Goldman: Don’t Blame Us
“When it comes to its role in the financial crisis, Goldman Sachs has a message for the world: Not guilty. Not one bit.”
Here is how they “made” $13 billion in 2009.
The following is via Business Week:
Goldman’s reputation with its clients—who must have at least $10 million to open an account—has never been better. Among the general public, however, the perception is that Goldman is the toxic epicenter of everything wrong with Wall Street. The firm’s 32,000 employees are seen as an army of Gordon Gekkos, greedy manipulators who pumped up the housing bubble, then bet opportunistically on its implosion as American International Group (AIG), its trading partner, buckled under massive debts. It is widely alleged—though unproven—that Goldman called on its close friends in government to arrange for an AIG bailout, effectively pocketing billions of taxpayer dollars. “Every game has a sucker,” says William K. Black, a professor of law and economics at the University of Missouri at Kansas City who was deputy director of the Federal Savings & Loan Insurance Corp., “and in this case, the sucker was not so much AIG as it was the U.S. government and taxpayer.”
Heads Goldman wins, tails you lose, America.
All this public opprobrium has cut into the sublime contentedness that once came with making partner at Goldman Sachs. Executives warn that the firm’s position as the whipping boy for a public enraged by financial industry bailouts will crimp future profits. It now has few friends in Washington. Even the market is discounting Goldman, though the company commands the highest return on equity of any major bank—nearly four times JPMorgan Chase’s (JPM). Today the market values Goldman Sachs shares at just less than half the book multiple at which they sold when Goldman went public 11 years ago. Changes have been made to compensation practices. The firm announced in December that its top 30 executives would, for one year, receive bonuses entirely in long-term stock. More than that, Goldman’s leaders say the vilification is unjustified. “This,” says Chief Financial Officer David A. Viniar, “has been one of the most frustrating experiences of my 30 years with the firm.”
The real story of what Goldman did is so much simpler than the conspiracy theories, says Viniar. Faced with a crisis they didn’t foresee, Goldman bankers merely did their jobs, no more and no less. The firm had no subprime agenda, no motives that were at odds with those of their clients. If they were half as smart and devious as the public believes, Goldman would have done far better than it did in 2008. [full story]