Goldman Sachs CEO on Financial Markets and the Economy (2013)
The Goldman Sachs Group, Inc. is an American multinational investment banking 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 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 market making and private equity deals, and is a primary dealer in the United States Treasury security market. It is recognized as one of the premier investment banks in the world.
Former Goldman executives who moved on to government positions include: Robert Rubin and Henry Paulson who served as United States Secretary of the Treasury under Presidents Bill Clinton and George W. Bush, respectively; Mario Draghi, President of the European Central Bank; Mark Carney, Governor of the Bank of Canada 2008–13 and Governor of the Bank of England from July 2013.
Goldman has been called “Wall Street’s No. 1 dealmaker”, and the world’s “best investment bank”. It has been described by business journalists Bethany McLean and Joe Nocera as the investment bank that “always seemed to be in the sweet spot of every market”, so successful that it aroused the envy of other investment bankers. In the 1980s its prestige was such that business school students thought of being hired by the firm “as the ultimate accomplishment”, (according to Floyd Harris, the chief financial correspondent of the New York Times), and “up to the 1990s”, Goldman’s reputation was “very high”, to the point that “they were believed to be able to outperform everyone else in every way.” (according to Suzanne McGee, author of Chasing Goldman Sachs,)
But it has also been harshly criticized, particularly in the aftermath of the 2007–2012 global financial crisis where some alleged that it misled its investors and profited from the collapse of the mortgage market. That time — “one of the darkest chapters” in Goldman’s history (according to the New York Times—brought investigations from the Congress, the Justice Department, and a lawsuit from the SEC—to whom it agreed to pay $550 million to settle. It was “excoriated by the press and the public” (according to journalists McLean and Nocera) — this despite the non-retail nature of its business that would normally have kept it out of the public eye. Visibility and antagonism came from the $12.9 billion Goldman received—more than any other firm—from AIG counterparty payments provided by the New York Federal Reserve bailout; the $10 billion in TARP money it received from the government (though the firm paid this back to the government); and a record $11.4 billion set aside for employee bonuses in the first half of 2009. While all the investment banks were scolded by congressional investigations, the company was subject to “a solo hearing in front of the Senate Permanent Subcommitee on Investigations” and a quite critical report. In a widely publicized story, Matt Taibbi in Rolling Stone characterized the firm as a “great vampire squid” sucking money instead of blood, allegedly engineering “every major market manipulation since the Great Depression … from tech stocks to high gas prices”
Goldman Sachs has denied wrongdoing. It has stated that its customers were aware of its bets against the mortgage-related security products it was selling to them, and that it only used those bets to hedge against loses, and was simply a market maker. The firm also promised a “comprehensive examination of our business standards and practices”, more disclosure and better relationships with clients.
Goldman has also been accused of an assortment of other misdeeds, varying from a general decline in ethical standards, working with dictatorial regimes, cosy relationships with the US federal government, via a “revolving door” of former employees insider trading by some of its traders, and driving up prices of commodities prices through futures speculation. Goldman has denied wrongdoing in these cases.
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