Bloomberg

Goldman Sachs, the Good, the Bad, and the Ugly

  1. The "Vampire Squid" at 142 years
    1

    The "Vampire Squid" at 142 years

    Goldman Sachs (GS), the most profitable investment bank in Wall Street history, went through a bit of a rough patch during the economic downturn. The firm posted its first quarterly loss since going public and handed over the largest fine ever collected by the Securities & Exchange Commission. From a purely economic angle, it appears that Goldman is now back on track, with $8.35 billion in profit last year. In the court of public opinion, however, Goldman Sachs is still on trial.

    The company was called the greedy cause of the downturn for selling bad debt and then betting against it. Rolling Stone framed Goldman as "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money." That's not to mention a 650-page Senate report that hangs over the firm.

    Turned over to the Justice Dept. and the SEC for further investigation, the report by the Permanent Subcommittee on Investigations says Goldman misled clients and Congress about the collateralized debt obligations that helped cause the financial crisis, according to Bloomberg.

    Founded on tobacco promissory notes and commercial paper, Goldman's 142-year history has in some ways repeated itself. This is certainly not Goldman's first dance with the SEC. And the firm battled back from its position as a national laughingstock following the Great Depression.

    Click here to read more of Goldman's history.
    Bloomberg
  2. Marcus Goldman Founds Goldman
    2

    Marcus Goldman Founds Goldman

    Date: 1869

    A Bavarian immigrant named Marcus Goldman founded the firm in a one-room office on Pine Street (above left). Goldman bought promissory notes from tobacco and diamond dealers that had been issued by their customers and then sold the notes to banks for a small profit, according to Time magazine. Son-in-law Samuel Sachs joined in 1882 and the firm became Goldman Sachs in 1885.
    Getty Images
  3. Sears, Roebuck IPO
    3

    Sears, Roebuck IPO

    Date: Sept. 17, 1906

    The firm joined the New York Stock Exchange in 1896 and enjoyed early successes backing the initial public offerings of large companies in the early 1900s. Perhaps the best-known of these was the IPO of Sears, Roebuck (SHLD), announced with the following financial note in the New York Times: "The subscription books for $9 million, 7 percent, cumulative preferred stock of Sears, Roebuck & Co., offered by Messrs. Lehman Brothers and Goldman, Sachs & Co., will be opened to-day at 10 a.m. and will be closed at 3 p.m. on Tuesday, Sept. 18 or earlier." Marcus's son, Henry Goldman (above) had joined the company and was instrumental in the Sears IPO.
    Via Bloomberg
  4. Launch of Ill-fated Investment Trusts
    4

    Launch of Ill-fated Investment Trusts

    Date: Dec. 4, 1928

    A $100 million investment trust ($1.32 billion in today's dollars) that was later compared to a Ponzi scheme was launched as the Goldman-Sachs Trading Corp. on December 4, 1928. That day, a New York Times article noted: "The organization is one of the largest of its kind ever established." Above, a crowd on Wall Street in the 1920s.
    Getty Images
  5. Huge Losses in Stock Market Crash
    5

    Huge Losses in Stock Market Crash

    Date: Oct. 24, 1929

    Goldman's annual report at the end of 1929 placed net assets of the Trading Corp. at $233 million ($3.08 billion in 2011 dollars) and cited cash profits of $31 million, according to the New York Times. The vast majority of the value turned out to be leverage. Black Thursday loosened the house of cards, with economists later arguing that Goldman's fund had facilitated the broader collapse. The name of Goldman Sachs was tarnished as Eddie Cantor—a vaudeville star who was also an investor—launched endless stage jokes about the firm.
    Getty Images
  6. Goldman's Comeback
    6

    Goldman's Comeback

    Date: Nov. 9, 1936

    Sears funded an expansion, following record sales, with a $36 million offering of shares floated in 1936 by Goldman. It was the largest offering since the collapse. Noted Time magazine, "At No, 30 Pine Street. Manhattan, home of Goldman, Sachs & Co., the proposed Sears deal had a significance all its own: It signaled the most remarkable investment banking comeback of [the] Depression."
    Getty Images
  7. Ford Motors's IPO
    7

    Ford Motors's IPO

    Date: Jan. 17, 1956

    Even as Goldman Sachs pushed into risk arbitrage, municipal bonds, and block trading, the firm scored a coup by becoming lead advisor and one among seven managers that floated a $114 million initial public offering for Ford Motors (F). It remained the largest IPO in American history until Apple Computer (AAPL) went public in December 1980.
    Getty Images
  8. Goldman in Danger, Again
    8

    Goldman in Danger, Again

    Date: June 21, 1970

    Penn Central Transportation collapsed on June 21, 1970 with more than $80 million in commercial paper outstanding, nearly all of which had been sold by Goldman Sachs. The SEC charged what Time called "massive fraud," leading up to the bankruptcy, which eventually caused companies issuing commercial paper to be rated by credit services. The strategy of being "long-term greedy," coined by new senior partner Gus Levy, seemed out of place amid the firm's evident short-term greed.
    Getty Images
  9. Goldman buys J. Aron
    9

    Goldman buys J. Aron

    Date: Nov. 16, 1981

    Goldman bought commodities trader J. Aron for $100 million ($274.2 million in 2011 dollars) in 1981, gaining both a commodities arm and the skills of future Chief Executive Officer Lloyd Blankfein. In the late 1970s and '80s, Goldman was run by the so-called "two Johns," John L. Weinberg and John C. Whitehead (above, in a 2001 photo).
    Bloomberg News
  10. Robert Rubin and Stephen Friedman, Co-Chairmen
    10

    Robert Rubin and Stephen Friedman, Co-Chairmen

    Date: 1990

    Future Treasury Secretary Robert Rubin (above) and Stephen Friedman took over as co-chairmen and co-senior partners of Goldman Sachs in 1990, commencing a decade that would bring the firm both prosperity and turmoil. When Rubin joined the Clinton Administration in 1992, Friedman took charge through 1994, when he left Goldman during a particularly dark period.
    AFP/Getty Images
  11. Bond Bets Lose Big
    11

    Bond Bets Lose Big

    Date: Sept. 6, 1994

    Bets on fixed income that had paid off to the tune of $2.7 billion in profit during 1993 started to go sour in 1994, with losses of up to $100 million a month during that year. As the pressure mounted, Stephen Friedman shocked the company by unexpectedly stepping down just after Labor Day in 1994. As a recent Vanity Fair article put it: "A power struggle ensued, unlike any other in the firm's long history." That struggle was between future Treasury Secretary Henry Paulson (above) and future New Jersey Governor Jon Corzine.
    AFP/Getty Images
  12. Yahoo Goes Public
    12

    Yahoo Goes Public

    Date: Apr. 12, 1996

    As the dot-com boom heated up, Goldman Sachs was instrumental in backing major IPOs such as that of Yahoo! (YHOO). The company was later criticized for backing such dot-dogs as EToys, NetZero, and Webvan. After the firm tried to pump up the prices of the offerings, the SEC fined Goldman $40 million for the violation, according to BusinessWeek.
    Getty Images
  13. Corzine Steps Down
    13

    Corzine Steps Down

    Date: Jan. 12, 1999

    After losses that amounted to $500 million in the fall of 1999, Jon Corzine resigned as co-chairman and left Goldman in the hands of Henry Paulson. The initial public offering for the firm, at the time Wall Street's last big private partnership, had been scheduled for September. Paulson's rise at the firm was, as the New York Times noted, quoting unnamed sources, "a power play by Mr. Paulson." Corzine campaigned for (above) and won a New Jersey Senate seat the following year.
    Getty Images
  14. Dot-com Peaks
    14

    Dot-com Peaks

    Date: Mar. 10, 2000

    Goldman did much to help push the Nasdaq to its towering peak of 5049 on Mar. 10, 2000. The subsequent crash resulted in fines and lawsuits and Goldman wound up paying $110 million to settle conflict-of-interest and insider-trading charges.
    AFP/Getty Images
  15. Paulson Becomes Treasury Secretary
    15

    Paulson Becomes Treasury Secretary

    Date: May 30, 2006

    After overseeing significant growth at Goldman Sachs during the early naughts—and banking $40 million in remuneration in 2005—Henry Paulson accepted President George W. Bush's offer to become Treasury Secretary. Paulson first declined the job, then negotiated broad policy powers before he accepted, according to the New York Times.
    AFP/Getty Images
  16. Blankfein named CEO
    16

    Blankfein named CEO

    Date: May 31, 2006

    When Henry Paulson moved to Treasury, Lloyd Blankfein took the helm at Goldman for what would be a massively turbulent period. Still CEO today, Blankfein was, as BusinessWeek put it in a 2004 profile, "not your typical Wall Street starched shirt. Blankfein got himself through Harvard University on financial aid … unlike many bankers, he is not afraid to admit to colleagues that he's nervous about his new job or that he got into Goldman through a back door."
    Getty Images
  17. Record Profit as Goldman Bets Against Goldman-issued Securities
    17

    Record Profit as Goldman Bets Against Goldman-issued Securities

    Date: Dec. 18, 2007

    Goldman bundled shaky debt and sold it during the housing boom, then shorted the securities. In 2009, the full story came out in McClatchy newspapers and in the New York Times. In 2007, however, the Times published a glowing article that mentioned Goldman's "high-octane business acumen, tempered with paranoia and institutionally encouraged—though not always observed—humility."
    Getty Images
  18. The End of Investment Banking, or Not
    18

    The End of Investment Banking, or Not

    Date: Sept. 21, 2008

    Goldman Sachs's and Morgan Stanley's switch from being investment banks to becoming bank holding companies was thought at the time to mark foundational change. As a New York Times headline put it: "A Wall St. Era Ends." Now the switch is viewed more as a method by which the two firms took advantage of funds from the Troubled Asset Relief Program, with little change in the way of regulation.
    Getty Images
  19. Buffett Invests $5 billion
    19

    Buffett Invests $5 billion

    Date: Sept. 23, 2008

    Berkshire Hathaway (BRK/A), led by Warren Buffett, purchased a roughly 10 percent stake in Goldman Sachs with the U.S. financial system in turmoil. The move amounted to a vote of confidence in the firm.
    AFP/Getty Images
  20. Goldman's Orphan Month
    20

    Goldman's Orphan Month

    Date: December 2008

    After Goldman posted its first loss since going public, it created the now-famed orphan month. To avoid what might have been back-to-back quarters of losses, December 2008 was orphaned with a loss of $1.3 billion when Goldman Sachs switched fiscal calendars. The firm ended its 2008 year on Nov. 30 and started calendar 2009 in January. The first quarter of the year, drawing on returns from March instead of December, showed a profit of $1.8 billion. The quarter was further boosted by taxpayer money from the AIG (AIG) bailout and by $15 billion Goldman borrowed from the U.S. Federal Reserve (above), on Dec. 9, 2008, according to Bloomberg. Just months later, Matt Taibbi came out with a Rolling Stone article that depicted Goldman as "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money."
    AFP/Getty Images
  21. Record Profit, Again
    21

    Record Profit, Again

    Date: January 2010

    Goldman Sachs announced a record profit of $13.4 billion, on revenue of $45.2 billion, for 2009. The big topic was whether or not the government bailout accounted for why Goldman had fared so well. Vanity Fair explored the topic in a 2010 article that questioned top brass about the bailout. The magazine's conclusion: "Goldman executives believe they have a public-relations problem, not a substantive one." Lloyd Blankfein testified (above) at the Financial Crisis Inquiry Commission on Jan. 13, 2010.
    Getty Images
  22. SEC Charges Fraud
    22

    SEC Charges Fraud

    Date: Apr. 16, 2010

    The charges were simple. Bad debt was bundled and sold by a Goldman Sachs vice-president named Fabrice Tourre, a.k.a. the "Fabulous Fab." In less than a year, 99 percent of the portfolio in question had been downgraded and investors were alleged to have lost more than $1 billion, according to the SEC.
    Getty Images
  23. The Largest Fine Ever Paid to the SEC
    23

    The Largest Fine Ever Paid to the SEC

    Date: July 16, 2010

    Goldman eventually settled for $550 million, the largest fine ever paid to the SEC and a humiliation for Goldman Sachs. Tourre is still tied up in civil fraud charges. As Senator Tom Coburn (R-Okla.) told Lloyd Blankfein at a Senate hearing: "… somebody has made a decision [Tourre's] going to be a whipping boy, he's the guy getting hung out to dry." Above, Senator Carl Levin (D-Mich.), on the left, and Senator Coburn, to the right, framed the head of Lloyd Blankfein at a hearing in 2010.
    Getty Images
  24. The Senate Says Goldman Wasn't Nice to Clients
    24

    The Senate Says Goldman Wasn't Nice to Clients

    Date: Apr. 14, 2011

    A 650-page Senate report released in April attempted to ensure that the bad debt bundled and sold by Goldman wouldn't be erased with a fall guy or the major fine paid to the SEC. The result of a two-year probe by the Permanent Subcommittee on Investigations, the report states that Goldman misled clients and Congress about the collateralized debt obligations that helped cause the financial crisis, according to Bloomberg. In May, the report was referred to the Justice Dept. and the SEC, according to Bloomberg. In early June, Goldman started fighting back against the report, emphasizing inconsistencies in the Senate report to reporters, according to Bloomberg.
    AFP/Getty Images