exposure to AIG was not material, and that the firm was protected by hedges (in the form of credit default swaps with other counterparties) and USD 7.5B of collateral.[64] The collateral and credit default swaps would have protected the firm from incurring an economic loss in the event of an AIG bankruptcy. The firm states that the cost of these hedges was over USD 100M.[65] However, because AIG was bailed out and not allowed to fail, these hedges did not pay out. Some have speculated that the hedges against their AIG exposure would not have paid out if AIG was allowed to fail, because of the systemic knock-on effects of AIGs failure to other financial institutions selling insurance against AIG. This is sometimes cited as a reason why AIGs bailout was, in effect, bailing out Goldman Sachs. However, in

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practice, credit default swaps 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 AIGs 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. Thus, the firm claims 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.[65] However, 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.

Goldman Sachs
Stanley was hired by the Federal Reserve to advise them on the AIG bailout.[70] The relationship with, and bailout of AIG was controversial because the bailout was crafted by then-US Treasury Secretary Henry Paulson, ex-CEO of Goldman Sachs until 2006; people saw the potential for a conflict of interest between his past and present roles.

Former-New York Fed Chairmans ties to the firm

In May 2009, it was reported that the Chairman of the New York Fed, Stephen Friedman, was a former-director at, and shareholder of Goldman Sachs, having retired from the firm in 1994 and retained substantial stock.[71] The controversy and criticism caused by what was seen as a conflict of interest between Friedmans new role as supervisor and regulator to Goldman Sachs (due to its conversion from securities firm to a bank holding company), and in particular, his purchase of shares in the firm when it traded at historical lows in Q4 2008, forced him to resign on May 7th 2009. Although Friedmans purchases of Goldman stock did not violate any Fed rule, statute, or policy, he stated that the Fed did not need this distraction. He also claims 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.[72] Friedman was named Chairman of the New York Fed in January 2008. However, Goldmans conversion to bank holding company in Septmber 2008 meant it was now regulated by the Fed and not the SEC. When it became apparent that Timothy Geithner, then-New York Fed president would leave his role at the Fed and become Treasury Secretary, a temporary one-year waiver of a rule was granted to Friedman that would otherwise forbid Fed board members from direct interest with those it regulated (class C directors). Friedman therefore 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).[71] This would

Effect of AIG wind down on earnings in 2009

Some have also claimed that Goldmans earnings in 2008 and Q1 2009 benefited materially from the bailout. However, in a statement by CFO David Viniar, the firm 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 banks trading relationship with AIG.[66]

Final AIG meetings on 15th September at the New York Federal Reserve
Some have cited, although incorrectly as others have noted[67], 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 AIGs fate. Much of this has stemmed from an inaccurate but often quoted New York Times article. The article was later corrected to state that Lloyd Blankfein, CEO of Goldman Sachs, was "one of the Wall Street chief executives at the meeting" (emphasis added). Bloomberg has also reported that representatives from other firms were indeed present at the September AIG meetings.[68] 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[69]; Paulson was not present at the September meetings at the New York Fed. It is also a lesser known fact that Morgan

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have been highly disruptive for the New York Feds role in the capital markets, and Friedman claims 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".[73]

Goldman Sachs
Jim Cramer - founder of TheStreet.com, best selling author, and host of Mad Money on CNBC Ashwin Navin - President and co-founder of BitTorrent, Inc. Abby Joseph Cohen - Perma-bull market forecaster formerly of Drexel Burnham Lambert George Herbert Walker IV - member of the Bush family and current managing director at Neuberger Berman Robert Zoellick - United States Trade Representative (2001-2005), Deputy Secretary of State (2005-2006), World Bank President. Mark Carney - Current Governor of the Bank of Canada [76][77] Michael D. Fascitelli- President & Trustee of Vornado Realty Trust. Neel Kashkari - Assistant Secretary of the Treasury for Financial Stability Charlie Haas - Wrestler, who is working for World Wrestling Entertainment. Malcolm Turnbull - Australian politician, currently the federal leader of the Liberal Party of Australia. John Thain - former Chairman and CEO, Merrill Lynch, and former chairman of the NYSE. Robert Steel - Chairman and President, Wachovia. Reuben Jeffery III, Under Secretary of State for Economic, Business, and Agricultural Affairs (2007-) Romano Prodi, Prime Minister of Italy twice (1996-1998 and 2006-2008) and President of the European Commission (1999-2004)[78] Mario Draghi, governor of the Bank of Italy (2006- )[78] Massimo Tononi, Italian deputy treasury chief (2006-2008)[78]

$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 generals 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.[74]

List of Officers and Directors

As of Nov 27, 2008[75]

Alumni
Henry H. Fowler - 58th United States Secretary of the Treasury (1965-1969) Robert Rubin - Former United States Treasury Secretary, ex-Chairman of Citigroup. Henry Paulson - Former United States Treasury Secretary. Edward Lampert- Hedge Fund Manager of ESL Investments. Brought K-Mart out of Bankruptcy in 2003. Joshua Bolten - former White House Chief of Staff Erin Burnett - CNBC Host Jon Corzine - Governor of the State of New Jersey. Michael Cohrs - Head of Global Banking at Deutsche Bank Emanuel Derman - Author of My Life as a Quant and co-developer of the BlackDerman-Toy model.

Goldman in the mortgage market

Actions in the 2007- subprime mortgage crisis
Despite the 2007 subprime mortgage crisis, Goldman was able to profit from the collapse in subprime mortgage bonds in the summer of 2007 by selling subprime mortgage-backed securities short. Two Goldman traders, Michael Swenson and Josh Birnbaum, are

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Name Nationality Current Position

Goldman Sachs
Fiscal Year Total

Since Total Annual LongAll Other Compensation Term Incentive Plans $235,943.00

Lloyd C. Blankfein David A. Viniar Gary D. Cohn John S. Weinberg Michael J. Evans

Chairman of 2006 US$600,000.00 the board & CEO CFO & Exec- 1999 $600,000.00 utive Vice President President, COO & Director Vice Chairman 2006 $600,000.00 -

$1,113,771.00

$222,492.00

$1,100,320.00

$163,841.00

$3,661,729.00

2006 $16,843,500.00 -

$79,736.00

$26,002,896.00 4 -

Vice Chair- 2008 $600,000.00 man & Chairman of Goldman Sachs, Asia Vice 2008 Chairman, Co-CEO International Executive Vice President, Global Head Compliance 2004 -

$2,250,850.00 $5,308,735.00

Michael Sherwood

Alan Cohen

Gregory Palm

Executive 1999 Vice President, General Counsel, CoHead - Legal Department Executive 2000 Vice President, General Counsel, CoHead - Legal Department Director Director Director Director 1999 2003 2005 2002 -

Esta Stecher

John H. Bryan Claes Dahlbck Stephen Friedman William W. George

10

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Rajat K. Gupta James A. Johnson Lois D. Juliber Lakshmi N. Mittal Ruth J. Simmons Director Director Director Director Director 2006 1999 2004 2008 2000 -

Goldman Sachs
-

credited with bearing responsibility for the firms large profits during Americas subprime mortgage crisis.[79] The pair, who are part of Goldmans structured products group in New York, made a profit of $4bn 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 [80]. 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. Goldman Sachs newest acquisitions are to include the subprime portfolio of imploded mortgage company Popular Financial Holdings late in the third quarter of 2008. [81] Detractors believe that Goldman wasnt quite as careful with its clients money as it was with its ownits flagship Global Alpha hedge fund tumbled 37% in the global credit crunch.[80] As most individual investments of hedge funds are not made public, however, no one can know exactly what assets the firm traded during the period leading up to the credit crisis.

Goldman Sachs Alternative Mortgage Products

In 2006, Goldmans Sachs mortgage-bonds division, Alternative Mortgage Products (known as GSAMP for short), issued 83 home-loan-backed bonds, valued at $44.5 billion. In the subprime sector, it grew its business by 59% from 2005, offloading some $12.9 billion on to fund managers. According to Inside Mortgage Finance, that made GSAMP the 15th biggest issuer of subprime-backed bonds in 2006. According to the website ABAlert.com (Asset-backed Alert), Goldman Sachs was one of the top 10 sellers of Collateralized Mortgage Obligations (CMOs) and may have sold about $100 billion in CMOs over the last two and a half years. [82] But, by the start of the third quarter this year, those securities were being downgraded by the credit ratings agencies faster than any other subprime lender. According to a Reuters report, Citigroups research (June 22, 2007), stated "portions of Goldmans GSAMP-issued bonds, which include subprime loans from a variety of lenders, have been downgraded a combined 69 times by Standard & Poors and Moodys Investors Service in the year through June 15. Sixty of the GSAMP downgrades refer to classes from 2006 bonds," Citigroup added, and Allan Sloane in The Washington Post stated that one of Goldmans 2006 crop - the GSAMP Trust 2006- S3 - may actually be "the worst dealfloated by a top-tier firm." One in every six of the 8,274 mortgages bundled together in GSAMP Trust 2006-S3 was already in default 18 months later. Whoever bought the S3 bonds will have either taken a 100% loss, or are waiting to sell it off at a heavy discount.
[83]

2008 Berkshire Hathaway Investment in Goldman Sachs

Goldman Sachs got help from Berkshire Hathaway, which bought $5 billion in Goldmans preferred stock, and got also warrants to buy another $5 billion in Goldmans common stock. [12] Goldman also received $10 billion of capital from the U.S. government in October 2008, under the Troubled Asset Relief Program.

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Goldman Sachs

Works about Goldman Sachs

Bank of Richmond. http://www.richmondfed.org/ publications/economic_research/ instruments_of_the_money_market/ Vault (2006). Vault employer profile. ch09.cfm. Retrieved on 2007-01-17. Goldman Sachs. New York: Vault, Inc.. [5] Rosenkrantz, Holly; Newton-Small, Jay ISBN 1-581-31469-8. (2004-11-23). "Bush Economic Adviser WetFeet (2004). The Goldman Sachs Friedman to Resign, Aide Says". Group. San Francisco, CA: WetFeet. ISBN Bloomberg.com. 1-582-07450-X. http://quote.bloomberg.com/apps/ Ellis, Charles D. (2008). The Partnership: news?pid=10000103&sid=a5PUdvzX0pXc&refer=ne The Making of Goldman Sachs. New York: Retrieved on 2007-01-17. The Penguin Press HC. ISBN [6] "Business Principles". The Goldman 1-594-20189-7. Sachs Group, Inc. Endlich, Lisa (1999). Goldman Sachs: The http://www2.goldmansachs.com/our-firm/ Culture Of Success. New York: A.A. Knopf. about-us/business-principles.html. ISBN 0-679-45080-7. Retrieved on 2008-01-24. Lindskoog, Nils (1998). Long-term Greedy: [7] Spiro, Leah Nathans (1999-05-17). The Triumph of Goldman Sachs. Appleton, "Goldman Sachs: How Public Is This WI: McCrossen Pub.. ISBN IPO?". BusinessWeek Online (The 0-965-21533-4. McGraw-Hill Companies Inc.). http://www.businessweek.com/1999/ 99_20/b3629102.htm. Retrieved on 2007-01-17. Goldman Sachs Capital Partners [8] "Perhaps 60% of todays oil price is pure Goldman Sachs Tower speculation". Global Research. Goldman Sachs Commodity Index http://www.globalresearch.ca/ index.php?context=va&aid=8878. Retrieved on 2008-06-09. [9] "Goldman Sachs marches on with Bushs [1] "Goldman Sachs Google Maps". candidate for World Bank". The http://maps.google.com/ Independent. maps?f=q&hl=en&sll=40.704066,-74.006395&sspn=0.187914,0.31929&q=goldman+sachs&om=1& http://www.independent.co.uk/news/ Retrieved on 2007-01-17. world/americas/goldman-sachs-marches[2] Spiro, Leah Nathans; Stanley Reed on-with-bushs-candidate-for-world(1997-12-22). "INSIDE THE MONEY bank-451094.html. Retrieved on MACHINEIn a big-is-all business, 2008-05-15. Goldman vows to go it alone". [10] "Goldman Sachs to be regulated by Fed". BusinessWeek (The McGraw-Hill Bloomberg. http://www.reuters.com/ Companies Inc.). article/mergersNews/ http://www.businessweek.com/1997/51/ idUSNWEN838420080922. Retrieved on b3558118.htm. Retrieved on 2008-09-21. 2007-01-17. [11] Wall Street in crisis: Last banks standing [3] Fox, Justin (2005-05-16). "GOLDMAN: give up investment bank status, The WE RUN WALL STREET". Fortune Guardian, September 22, 2008 magazine (Cable News Network LP, [12] Goldman, Morgan Stanley Bring Down LLLP. A Time Warner Company). Curtain on an Era, bloomberg, http://money.cnn.com/magazines/ September 22, 2008 fortune/fortune_archive/2005/05/16/ [13] Duke, Simon Goldman Sachs ready to 8260146/index.htm. Retrieved on hand out 7bn salary and bonus 2007-01-17. package... after its 6bn bail-out Mail on [4] Hahn, Thomas K.. "Commercial Paper". line. in Timothy Q. Cook and Robert K. [14] AIG ships billions in bailout abroad, The Laroche editors (PDF). Instruments of Politico, March 15, 2009 the Money Market (Seventh Edition ed.). Richmond, Virginia: Federal Reserve

See also

References

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From Wikipedia, the free encyclopedia

Goldman Sachs

[15] A.I.G. Lists Firms It Paid With Taxpayer cms.php?story_id=3967. Retrieved on Money, The New York Times, March 15, 2008-01-18. 2009 [26] Mackintosh, James (2007-05-24). [16] "GOLDMAN SACHS REPORTS RECORD "Biggest hedge funds tighten grip". EARNINGS PER COMMON SHARE OF Financial Times. http://www.ft.com/cms/ $19.69 FOR 2006" (PDF). The Goldman s/0/a1937de0-0994-11dcSachs Group, Inc.. 2006-12-12. p. 1. a349-000b5df10621.html. Retrieved on http://www2.goldmansachs.com/ 2008-01-18. our_firm/investor_relations/ [27] Goldman pumps in $2bn to bail out financial_reports/docs/earnings/ hedge fund (Times Online) 4Q06_ER-FINAL-External.pdf. Retrieved [28] >"GS Capital Partners". The Goldman on 2007-01-17. Sachs Group, Inc. [17] Gavin, Robert (2006-12-12). "Good deal: http://www2.goldmansachs.com/ Average Goldman Sachs employee makes client_services/merchant_banking/pia/ $622,000". The Boston Globe (The New capital/index.html. Retrieved on York Times Company). 2007-02-08. http://www.boston.com/business/articles/ [29] >"GS Capital Partners VI". Business 2006/12/12/ Wire. http://home.businesswire.com/ good_deal_average_goldman_sachs_employee_makes_622000/ portal/site/google/ ?p1=MEWell_Pos2. Retrieved on index.jsp?ndmViewId=news_view&newsId=2007042 2007-01-17. [30] Goldman Sachs Paper No.134 Relevant [18] "Please, Sir, I want Some More". New Emerging Markets York Magazine. 2005-12-05. [31] Khan, Jasim Uddin (2005-12-15). http://nymag.com/nymetro/news/ "Bangladesh on Goldman Sachs Next bizfinance/biz/features/15197/. Retrieved Eleven list". The Daily Star. on 2007-08-24. http://www.thedailystar.net/2005/12/15/ [19] Harper, Christine (2007-12-21). d5121501107.htm. Retrieved on "Goldman Awards Blankfein a Record 2007-01-17. $67.9 Million Bonus (Update1)". [32] "The Street Turns Green". Newsweek Bloomberg.com. (Newsweek, Inc.). 2007. http://www.bloomberg.com/apps/ http://www.newsweek.com/id/36497. news?pid=20601087&sid=ac1OzKh7snD4. Retrieved on 2007-11-23. Retrieved on 2007-12-21. [33] "The Goldman Sachs Foundation". The [20] Schulman, Daniel (2007-01-01). "The Goldman Sachs Group, Inc. Highwaymen". Mother Jones. http://www2.goldmansachs.com/ http://www.motherjones.com/news/ our_firm/our_culture/ feature/2007/01/highwaymen.html. corporate_citizenship/gs_foundation/ Retrieved on 2007-04-30. index.html. Retrieved on 2007-05-18. [21] http://www2.goldmansachs.com/our-firm/ [34] "100 Best Companies to Work 2007, All about-us/index.html Stars". Fortune. 2007. [22] Based on SEC filings for the last twelve http://money.cnn.com/magazines/ months ending May 31, 2008. fortune/bestcompanies/2007/allstars/. [23] ^ Goldman Had More Trading-Loss Days Retrieved on 2007-05-18. Than Morgan Stanley, Lehman [35] Goldman Sachs Establishes Goldman (Bloomberg.com) Sachs Gives Charitable Fund [24] Pasha, Shaheen (2006-10-06). "Banks [36] Worthy, Ford S.; Brett Duval Fromson love affair with hedge funds". and Lorraine Carson (1986-12-22). CNNMoney.com. http://money.cnn.com/ "WALL STREETS SPREADING 2006/10/05/news/companies/ SCANDAL". Fortune Magazine (Cable banks_hedgefunds/ News Network LP, LLLP. A Time Warner index.htm?postversion=2006100607. Company). http://money.cnn.com/ Retrieved on 2007-01-17. magazines/fortune/fortune_archive/1986/ [25] "The List: The Worlds Largest Hedge 12/22/68462/index.htm. Retrieved on Funds". Foreign Policy. September,2007. 2007-01-17. http://www.foreignpolicy.com/story/ [37] Thomas, Landon Jr. (2002-02-18). "Cold Call". New York Magazine (New York

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Magazine Holdings LLC). http://nymag.com/nymetro/news/ bizfinance/columns/businessclass/5693/ index.html. Retrieved on 2007-01-17. [38] "Goldman Sachs urged bets against California bonds it helped sell", Sharona Coutts, Marc Lifsher and Michael A. Hiltzik, Los Angeles Times, November 11, 2008 [39] [1] [40] "Goldman Sachs hires law firm to shut bloggers site", James Quinn, Telegraph.co.uk, April 11, 2009 [41] "Summers Raked in Speaking Fees from Wall Street", Philip Rucker, The Washington Post, April 3, 2009 [42] "Larry Summers, Tim Geithner and Wall Streets ownership of government", Glenn Greenwald, Salon.com, April 4, 2009 [43] "Transcript", Bill Moyers Journal, April 3, 2009 [44] "Prophet and Loss", Rick Schmitt, Stanford Magazine, March/April, 2009 [45] "Senate committee approves Gensler to head CFTC", Christopher Doering, Reuters, March 16, 2009 [46] "Another Lobbyist Headed Into Obama Administration ", Justin Rood and Emma Schwartz, ABCNews.com, January 27, 2009 [47] "Goldman creates orphans and other conspiracies", Tracy Alloway, FT.com, April 16, 2009 [48] Goldman Sachs First Quarter 2009 Earnings Release - Goldman Sachs Investor Relations (accessed 22-04-2009) [49] ^ "Goldman Revamp Puts Dec. Losses Off Books", Washington Post (retrieved 22-04-2009) [50] "Goldman Sachs Form 8-K December 15, 2008 [51] LyondellBasell considers bankruptcy filing - Reuters (accessed 22-04-2009) [52] Lyondell Banks Caught in Bankruptcy Lose $3.7 Billion in Loans - Bloomberg (accessed 22-04-2009) [53] Goldman Sachs and Merrill: Did December Ever Happen? - Option Hustler (accessed 22-04-2009) [54] Rebroadcast of Goldman Sachs Conference Call to Announce 2009 First Quarter Results - Goldman Sachs Investor Relations (accessed 22-04-2009)

Goldman Sachs

[55] Goldman Sachs First Quarter 2009 Earnings Release - Goldman Sachs Investor Relations (accessed 22-04-2009) [56] "Morgan Stanley Posts Bigger-ThanEstimated Loss (Update3) ", Christine Harper, Bloomberg.com, April 22, 2009 [57] Financial Supplement - 1Q 2009 Morgan Stanley (accessed 22-04-2009) [58] Goldmans blow out Q1 figures - reaction - FT Alphaville (retrieved 22-04-2009) [59] Morgan Stanley Posts Bigger-Than Estimated Loss, Cuts Dividend Bloomberg (accessed 22-04-2009) [60] http://www.businessweek.com/ the_thread/economicsunbound/archives/ 2009/03/german_and_fren.html#more [61] "Dimming the Aura of Goldman Sachs", New York Times, April 17, 2009 [62] http://dealbook.blogs.nytimes.com/2009/ 04/07/inspector-to-audit-aigscounterparty-payouts/ [63] http://dealbook.blogs.nytimes.com/2009/ 03/26/cuomo-widens-his-aiginvestigation/?hp [64] http://dealbook.blogs.nytimes.com/2009/ 03/20/goldman-maintains-it-had-no-aigexposure/ [65] ^ "Goldman Protected Its Clients From AIGs Weakness ", letter from Lucas van Praag , Managing Director, Goldman Sachs & Co, Wall St. Journal, April 13, 2009 [66] http://www.bloomberg.com/apps/ news?pid=20601087&sid=aVJT1NtIY3DQ&refer=ho [67] Another Dishonest NYT Editorial on AIG Economics of Contempt (blog) (retrieved 29-04-2009) [68] Goldman, Merrill Collect Billions After Feds AIG Bailout Loans - Bloomberg (retrieved 29-04-2009) [69] Goldman rejected settling of AIG trades at discount, CEO Blankfein had no meetings with Paulson about problems at insurer: CFO - MarketWatch (retrieved 29-04-2009) [70] AIG Seeks Funds From JPMorgan, Goldman After Fed Balks at Loan Bloomberg (retrieved 29-04-2009) [71] ^ "Friedman taken to task over Goldman deal" - Financial Times (accessed 10-05-2009) [72] NY Fed statement: Stephen Friedman Resigns as Chairman of the New York Feds Board of Directors - Financial Times (accessed 10-05-2009)

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From Wikipedia, the free encyclopedia

[73] Letter from Stephen Friedman to William Dudley and Ben Bernanke - FT Alphaville (accessed 10-05-2009) [74] "Goldman Pays to End State Inquiry Into Loans ", Leslie Wayne, New York Times, May 11, 2009 [75] "The Goldman Sachs Group, Inc. (GS.N) Officers and Directors", Reuters.com [76] Bank of Canada Press Release [77] The opaque and unaccountable Mr. Hide [78] ^ Ambrose Evans-Pritchard (30 May 2007). "Italians claim country run by Goldman Sachs". Telegraph.co.uk. http://www.telegraph.co.uk/finance/ markets/2809685/Italians-claim-countryrun-by-Goldman-Sachs.html. Retrieved on 2009-14-04.

Goldman Sachs
[79] Time Online, December 19, 2007, [2] [80] ^ The Guardian, December 21, 2007, [3] [81] Market Watch,Popular Announces Substantial Sale of Loan and Servicing Assets of its U.S. Mortgage Unit Popular Financial Holdings to Goldman Sachs,[4] [82] Finfacts Ireland, How Goldman Sachs made money from US subprime mortgages on the way up and down, December 4, 2007 [5] [83] The Washington Post, An Unsavory Slice of Subprime, October 16, 2007 [6].

External links
Goldman Sachs The Great Crash

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