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
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

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

The "Vampire Squid" at 142 years
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
Marcus Goldman Founds Goldman
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.
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Sears, Roebuck IPO
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.
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Launch of Ill-fated Investment Trusts
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.
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Huge Losses in Stock Market Crash
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.
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Goldman's Comeback
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."
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Ford Motors's IPO
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.
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Goldman in Danger, Again
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.
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Goldman buys J. Aron
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).
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Robert Rubin and Stephen Friedman, Co-Chairmen
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.
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Bond Bets Lose Big
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.
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Yahoo Goes Public
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.
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Corzine Steps Down
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.
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Dot-com Peaks
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.
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Paulson Becomes Treasury Secretary
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.
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Blankfein named CEO
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."
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Record Profit as Goldman Bets Against Goldman-issued Securities
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."
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The End of Investment Banking, or Not
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.
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Buffett Invests $5 billion
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.
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Goldman's Orphan Month
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."
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Record Profit, Again
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.
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SEC Charges Fraud
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.
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The Largest Fine Ever Paid to the SEC
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.
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The Senate Says Goldman Wasn't Nice to Clients
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.
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