Goldman Sachs Group, Inc. is a multinational investment bank and an American financial services company headquartered in New York City. Apart from investment banking, it offers services in investment management, securities, asset management, prime brokers, and securities underwriting.
As a bank "Bulge Bracket", this is one of the largest investment banking companies in the world. It is considered a major dealer in the US Treasury security market and more generally, a leading market maker. The bank has a direct bank known as Goldman Sachs Bank USA where it maintains its online banking presence. Goldman Sachs was founded in 1869 and is headquartered at 200 West Street in Lower Manhattan with additional offices in other international financial centers.
Due to his involvement in securitization during the subprime mortgage crisis, Goldman Sachs suffered during the 2007-2008 financial crisis, and received a $ 10 billion investment from the US Treasury Department as part of the Troubled Asset Relief Program, a financial bailout made. by the Emergency Economic Stabilization Act of 2008. The investment was made in November 2008 and was fully paid in June 2009.
Former Goldman Sachs employees have moved into government positions. Important examples include former US Treasury Secretary Robert Rubin and Henry Paulson; The current US Treasury Secretary Steven Mnuchin; former chief economic adviser Gary Cohn; European Central Bank President Mario Draghi; former Bank of Canada Governor and current Bank of England Governor Mark Carney and current Australian Prime Minister Malcolm Turnbull. In addition, former Goldman employees have led the New York Stock Exchange, the World Bank, and competing banks such as Citigroup and Merrill Lynch.
Video Goldman Sachs
History
Establishment and establishment
Goldman Sachs was founded in New York in 1869 by Marcus Goldman. In 1882, Goldman's son-in-law Samuel Sachs joined the company. In 1885, Goldman brought his son, Henry, and his daughter-in-law, Ludwig Dreyfuss, into the business and the company adopted the current name, Goldman Sachs & amp; Co. The company made a name for itself pioneering the use of commercial paper for entrepreneurs and joined the New York Stock Exchange (NYSE) in 1896. In 1898, the company's capital reached $ 1.6 million (about $ 47 million in real value), and growing rapidly.
Goldman entered the initial public offering market in 1906 when it took Sears, Roebuck and the public Company. The deal came about because of Henry Goldman's personal friendship with the owner of Sears, Julius Rosenwald. Other IPOs followed, including F. W. Woolworth and Continental Can. In 1912, Henry S. Bowers became the first non-member of the founding family to become a corporate partner and share the profits.
In 1917, under pressure from another partner in the company due to his pro-German stance, Henry Goldman resigned. Company control is now in the hands of the Sachs family. Waddill Catchings joined the company in 1918. In 1920, the company moved from 60 Wall Street to $ 1.5 million on a 12-storey location on 30-32 Pine Street. In 1928, Catchings was Goldman's partner with the largest single share in the company.
On December 4, 1928, the company launched Goldman Sachs Trading Corp., a closed fund. The fund failed during the Stock Market Crash of 1929, amid allegations that Goldman had been involved in stock price manipulation and insider trading.
Mid-20th Century
In 1930, the company withdrew Catchings, and Sidney Weinberg took over the role of senior partner and shifted Goldman's focus from trading and towards investment banking. It was Weinberg's actions that helped restore some of Goldman's tainted reputation. Behind Weinberg, Goldman was a key adviser to the Ford Motor Company IPO in 1956, which was then a major coup on Wall Street. Under the Weinberg administration, the company also started investment research divisions and municipal bond departments. It is at this point that the company becomes an early innovator in risk arbitration.
Gus Levy joined the company in the 1950s as a securities trader, who started a trend at Goldman where there would be two forces that generally compete for supremacy, one from investment banking and one from securities trading. For much of the 1950s and 1960s, these were Weinberg and Levy. Levy was a pioneer in block trading and the company set this trend under his guidance. Due to Weinberg's heavy influence on the company, it formed an investment banking division in 1956 in an effort to spread influence and not focus it all on Weinberg.
In 1969, Levy took over as Senior Partner of Weinberg, and built a Goldman trading franchise once again. It is Levy who is credited with Goldman's notorious "greedy long term" philosophy, which implies that as long as money is made in the long term, trade losses in the short term need not be feared. At the same time, the partners reinvest almost all of their income in the company, so the focus is always in the future. That same year, Weinberg retired from the company.
Another financial crisis for the company occurred in 1970, when the Penn Central Transportation Company went bankrupt with more than $ 80 million in commercial paper, mostly issued through Goldman Sachs. Bankruptcy is great, and the resulting lawsuits, especially by the SEC, threaten the company's partnership, life, and reputation. It is this bankruptcy that generates a credit rating created for every commercial letter publisher today by some credit rating service.
During the 1970s, the company also evolved in several ways. Under the direction of Senior Partner Stanley R. Miller, he opened his first international office in London in 1970 and created a personal wealth division along with a fixed income division in 1972. It also pioneered the "white knight" strategy in 1974 during its attempt to defend Storage Battery Electric against a hostile takeover bid from International Nickel and Goldman rival Morgan Stanley. This action will enhance the company's reputation as an investment advisor because it promises to no longer participate in hostile takeovers. John L. Weinberg (son of Sidney Weinberg), and John C. Whitehead took over the role of senior partner in 1976, once again emphasizing joint leadership in the company. One of their initiatives is the establishment of 14 business principles that are still claimed by the company.
End of the 20th century
On November 16, 1981, the company acquired J. Aron & amp; The company, a commodity trading company that joins the Fixed Income division becomes known as Fixed Income, Currency, and Commodities. J. Aron is a player in the coffee and gold market, and Goldman's current CEO, Lloyd Blankfein, joins the company as a result of this merger. In 1985, the company underwrote the public offering of the Rockefeller Center real estate investment trust, which is the largest REIT offering in history. In keeping with the beginning of the dissolution of the Soviet Union, the company was also involved in facilitating the global privatization movement by advising the rotating companies of its parent government.
In 1986, the company formed Goldman Sachs Asset Management, which manages most of today's mutual funds and hedge funds. In the same year, the firm also underwrote Microsoft's IPO, suggested General Electric on the acquisition of RCA and joined the London and Tokyo stock exchanges. 1986 was also the year when Goldman became the first US bank to enter the top 10 mergers and acquisitions in the UK. During the 1980s the company became the first bank to distribute its investment research electronically and created the first public offering of original deep-discount bond issues.
Robert Rubin and Stephen Friedman took over the Co-Senior Partnership in 1990 and pledged to focus on corporate globalization and strengthen Mergers & amp; Acquisitions and Trade business lines. During their reign, the company introduced paperless trade to the New York Stock Exchange and led the management of the first global debt offerings by US companies. He also launched the Goldman Sachs Commodity Index (GSCI) and opened an office in Beijing in 1994. Also in 1994, Jon Corzine took over leadership as CEO, following the departure of Rubin and Friedman. Another important event in Goldman's history was the 1995 Mexican bailout. Rubin invited criticism in Congress for using Treasury Department accounts under his personal control to distribute $ 20 billion to secure Mexican bonds, which Goldman is a key distributor. On November 22, 1994, the Mexican stock market Bolsa has recognized Goldman Sachs and one other company to operate in that market. The 1994 economic crisis in Mexico threatened to wipe out the value of Mexican bonds held by Goldman Sachs.
In 1994, Goldman financed Rockefeller Center in an agreement that allowed it to take ownership in 1996, and sold Rockefeller Center to Tishman Speyer in 2000. In April 1997, Goldman became the primary responsibility of Yahoo! IPO. In 1998, he became co-chair of 2 trillion yen of NTT DoCoMo IPO. In 1999, Goldman acquired Hull Trading Company, one of the world's major market makers, for $ 531 million. After decades of debate among partners, the company became a public company through an initial public offering in May 1999. Goldman sold 12.6% of the company to the public, and, after the IPO, 48.3% of the company was held by the company. former partner, 21.2% of the company held by non-partner employees, and the remaining 17.9% held by retired partner Goldman and two old investors, Sumitomo Bank Ltd. and Assn, the investment agency of the Kamehameha School. Shares were priced $ 53 each and, after the IPO, Henry Paulson became Chairman and Chief Executive Officer, replacing Jon Corzine.
21st century
Goldman Sachs bought Spear, Leeds, & amp; Kellogg, one of the largest specialist firms on the New York Stock Exchange, for $ 6.3 billion in September 2000. In January 2000, Goldman, along with Lehman Brothers, was the primary manager for the first Internet bond offering for the World Bank. In 2003, the company took a 45% stake in a joint venture with JBWere, an Australian investment bank. In December 2005, four years after its report on emerging "BRIC" economies (Brazil, Russia, India and China), Goldman Sachs named the list of "Eleven as Well as" countries, using macroeconomic stability, political maturity, trade openness and investment policy and quality of education as criteria: Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Turkey, South Korea, and Vietnam.
In May 2006, Paulson left the firm to serve as the US Treasury, and Lloyd C. Blankfein was promoted to Chairman and Chief Executive Officer. In January 2007, Goldman, along with CanWest Global Communications, acquired Alliance Atlantis, the company with rights to the franchise CSI.
The subprime mortgage crisis: 2007-2008
During the Subprime mortgage crisis of 2007, Goldman was able to profit from the fall of subprime mortgage bonds in the summer of 2007 by subprime mortgage-backed short selling securities. Two Goldman merchants, Michael Swenson and Josh Birnbaum, are credited for being responsible for the company's huge profits during the crisis. The pair, a member of Goldman's structured product group in New York City, made a $ 4 billion gain on "bets" on collapse in the sub-prime market and mortgage-related short-term securities. In the summer of 2007, they persuaded colleagues to look at their point of view and convince skeptical risk management executives. The company initially avoided major subprime writedowns and achieved a net profit because of significant losses on securitized non-prime loans that were offset by gains on short mortgage positions. The survival of the company was then questioned as the crisis escalated in September 2008.
On October 15, 2007, when the crisis began to unravel, Allan Sloan, senior editor for Fortune magazine, wrote:
So let's reduce this macro story to the human scale. Meet GSAMP Trust 2006-S3, a $ 494 million decline in garbage mortgage buckets, part of more than half a trillion dollars of mortgage-backed securities issued last year. We found this problem by asking mortgage experts to choose the worst deal they know about it has been levied by the top company - and this one is very bad.
It was sold by Goldman Sachs - GSAMP originally stood for Goldman Sachs Alternative Mortgage Products but now has become the name itself, like AT & T and 3M. This problem, backed by a very risky second mortgage loan, contains all the elements that facilitate housing and bust bubbles. There are speculators seeking quick profits in the hot housing market; there are loans that seem to be made with little or no serious analysis by the lender; and finally, there is Wall Street, which produces "product" mortgages because buyers want it. As they say on the Road, "When ducks duk, feed them."
On September 21, 2008, Goldman Sachs and Morgan Stanley, the last two major investment banks in the United States, both confirmed that they would become the parent company of a traditional bank. The Federal Reserve's approval of their bid to become a bank ended the business model of an independent securities firm, 75 years after Congress separated them from the lenders, and ended a week of turmoil that sent Lehman Brothers into bankruptcy and caused a hasty sale of Merrill Lynch & amp; Co to Bank of America Corp. On September 23, 2008, Berkshire Hathaway agreed to buy $ 5 billion in Goldman preferred stock, and also received a warrant to buy another $ 5 billion in Goldman common stock within 5 years. The company also raised $ 5 billion through an initial public offering of $ 123 per share. Goldman also received a $ 10 billion in preferred stock investments from US Treasury in October 2008, as part of the Troubled Asset Relief Program (TARP).
Andrew Cuomo, then New York Attorney General, questioned Goldman's decision to pay 953 employee bonuses of at least $ 1 million each after receiving TARP funds in 2008. The same period, however, CEO Lloyd Blankfein and 6 other senior executives opted to leave bonuses, states that they believe it is the right thing to do, given the "fact that we are part of an industry directly linked to ongoing economic difficulties". Cuomo called the move "appropriate and prudent", and urged other bank executives to follow company leads and refuse bonus payments. In June 2009, Goldman Sachs paid back US Treasury TARP investment, with a 23% interest (in the form of $ 318 million in preferred dividend payments and $ 1.418 billion in redemption of orders). On March 18, 2011, Goldman Sachs acquired the Federal Reserve to repurchase Berkshire preferred stock at Goldman. In December 2009, Goldman announced that its top 30 executives would be paid year-end bonuses in limited inventory that they could not sell for 5 years, on awkward terms.
During the 2008 Financial Crisis, the Federal Reserve introduced a number of short-term credit and liquidity facilities to help stabilize the market. Some transactions under these facilities provide liquidity to institutions whose failure can greatly compress the already fragile financial system. Goldman Sachs was one of the heaviest users of this loan facility, taking a loan deal between March 18, 2008 and April 22, 2009. The Main Dealer Credit Facility (PDCF), the first Fed facility to provide overnight loans to investment banks, lent Goldman Sachs a total of $ 589 billion against collateral such as corporate market instruments and mortgage-backed securities. The Term Securities Lending Facility (TSLF), which allows major dealers to borrow a liquid Treasury securities for a month in exchange for less liquid guarantees, lends Goldman Sachs a total of $ 193 billion. Goldman Sachs lending reached $ 782 billion in hundreds of transactions that spin during these months. The loan has been settled in accordance with the terms of the facility.
Reemergence: 2008-present
According to a survey of BrandAsset Valuator 2009 drawn from 17,000 people worldwide, the company's reputation suffered in 2008 and 2009, and rival Morgan Stanley respected more than Goldman Sachs, a reversal of sentiment in 2006. Goldman declined to comment on the findings. In 2011, Goldman took full control of JBWere in a $ 1 billion purchase. In 2011, Goldman Sachs closed Global Alpha funds, after the company's largest hedge fund. The announcement follows a decline in the reported fund balance to less than $ 1.7 billion in June 2011 from $ 11 billion in 2007. The decline was due to investors withdrawing from the fund following substantial market losses earlier. Global Alpha is at one point one of the largest hedge funds in the world, with more than $ 12 billion under management. It started in 1995 with $ 10 million. In September 2013, Goldman Sachs Asset Management announced it has signed an agreement with Deutsche Asset & amp; Wealth Management to acquire a stable value business, with total assets under $ 21.6 billion supervision as of June 30, 2013.
In April 2013, along with Deutsche Bank, Goldman led a $ 17 billion bond offering by Apple Inc., the largest corporate and corporate bond transaction in history and Apple's first since 1996. Goldman Sachs managed both of Apple's previous bond offerings in the 1990s. Goldman Sachs is primarily responsible for Twitter's initial public offering in 2013. At that time, Goldman's position as the lead guarantor for Twitter was considered "one of the greatest technology gifts around". Goldman got about $ 22.8 million in fees from Twitter IPO; However, chief economist and strategist at ZT Wealth said, "Goldman being the first name on the S-1 has little to do with cost, it's about Goldman balancing itself as a serious leader and competing with Morgan Stanley's dominant position in technology."
In 2013, Goldman became the underwrote of the $ 2.913 billion Grand Parkway System Bond Toll Offer for the Houston, Texas region, one of the fastest growing regions in the United States. Bonds will be repaid from toll revenues. In June 2013, Goldman Sachs purchased a loan portfolio from Brisbane-based Suncorp Group, one of the largest banks and insurance companies in Australia. A $ 1.6 billion loan portfolio was purchased for A $ 960 million. On October 30, 2014, Goldman Sachs applied for a patent for a virtual currency called SETLCoin.
In August 2015, Goldman Sachs agreed to acquire GE General Capital, the online deposit platform of GE Capital Bank. Terms of the transaction are not disclosed, but the purchase includes US $ 8 billion of online deposits and US $ 8 billion certified deposit certificates. This purchase allows Goldman Sachs to access stable and cheap funding sources.
In April 2016, Goldman Sachs launched a direct bank, GS Bank. In October 2016, Goldman Sachs Bank USA began offering personal loans at no cost under the Marcus brand by Goldman Sachs. In March 2016, Goldman Sachs agreed to acquire financial technology startup Honest Dollar, a digital retirement savings tool established by American businessman, whurley, which focuses on helping small business employees and self-employed workers get affordable retirement plans. Terms of the deal were not disclosed. In May 2017, Goldman Sachs bought $ 2.8 billion of PdVSA 2022 bonds from the Central Bank of Venezuela.
In April 2018, Goldman Sachs purchased Clarity Money, a personal financial startup, to be added to Marcus's list by Goldman Sachs. The acquisition is expected to add more than 1 million customers to Marcus's business. Finally, the app will be renamed to Marcus.
Maps Goldman Sachs
Current operation
The company includes 4 business units, as follows:
Investment banking
In 2015, investment banking accounts for 21% of the company's total revenue. Investment banking includes financial advisors (mergers and acquisitions, investments, corporate defense activities, restructuring, and spin-offs) and underwriting (increase in capital, public offering, and private placement of equity and debt instruments).
Goldman Sachs is one of the leading advisory firms of M & A, often tops the Thomson Financial league table in transaction size. The company gained a reputation as a white knight in the mergers and acquisitions sector by advising clients on how to avoid an unfriendly takeover. During the 1980s, Goldman Sachs was the only major investment bank with a strict policy towards helping start a hostile takeover, which enhanced the company's reputation deeply amongst the management teams seated at the time.
Invest and lend
By 2015, investments and loans accounted for 16% of total corporate earnings.
Institutional Client Services
By 2017, the Institutional Client Service accounts for 37% of revenue.
This segment is divided into four divisions and includes Fixed Income (interest rate and credit products, mortgage-backed securities, insurance-related securities and structured products and derivatives), Currency and Commodities (equity and commodity trading), Equities (equity trading, derivatives equity, structured products, options, and futures contracts), and Main Investment (investment and investment banking funds). This segment consists of revenues and profits derived from trading activities of the Bank, both on behalf of its clients (known as the trading flow) and for its own account (known as ownership trading).
Investment management
By 2015, investment management accounts for 18% of total corporate earnings.
The Investment Management Division provides investment advisory and financial planning services and offers investment products (mainly through separately managed accounts and combined vehicles) across all major asset classes to diverse groups of institutions and individuals worldwide. This division provides clearing, financing, custody, securities loans, and reporting services to institutional clients, including hedge funds, mutual funds, and pension funds. Sharing generates revenue primarily in the form of spreads, or management and transaction costs.
GS Capital Partners
GS Capital Partners is Goldman Sachs private equity firm that invests on behalf of institutional clients. It has invested more than $ 17 billion in 20 years from 1986 to 2006. One of the most prominent funds is the GS Capital Partners V fund, which has more than $ 8.5 billion in equity for investment. On April 23, 2007, Goldman closed new investments in GS Capital Partners VI with $ 20 billion in capital commitments, including $ 11 billion from highly qualified institutional and high-value clients and $ 9 billion from Goldman Sachs and its employees. In 2016, the company announced it will raise up to $ 8 billion for new funds focused on corporate purchases, its first new fund since the 2007-2008 financial crisis.
Investment owned by Goldman Sachs funds includes American Casino & amp; Entertainment Property, 8.15% EagleBank, 5.2% of Chinese Shuanghui, Transunion, and 5% processors from CMC Markets.
Corporate citizenship
According to its website, Goldman Sachs has committed more than $ 1.6 billion to philanthropic initiatives since 2008.
Goldman Sachs reports its environmental and social performance in its annual Corporate Social Responsibility (CSR) Report that follows the Global Reporting Initiative (GRI) protocol.
Goldman Sachs Global Leader Program
During 2001-2009, the Goldman Sachs Global Leaders Program (GSGLP) identified 1,050 outstanding undergraduate students from over 100 universities and academies participating around the world, giving them "Global Leaders" in recognition of their academic excellence and leadership potential. Global Leaders study a wide range of fields ranging from economics to medical science. GSGLP alumni have won the scholarship of Rhodes, Truman, Marshall, Gates and Cambridge as well as Fulbright Fellowships.
Climate change policy
Goldman Sachs has received favorable press coverage for doing business and implementing internal policies related to reversing global climate change. The company has invested $ 54 billion in the clean energy sector since 2008, with the goal of investing $ 150 billion by 2025. Goldman Sachs has helped Tesla Motors generate $ 8 billion.
Employee contributions
Goldman Sachs Giving
In November 2007, Goldman Sachs established a donor advisory fund called Goldman Sachs Gives that donated to charitable organizations around the world, and provided an employee donation match of up to $ 20,000.
TeamWorks Community
The company's TeamWorks community is an annual global volunteer initiative that gives 25,000 Goldman employees a day off from May to August to volunteer on team-based projects held with local nonprofits. The initiative has worked on 1,600 projects for 900 organizations.
junior banker task force
In 2013, Goldman Sachs developed a "junior banker task force" of executives from around the world to improve the work environment and career development of analysts.
10,000 Women
In March 2008, Goldman launched 10,000 Women initiatives to train 10,000 women from developing countries in business and management.
10,000 Small Business
In November 2009, Goldman pledged $ 500 million to help small businesses in the 10,000 Small Business initiative. The initiative aims to provide 10,000 small businesses with assistance - from business and management education and mentoring to lending and philanthropic support. This network is offered through partnerships with national and local business organizations, as well as Goldman Sachs employees. In addition to Goldman CEO Lloyd Blankfein, Warren Buffett of Berkshire Hathaway and Harvard Business School professor Michael Porter, chairing the program advisory board.
Through this program, in 2015, Goldman Sachs donated $ 2 million to LaGuardia Community College in New York.
High School Investment
Goldman invested $ 16 million to help build a 45,000 square foot campus for 1,000 high school and high school students at Lincoln Heights in Los Angeles for the Alliance School-Ready Public Schools charter system. School opens in autumn 2012.
Social impact fund
During 2014, Goldman Sachs sponsors a $ 250 million Social Impact Fund. The refund, launched by Urban Investment Group, was linked to the success of various high value social projects, including affordable housing projects, pre-school education, and prisoner education projects designed to reduce recidivism. Between 2001 and 2014, over $ 3 billion of Goldman Sachs capital has been used for impact investments.
Social impacts
In August 2012, Goldman Sachs created the first social impact bonds in the United States. The "bond" is actually a $ 9.6 million loan to support the delivery of therapeutic services to children aged 16-18 who are imprisoned on Rikers Island. The loan will be repaid based on the actual and projected actual cost savings realized by the New York City Department of Improvement as a result of the expected depreciation of the recidivism.
In June 2013, Goldman Sachs launched its second social impact bond, borrowing up to $ 4.6 million for a childhood education program in Salt Lake City, Utah. The United Way of Salt Lake says that the investment deal, by Goldman Sachs and J.B. Pritzker, could potentially benefit up to 3,700 children over several years and save millions of dollars for state and local governments.
Controversies and legal issues
Goldman has been accused of various misconduct, including a general downturn in ethical standards, working with dictatorial regimes, comfortable relationships with the US federal government through a former employee's "door swivel", insider trading by some traders, and driving up commodity prices through futures speculation. Goldman denies any wrongdoing in these cases.
Role in the financial crisis 2007-2008
Goldman has been criticized after the 2007-2008 financial crisis, where some suspect that it misled its investors and profited from the collapse of the mortgage market. It was in Goldman's history that brought an investigation of the United States Congress, the US Department of Justice, and a lawsuit from the US Securities and Exchange Commission that resulted in Goldman paying $ 550 million settlement. Goldman Sachs "was criticized by the press and the public" despite the non-retail nature of his business that would normally keep him out of the public eye. Visibility and antagonism came from the $ 12.9 billion Goldman earned, more than any other company, from AIG bailout payments provided by the AIG bailout, $ 10 billion in TARP money received from the government (though the company paid back to the government), and a record $ 11.4 billion was set aside for employee bonuses in the first half of 2009. While all investment banks were scolded by congressional investigations, Goldman Sachs was subject to a "solo trial in front of the Permanent Senate Subcommitee Investigation" and a fairly critical report. In a widely publicized story in Rolling Stone, Matt Taibbi characterizes Goldman Sachs as "the great vampire squid" sucking money instead of blood, allegedly engineering "every major market manipulation since the Great Depression... of the stock technology to high gas prices "
In June 2009, after the company repaid TARP investment from US Treasury, Goldman made some of the biggest bonus payments in its history due to its strong financial performance. Andrew Cuomo, then New York Attorney General, questioned Goldman's decision to pay 953 employee bonuses of at least $ 1 million each after receiving TARP funds in 2008. The same period, however, CEO Lloyd Blankfein and 6 other senior executives opted to leave bonuses, states that they believe it is the right thing to do, given the "fact that we are part of an industry directly linked to ongoing economic difficulties".
Goldman Sachs stated that his net exposure to AIG is 'immaterial', and that the company is protected by hedging (in the form of CDS with other partners) and $ 7.5 billion in collateral. The company claims the cost of this hedge is more than $ 100 million. According to Goldman, both collateral and CDS will protect the bank from causing economic losses in the event of AIG bankruptcy (however, since AIG has been rescued and not allowed to fail, the hedge does not pay). CFO David Viniar stated that earnings associated with AIG in the first quarter of 2009 "rounded off to zero", and earnings in December was not significant. He went on to say that he was "baffled" by the government's interest and investors have shown in the bank's trading relationship with AIG.
Some people say it's wrong according to others that Goldman Sachs receives preferential treatment from the government by being the only Wall Street company that has participated in an important September meeting in the New York Fed, which decides AIG's fate. Much of this comes from inaccurate but often quoted articles of the New York Times. The article was later corrected to assert that Blankfein, CEO of Goldman Sachs, was "one of the chief executives of Wall Street at the meeting" (emphasis added). Bloomberg also reported that representatives from other companies were present at the AIG meeting in September. Furthermore, Goldman Sachs CFO David Viniar stated that CEO Blankfein never "met" with his predecessor and US Treasury Secretary Henry Paulson to discuss AIG; However, there are often phone calls between them. Paulson was not present at the September meeting in the New York Fed. Morgan Stanley was hired by the Federal Reserve to advise on the AIG bailout.
Sales of Dragon Systems to Lernout & amp; Hauspie despite accounting problems
In 2000, Goldman Sachs suggested the Dragon System on its sale to Lernout & amp; Hauspie from Belgium for $ 580 million in stock L & amp; H. L & amp; H then collapsed due to accounting fraud and its stock price declined significantly. Jim and Janet Baker, founders and together 50% of Dragon owners, filed suit against Goldman Sachs, accused of negligence, deliberate and negligent negligence, and fiduciary duty violations because Goldman did not warn the Dragon or Bakers accounting problems of the acquirer, L & H. On January 23, 2013 a federal jury dismisses Bakers' claims and finds Goldman Sachs irresponsible to Bakers.
Stock price manipulation
Goldman Sachs was indicted for repeatedly issuing research reports with ever-increasing financial projections for Exodus Communications and Goldman Sachs accused of giving Exodus the highest stock rating even though Goldman knew Exodus did not deserve that rating. On July 15, 2003, Goldman Sachs, Lehman Brothers and Morgan Stanley were charged for artificially inflating the share price of RSL Communications by issuing false or misleading statements in the research analyst's report, and paying $ 3,380,000 for completion.
Goldman Sachs was accused of requesting a kickback from an institutional client who made a huge profit reversing shares that Goldman deliberately undervalued in an underwriting initial public offering. The document under the seal in a decade of lawsuit regarding IPO eToys.com in 1999 but was released accidentally to the New York Times showed that Goldman's managed IPO was below price and Goldman asking the client can to profit from the price to increase business with it. Clients are willing to meet these demands because they understand that it is necessary to participate in the undervalued IPO further. Companies became public and their original consumer shareholders were both tricked by this practice.
Use of offshore tax havens
A 2016 report by Citizens for Tax Justice states that "Goldman Sachs reported having 987 overseas subsidiaries tax-exempt, 537 of whom are in the Cayman Islands even though they do not operate a legitimate office in the country, according to the website itself. officially has $ 28.6 billion offshore. "The report also notes that some banks and other US companies use the same tax avoidance tactics.
In 2008, Goldman Sachs had an effective tax rate of just 1%, down from 34% a year earlier, and its tax liabilities decreased to $ 14 million in 2008, compared to $ 6 billion in 2007. Critics argue that Goldman Sachs reduction tax rates achieved by transferring its income to subsidiaries in low-or no-tax countries, such as the Cayman Islands.
Involvement in the European sovereign debt crisis
Goldman is being criticized for his involvement in the European sovereign debt crisis of 2010. Goldman Sachs is reported to have systematically helped the Greek government cover up the facts about its national debt between 1998 and 2009. In September 2009, Goldman Sachs, among others, created a credit default swap index (CDS ) specifically to cover the risk of Greece's national debt. Greek national bond interest rates soared, leading the Greek economy very close to bankruptcy in 2010 and 2011.
The relationship between Goldman Sachs and European leadership positions is another source of controversy. Lucas Papademos, the former Greek prime minister, runs the Central Bank of Greece at a time of controversial derivative transactions with Goldman Sachs allowing Greece to hide its debt. Petros Christodoulou, General Manager of the Public Debt Management Agency of Greece is a former employee of Goldman Sachs. Mario Monti, the former prime minister and finance minister of Italy, who led a new government that took over after Berlusconi's resignation, is an international advisor to Goldman Sachs. Otmar Issing, a former Bundesbank board member and Executive Board of the European Bank also suggested Goldman Sachs. Mario Draghi, head of the European Central Bank, is a former managing director of Goldman Sachs International. AntÃÆ'³nio Borges, Head of the European Department of International Monetary Fund in 2010-2011 and responsible for most of the privatization of the company in Portugal since 2011, is the former Vice Chairman of Goldman Sachs International. Carlos Moedas, a former employee of Goldman Sachs, is the Secretary of State for the Portuguese Prime Minister and Director of ESAME, an institution established to monitor and control the implementation of structural reforms agreed by the Portuguese and troika governments comprising the European Commission, the European Central Bank and the International Monetary Fund. Peter Sutherland, former Irish Attorney General is non-executive director of Goldman Sachs International.
Employee view
In March 2012, Greg Smith, then head of the Goldman Sachs equity derivatives trading business in Europe, Middle East and Africa (EMEA), resigned from his position through a critical letter printed as an op-ed at The New York Times . In the letter, he attacked CEO Goldman Sachs and Chairman Lloyd Blankfein for losing touch with corporate culture, which he described as "a secret sauce that makes this place great and allows us to earn our clients' trust for 143 years." Smith says that advising clients "to do what I believe is right for them" is becoming increasingly unpopular. Instead of a "toxic and destructive" environment where "client interests continue to be ruled out," senior management describes clients as "muppets" and peers loudly talking about "ripping off their clients". In return, Goldman Sachs said that "we will only succeed if our clients are successful", claiming "this fundamental truth lies at the heart of how we do ourselves" and that "we do not think [Smith's comments] reflect the way we conduct our business. "Later that year, Smith published a book titled Why I left Goldman Sachs .
According to the research itself after op-ed printing, almost all claims made in Smith's Op-Ed-about Goldman Sachs burner turned into "strangely short" on the evidence. The New York Times has never issued a retraction or admitted an error in the judgment that initially published Smith's publication.
In 2014 a book by former Goldman portfolio manager Steven George Mandis published titled What Happened to Goldman Sachs: The Insider Story of Organizational Drift and Unwanted Consequences . Mandis also has a PhD dissertation on Goldman at Columbia University. Mandis left in 2004 after working for the company for 12 years. In an interview, Mandis said, "You read about Goldman Sachs and whether the bank is the best or the bank is the worst, this is not one of those books - everything is never black or white." According to Mandis, there is "organizational shift" in the evolution of the company.
In 2010, two former female employees filed suit against Goldman Sachs for gender discrimination. Cristina Chen-Oster and Shanna Orlich claim that the firm fosters "a culture of sexual harassment and uncorrected sexual assault" that causes women to be "sexual or neglected". The lawsuit cites cultural discrimination and pay including frequent client trips to strip clubs, client golf events that do not involve female employees, and the fact that women's vice presidents make 21% less than their male counterparts.
Suggestions for California short bonds borne by the company
On November 11, 2008, the Los Angeles Times reported that Goldman Sachs has secured $ 25 million from its California bonds, and advised other clients to reduce the bonds. While some journalists criticize contradictory actions, others point out that the opposite investment decisions made by the underwriting and trading sides of banks are normal and in line with Chinese wall regulations, and in fact critics have demanded an increase in independence between guarantee and trade.
Personnel "revolving door" with US Government
During 2008, Goldman Sachs received criticism for a clear revolving relationship, in which employees and consultants have moved in and out of high-level US Government positions, creating a potential conflict of interest. A large number of former Goldman Sachs employees in the US government have jokingly called "Government Sachs". Former Treasury Secretary Paulson is a former CEO of Goldman Sachs. Additional controversy attended the selection of former Goldman Sachs lobbyist Mark A. Patterson as chief of staff for Treasury Secretary Timothy Geithner, despite President Barack Obama's campaign promise that he would limit lobbyist influence in his government. In February 2011, Washington Examiner reported that Goldman Sachs was "the company where Obama raised the most money in 2008" and that "CEO Lloyd Blankfein has visited the White House 10 times."
Insider trading case
In 1986, Goldman Sachs investment banker David Brown pleaded guilty to allegations of passing information in on a takeover deal eventually granted to Ivan Boesky. In 1989, Robert M. Freeman, who was a senior Partner, who was the Head of Arbitrage Risk, and who was a protégé © © Robert Rubin, pleaded guilty to insider trading, to his own account and to corporate accounts.
The case of people trading in Rajat Gupta
In April 2010, director Goldman Rajat Gupta was named in the case of insider trading. It said Gupta had "tip on hedge-fund billionaires," Raj Rajaratnam of the Galleon Group, about Berkshire Hathaway's $ 5 billion investment in Goldman during the 2007-2008 financial crisis. According to the report, Gupta had told Goldman a month before his involvement became public that he would not seek re-election as a director. In early 2011, with pending Rajaratnam criminal proceedings commencing, the Securities and Exchange Commission of the United States (SEC) announced civil suits against Gupta which included Berkshire investments as well as quarterly earnings information from Goldman and Procter & amp; Gamble (P & amp; G). Gupta is a board member at P & amp; G until voluntarily resigned on the day of the SEC announcement, after the indictment was announced. "Gupta was an investor in several Galleon hedge funds when he delivered the information, and he had other business interests with Rajaratnam that were potentially lucrative.... Rajaratnam uses information from Gupta to profit illegally in hedge fund trading.. Information about Goldman making Rajaratnam $ 17 million richer.... The Procter & Gamble data creates an illegal profit of over $ 570,000 for a managed Galleon fund by others, the SEC said. "Gupta is said to have" vehemently rejected SEC's allegations ". He is also a member of the board of AMR Company.
Gupta was found guilty in June 2012 of alleged insider trading from the Galleon Group case on four counts of conspiracy crime and securities fraud. He was sentenced in October 2012 to two years in prison, an additional year in a supervised release and ordered to pay a $ 5 million fine.
Unlike many investors and investment bankers, Goldman Sachs anticipates the subprime mortgage crisis that grew in 2007-8. Some of its traders became "bearish" in the housing boom starting in 2004 and developing mortgage-related securities, originally intended to protect Goldman from losses of investment in the housing market. In late 2006, Goldman's management changed the company's overall position in the mortgage market from positive to negative. When the market began to decline, Goldman "created more of these securities", no longer just hedging or fulfilling investors' orders, but, according to business journalist Gretchen Morgenson, "allowing for big profits" from mortgage default and Goldman was "using CDO for placing enormous negative bets that are not primarily for hedging purposes ". The authors Bethany McLean and Joe Nocera stated that "the company then insisted that it was just a 'market maker' in this transaction - implying that it does not have a share in the economic performance of the securities it sells to clients - being less true overtime.
The investment is called synthetic CDO because unlike regularly guaranteed debt obligations, the principal and interest they pay does not come from mortgages or other loans, but from premiums to pay insurance against mortgage defaults - insurance known as "credit default swaps". Goldman and several other hedge funds hold "short" positions in securities, paying premiums, while investors (insurance companies, pension funds, etc.) receive premiums are "long" positions. The homes are responsible for paying "claims" insurance for Goldman and any other shorts if mortgages or other loans fail. Through April 2007 Goldman published more than 20 CDOs in the "Abacus" series for a total of $ 10.9 billion. All with Goldman packed, sold, and shorted a total of 47 synthetic CDOs, with an overall face value of $ 66 billion between July 1, 2004 and May 31, 2007.
But while Goldman is praised for his foresight, some argue the stakes against securities made give him an interest in their failure. This effect is very bad for long-term investors and in April 2010, at least US $ 5 billion from securities either carry a "garbage" rating, or a default. A CDO examined by critics who bet Goldman, but also sold to investors, is a $ 800 million Hudson Mezzanine CDO issued in 2006. In a Senate Senate Subcommittee hearing, Goldman executives stated that the company was trying to issue subprime securities from his books. Can not sell it directly, it includes those in the underlying securities of the CDO and takes the short side, but critics of McLean and Nocera complain the CDO prospectus does not explain this but describes its content as "'Street-derived assets', making it sound as though Goldman randomly selecting securities, rather than specifically creating a fence for his own book. "The CDO did not perform well and in March 2008 - just 18 months after the problem - so many borrowers have failed that the holder of the paid warrant" is about US $ 310 million for Goldman and others who bet against him ". The head of European fixed income sales, Goldman, bemoaned an email published by the Permanent Senate Subcommittee on Investigations, "a really bad feeling across European sales of some trades we do with clients" who have invested in CDOs. "The damage that has happened to our franchise is very significant."
Critics have also complained that while Goldman investors are big banks and big respected banks, at least some of the CDO's securities and their losses are filtered into small public institutions - "the money used to manage schools and repair holes and fund city budgets ". For example, an investor at Abacus, IKB Bank, "created a structured investment vehicle called Rhinebridge." Rhinebridge, like other SIVs, issued debt which was then used to buy mortgage and CDO-based securities such as Abacus. bought by among others, King County, Washington, who manages the money on behalf of a hundred other public institutions. This is the money that is used to run the school and fix the holes and fund the city budget.... For all claims then Goldman that this only deals with the most sophisticated investor, the fact remains that investors can become fiduciary, invest in the names of school districts, fire departments, pensioners, and municipalities across the country. "
IKB "paid its share of the deal with the money collected from relatively unsophisticated investors including King County in Washington State.In 2007, the county bought US $ 100 million of commercial paper, short-term debt, from Rhineland, a special fund made by IKB which ultimately resulted in nearly US $ 150 million of securities made by the Goldman vehicle known as the Abacus 2007-AC1... [King County also made] US $ 50 million in purchases... in 2007 from other IKB funds, dubbed Rhinebridge, the county lost $ 19 million when Rhinebridge collapsed - and an additional US $ 54 million when other similar funds failed.Around 100 regional agents in the Seattle area, including some related to libraries and schools, saw their budgets cut as a result. public statements, Goldman claims that he is only doing restrictions and does not expect the CDO to fail. He also denied that his investors were not aware of Goldman's bet against the products he sold to them. There is a complicated relationship between Goldman Sachs traders, Jonathan M. Egol, syntactically guaranteed debt obligations, or C.D.O., ABACUS, and asset-backed securities index (ABX). Goldman is also suspected of trying to pressure credit rating agency Moody's to give its product a higher rating than it should.
civil fraud lawsuit SEC 2010
In April 2010, the Securities and Exchange Commission (SEC) charged Goldman Sachs and one of its vice presidents, Fabrice Tourre, with securities fraud. The SEC alleged that Goldman had told buyers of a synthetic CDO, a kind of investment, that the underlying asset in the investment had been chosen by an independent CDO manager, ACA Management. In fact, Paulson & amp; The hedge fund co-want to bet on investments has played an "important role" in the election, and the securities package turned out to be "one of the worst performing mortgage transactions of the housing crisis" because "less than a year after the deal is over, 100% of the bonds are selected for Abacus has been downgraded ".
Certain synthetic CDOs used by the SEC's 2010 fraud lawsuit for Goldman with misleading investors are called Abacus 2007-AC1. Unlike many Abacus securities, 2007-AC1 did not have Goldman Sachs as a short seller, in fact, Goldman Sachs lost money on the deal. The position was taken by a customer (John Paulson) who hired Goldman to issue security (according to SEC complaint). Paulson and his employees voted 90 BBB-rated mortgage bonds that they believed were most likely to lose value and were the best bet to buy insurance. Paulson and the CDO manager, ACA Management, worked on a portfolio of 90 bonds that would be insured (ACA allegedly unaware of Paulson's short position), reaching an agreement by the end of February 2007. Paulson paid Goldman about US $ 15 million for his work on the deal. Paulson eventually earned $ 1 billion in profits from short-term investments, gains from the losses of investors and their insurance companies. These are mainly IKB Deutsche Industriebank (losses of US $ 150 million), and investors and other insurance companies of US $ 900 million - ACA Financial Guaranty Corp., ABN AMRO and Royal Bank of Scotland.
The SEC alleges that Goldman "materially misrepresents and omits the facts in the disclosure document" about financial security, including the fact that it "allows clients who bet against the mortgage market [hedge fund manager Paulson & Co.] to influence which mortgage effects which is incorporated into the investment portfolio, while informing other investors that securities are selected by an independent, objective third party, "ACA Management. The SEC further states that "Tourre also misleads the ACA to believe... that Paulson's interests in the collective sect process are the same as the ACA, when in fact Paulson's interests are very contradictory."
In response, Goldman issued a statement saying that SEC's indictment was "unfounded in law and fact", and in later statements declared that it was not compiling a portfolio for losing money, that it had given broad disclosure to long investors on the CDO, that it had lost $ 90 million, that the ACA chose the portfolio without Goldman suggesting Paulson is a long investor, that he did not disclose the buyer's identity to the seller and vice versa because it is not a normal business practice for the market maker, and that ACA itself is the largest buyer of the Abacus pool, US $ 951 million. Goldman also stated that any investor losses result from the overall negative performance of all sectors, not from certain security in the CDO. While some journalists and analysts have called this statement misleading, others believe that Goldman's defense is strong and the SEC case is weak.
Some securities lawyers such as Duke University law professor James Cox believe the lawsuit was appropriate because Goldman was aware of the relevance of Paulson's involvement and took steps to shrink it. Others, including Lawneys Wayne University Law School law professor Peter Henning, noted that large buyers are sophisticated investors able to accurately assess the risks involved, even without the knowledge of the parts played by Paulson.
Goldman Sachs criticism shows that Paulson went to Goldman Sachs after being rejected for ethical reasons by another investment bank, Bear Stearns whom he asked to build a CDO. Ira Wagner, head of the Bear Stearns CDO Group in 2007, told the Financial Crisis Investigations Commission that asking short investors to choose a warrant referenced as a serious conflict of interest and Paulson's proposed agreement structure encouraged Paulson to choose the worst assets.. Describing the reason Bear Stearns, a writer compared the deal with "a boss who asks the football owner to put a star quarterback to increase his stakes chance against the team." Goldman claims a loss of $ 90 million, critics argue it can not (not for lack of trying) to release its position before the underlying underlying defaulted securities.
Critics also question whether the deal is ethical, even if it is legal. Goldman has many advantages over its long-term customers. According to McLean and Nocera there are dozens of securities insured on the CDO - for example, another ABACUS - it has 130 credits from different mortgage initiators, commercial mortgage-backed securities, Sallie Mae debt, credit cards, etc. Goldman buys a mortgage to create securities, which makes it "far more likely than his client to have initial knowledge" that the housing bubble deflates and the originator of a mortgage such as New Century begins to falsify documentation and sells mortgages to customers who can not afford mortgage-holder returns - smooth on at least one prospectus ABACUS warns long-time investors that 'Buyer Buyers' (Goldman) 'may have information, including material, non-public information' that is not reserved for long investors.
According to an article in the Houston Chronicle, critics are also concerned that Abacus could damage the US position "as a safe harbor for world investors" and that "the involvement of European interests as a loser in this game allegedly still has attracted the attention of political leaders in the region, especially British Prime Minister Gordon Brown, who accused Goldman of "moral bankruptcy." This is, in short, a great global story... What does Goldman Sachs do with illegal abacus investment vehicles? ,... But there is no need for judges and jurors to conclude that, besides the law, this is just wrong. "On July 15, 2010, Goldman quit the court, agreeing to pay the SEC and investors US $ 550 million, including $ 300 million to the US government and $ 250 million for investors, one of the biggest penalties ever paid by Wall Street companies. In August 2013 Tourre was found responsible on 6 out of 7 counts by a federal jury. The company does not recognize or refuse to make a mistake, but acknowledges that its marketing materials for investment "contain incomplete information", and agrees to amend some of its business practices regarding mortgage investments.
Defense turre tester ABACUS
The Goldman 2010 settlement does not include allegations against Goldman vice president and salesman for ABACUS, Fabrice Tourre. Tourre failed to seek the dismissal of the lawsuit, which was later heard in 2013. On August 1, a federal jury found that Tourre was responsible for six of seven charges, including that he misled investors about mortgage deals. He was found not responsible for allegations that he intentionally made a statement that was untrue or misleading.
Alleged commodity price manipulation
The provisions of the 1999 deregulation financial law, the Gramm-Leach-Bliley Act, allow commercial banks to enter into any business activity that "complements financial activity and pose no substantial risk to the security or health of a depository or financial system generally." since the legislation passed, Goldman Sach and other investment banks (Morgan Stanley, JPMorgan Chase) have branched out into owners of various companies including raw materials, such as food products, zinc, copper, tin, nickel and, aluminum.
Some critics, such as Matt Taibbi, believe that allowing companies to "control the supply of important physical commodities, and also trade financial products that may be related to those markets," is "like letting casino owners who take books in NFL games for a week also train all team on Sunday. "
Former Goldman Sachs trader Matthew Marshall Taylor was convicted of hiding an illegal trade of $ 8.3 billion involving derivatives on the S & amp; P 500 by making "some fake entries" into the Goldman trading system. When the management of Goldman Sachs said
Source of the article : Wikipedia
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