Meet God, he happens to work with Goldman Sachs

Mon Nov 9 20:49:24 CET 2009

REPLY TO: D66 at nic.surfnet.nl

Komt me allemaal redelijk bekend voor.
Toch wel eng dat 1 bedrijf overal een vrij grote vinger in de pap heeft...

Ernst Debets/
Zaanstad

-----Oorspronkelijk bericht-----
Van: owner-d66 at nic.surfnet.nl [mailto:owner-d66 at nic.surfnet.nl] Namens Cees Binkhorst
Verzonden: zondag 8 november 2009 23:31
Aan: Discussielijst over D66
Onderwerp: Meet God, he happens to work with Goldman Sachs

REPLY TO: D66 at nic.surfnet.nl

Sommigen onder ons zijn geroepen, anderen niet ;)

Groet / Cees

http://www.timesonline.co.uk/tol/news/world/us_and_americas/article6907681.ece

November 8, 2009 
I'm doing 'God's work'. Meet Mr Goldman Sachs
The Sunday Times gains unprecedented access to the world's most
powerful, and most secretive, investment bank
John Arlidge

Number 85 Broad Street, a dull, rust-coloured office block in lower
Manhattan, doesn’t look like a place to stop and stare, and that’s just
the way the people who work there like it. The men and women who arrive
in the watery dawn sunshine, dressed in Wall Street black, clutching
black briefcases and BlackBerrys, are very, very private. They walk
quickly from their black Lincoln town cars to the lobby, past, well,
nothing, really. There’s no name plate on the building, no sign on the
front desk and the armed policeman stationed outside isn’t saying who
works there. There’s a good reason for the secrecy. Number 85 Broad
Street, New York, NY 10004, is where the money is. All of it. 

It’s the site of the best cash-making machine that global capitalism has
ever produced, and, some say, a political force more powerful than
governments. The people who work behind the brass-trim glass doors make
more money than some countries do. They are the rainmakers’ rainmakers,
the biggest swinging dicks in the financial jungle. Their assets total
$1 trillion, their annual revenues run into the tens of billions, and
their profits are in the billions, which they distribute liberally among
themselves. Average pay this recessionary year for the 30,000 staff is
expected to be a record $700,000. Top earners will get tens of millions,
several hundred thousand times more than a cleaner at the firm. When
they have finished getting "filthy rich by 40", as the company saying
goes, these alpha dogs don’t put their feet up. They parachute into some
of the most senior political posts in the US and beyond, prompting
accusations that they "rule the world". Number 85 Broad Street is the
home of Goldman Sachs. 

The world’s most successful investment bank likes to hide behind the
tidal wave of money that it generates and sends crashing over Manhattan,
the City of London and most of the world’s other financial capitals. But
now the dark knights of banking are being forced, blinking, into the
cold light of day. The public, politicians and the press blame bankers’
reckless trading for the credit crunch and, as the most successful bank
still standing, Goldman is their prime target. Here, politicians and
commentators compete to denounce Goldman in ever more robust terms —
"robber barons", "economic vandals", "vulture capitalists". Vince Cable,
the Lib Dem Treasury spokesman, contrasts the bank’s recent record
results — profits of $3.2 billion in the last quarter alone — and its
planned bumper bonus payments with what has happened to ordinary
people’s jobs and incomes in 2009. 

It’s even worse in the US. There, Rolling Stone magazine ran a story
that described Goldman as "a great vampire squid wrapped around the face
of humanity, relentlessly jamming its blood funnel into anything that
smells like money". In his latest documentary, Capitalism: A Love Story,
Michael Moore drives up to 85 Broad Street in an armoured Brinks money
van, leaps out carrying a sack with a giant dollar sign on it, looks up
at the building and yells: "We’re here to get the money back for the
American people!"

Goldman’s reputation is suddenly as toxic as the credit default swaps
and other inexplicably exotic financial instruments it used to buy with
glee. That’s bad for the one thing it values more than anything else:
business. Being the prime target for popular and political outrage could
put Goldman first in line for draconian new regulation. So it has,
reluctantly, decided that the time has come to speak out, to fight its
corner. That’s how, on one of those bright autumnal New York mornings
when anything seems possible — even an invitation to break bread with
the masters of the universe — I find myself walking past the security
guard who held up Michael Moore and into the building with no name. 

"Aha! You catch us plotting in real time," says Lloyd Blankfein,
breaking away from a cabal of senior executives discussing his trip to
Washington the previous day. Blankfein, 55, Goldman’s chairman and chief
executive, is wearing a grey suit with a jaunty Hermès tie with little
red bicycles on it. In his hand, he’s carrying one of those cups of
coffee that look bigger than the human stomach. Maybe it’s the caffeine,
maybe it’s the tie — a birthday present from his daughter — but he’s in
a remarkably jolly mood for a man everyone seems to hate. "It’s like a
safari here," he jokes. "You’ve come in to look at the animals." 

Blankfein may be Wall Street’s Sun God, but, with the economic outlook
stormy, he doesn’t want to advertise it, so the merest hint of a status
symbol or — horror! — ostentation is airbrushed out of his life,
publicly, at least. Take his office on the 30th floor. The chairs are
the same ones that were there when he became CEO three years ago. There
are none of the $87,000 handmade rugs or $5,000 wastepaper baskets of
Wall Street lore. There’s no sign of irrational exuberance. Only coffee,
which arrives cold. It sets just the right tone for the job in hand. The
grand wizard of Wall Street is steeling himself for the hardest sell of
his life: he’s here to argue for good ol’ capitalism, for investment
banks and for Goldman Sachs. 

Luckily for him and his firm, he’s a damn good salesman. He starts with
a little humility. He understands that "people are pissed off, mad, and
bent out of shape" at bankers’ actions. Goldman played its part in the
meltdown that almost destroyed the global financial system. It, like
most other banks, lent too much money, made its first quarterly loss for
more than a decade last year and ended up taking bail-out cash from
Washington. "I know I could slit my wrists and people would cheer," he
says. But then, he slowly begins to argue the case for modern banking.
"We’re very important," he says, abandoning self-flagellation. "We help
companies to grow by helping them to raise capital. Companies that grow
create wealth. This, in turn, allows people to have jobs that create
more growth and more wealth. It’s a virtuous cycle." To drive home his
point, he makes a remarkably bold claim. "We have a social purpose." 

Social purpose? Those who have lost their jobs or seen their pay slashed
thanks to bankers who flogged dodgy mortgages and dreamt up investments
so complex not even they understood them, would gladly tell him where to
stick his social purpose. But the problem is, Blankfein is a good
advertisement for wealth creation. His own. He is no scion of privilege,
dispensing plummy-voiced homilies to raw capitalism from his 30th-floor
eyrie. Born in a tough neighbourhood in the Bronx, the son of a postal
worker and a receptionist, he was the first in his family to go to
college and used financial aid to go to Harvard. 

Even though he proudly pays himself more in a year than most of us could
ever dream of — $68m in 2007 alone, a record for any Wall Street CEO, to
add to the more than $500m of Goldman stock he owns — he insists he’s
still "a blue-collar guy". 

But what about the charge sheet? Bankers brought the world to the brink
of bankruptcy and instead of doing the decent thing and jumping out of
the nearest window, they turned up cap in hand to governments to hoover
up taxpayers’ money to save their skin. Now, just one year on, they are
carrying on as if nothing has happened, gambling, and winning,
handsomely, with our cash. Goldman’s profits in the second quarter were
a record $3.4 billion. Most of the money is being made in trading in
bonds, currencies and commodities. 

Goldman is coining it again for two reasons. First, global markets are
booming — up 50% from the credit-crunch lows, as new money, much of it
from governments, has gushed into the financial system. Second, with
Lehman Brothers and Bear Stearns off the street, Merrill Lynch a
crippled shadow of its former self, and neither Citigroup nor UBS the
forces of old, Goldman has a bigger slice of a growing pie. "We didn’t
f*** up like the other guys. We’ve still got a balance sheet. So, now
we’ve got a bigger and richer pot to piss in," is how one Goldman banker
puts it. Small wonder the bank is on course to set aside over $20
billion for salaries and bonuses. 

So far, so lucrative. But isn’t it simply unfair? Isn’t Goldman acting
as the modern equivalent of war-time profiteer, taking advantage of
global crisis and emergency government action to mint millions? Even the
veteran financier George Soros says the big profits made by Wall Street
banks are "hidden gifts" from the state. 

Blankfein dismisses any suggestion that Gold-man needed to be bailed
out, and, by extension, rejects any notion that the firm is now
profiting from public support. Sure, he took $10 billion from
Washington’s Troubled Asset Relief Program (Tarp). But the bank has
since repaid the cash, with healthy interest — 23%. Goldman also
bene-fited from the federal bail-out of the huge US insurance firm AIG.
Goldman had bought $20 billion worth of insurance from AIG and received
billions of dollars — perhaps as much as $13 billion — when Washington
pumped $90 billion into the stricken giant. But Blankfein insists
Goldman was "hedged" against any AIG losses, in the best possible way —
with cash. So even if AIG had gone under, Goldman would not have
suffered. Critics say that had AIG gone bust, the entire financial
system could have collapsed, taking Goldman with it. What’s more, at the
height of the crisis, the Federal Reserve broke with an 80-year-old
tradition and let Goldman turn itself from a pure investment bank into a
bank holding company. This meant it could borrow funds at the same cheap
rate as commercial banks for as long as it wanted. Blankfein says
Goldman changed status not for the money, but because it had become
clear, following the collapse of Bear Stearns and Lehman, that the
market had lost faith in the ability of the US Securities and Exchange
Commission to regulate investment banks. Being regulated by the central
bank, the Federal Reserve, would help to restore confidence in the
financial system as a whole. 

Whatever the truth behind the bail-out, not even the smartest Goldmanite
can deny that it is only thanks to government aid that the bank still
has a financial system to work with. Washington has bolstered the US
economy and banks to the tune of $12 trillion. Does Blankfein not
acknowledge that it is maddening for most of us to watch Goldman gobble
up so much cash while we struggle? Quite the opposite. He insists we
should be celebrating his bank’s success, not condemning it. "Everybody
should be, frankly, happy," he says. Can he be serious? Deadly.
Goldman’s performance, he argues, is the firmest indication of a nascent
economic recovery that will benefit not just him and his firm but all of
us. "The financial system led us into the crisis and it will lead us
out."

Blankfein goes on to say something equally audacious. We should welcome
the return of titanic paydays at Goldman. Goldman is exempt from
President Barack Obama’s cap on bonuses because it has paid back
bail-out cash. Paying top dollar to recruit and retain the best bankers
won’t sink the system, he claims, but save it. Performance-related pay
is a guarantee of high-quality responsible banking. "If you examine our
practices on compensation, you will see a complete correlation
throughout our history of having remuneration match performance over the
long term. Others made no money and still paid large bonuses. Some are
not around any more. I wonder why." 

Many disagree, arguing that in the new, flatter economic landscape,
megabucks pay is no longer necessary. Lucian Bebchuk, professor of law,
economics and finance at Harvard Law School, says: "These days, it’s
easier for banks to keep their employees from being raided. The outside
opportunities are less attractive now than in 2007." 

Okay, forget bail-outs, forget bonuses, forget all the money stuff, if
you can. Surely Blankfein cannot dodge the playwright David Hare?
Through his latest work, The Power of Yes, which tackles the issue of
the credit crunch, Hare argues that it is "blackmail" to say that there
cannot be a recovery unless we let bankers get on with what they have
always done and pay themselves squillions. It’s like what the miners did
in the 1970s, only this time the National Union of Mineworkers is the
City and Wall Street. Blankfein has no time for such soft talk. Bankers
are not miners. "I’ve got news for you," he shoots back, eyes narrowing.
"If the financial system goes down, our business is going down and,
trust me, yours and everyone else’s is going down, too."

Like a patient who has survived a near-death experience, for Blankfein
the credit crunch has rekindled his innate passion for moneymaking.
Talking to him is like talking to a man who has greenbacks, not blood,
running through his veins. He believes he’s good at what he does and
what he does is good. He has his supporters. Vanity Fair awarded him the
coveted No 1 spot in its 2009 New Establishment list, its league table
of the 100 top power players in the information age, above such
luminaries as the Apple boss, Steve Jobs, and the Google founders,
Sergey Brin and Larry Page. Others, such as the New York Times columnist
Andrew Ross Sorkin, argue that the public "cannot have it both ways". At
the height of the crisis last year, Sorkin recalls, "many crossed their
fingers, hoping Goldman and the rest of Wall Street would be saved to
halt the downward spiral. But now when the banks finally get back on
their feet, we want them to fall flat again". 

Like it or loathe it, one thing is unarguable: "Tenacious G" does seem
to draw the winning hand in good times and, as we have seen recently, in
bad. It begs one simple question. How? What’s in the special sauce? To
try to find the answer, you have to leave Blankfein’s office and take
the lift to the 17th floor. On the way, you hear investment bankers,
traders, "strats" — strategists — and "quants", the mathematical lizard
brains who dream up whizzy trading formulae, discussing "interest rate
swaps", "no credit defaults", "exotic and vanilla options", "bid-ask
spreads", "bunds", "bobls" and goodness knows what else. You can’t see
the cash whizzing around 85 Broad Street as you walk through the place,
but you can feel it being shuffled 24 hours a day between central,
commercial and investment banks, vast companies, Russian oligarchs,
Middle Eastern movers and sheikhers, Texas oilmen and secretive
billionaires in Bermuda and the Cayman Islands. 

In an office with an ink stain on the carpet, sits Liz Beshel. She’s the
first ingredient of Goldman’s witches’ brew. The firm only hires the
very, very brightest and they don’t come much sparkier than Beshel. The
40-year-old single mother talks so fast, and with such insight into
financial markets, you practically need a degree from Harvard Business
School to keep up. She was snapped up by Goldman straight from college
and managed to get an executive MBA from Columbia University, New York,
"on Fridays". As you do. She rose quickly though investment banking to
become the firm’s youngest-ever global treasurer, the keeper of the
cash. Today, every pound the firm invests, every yen it borrows, every
dollar that flows on and off its balance sheet, is under her watchful
eye, all $1 trillion a day of it. How much cash does the bank have right
now? I ask. "$164.2 billion in cash or cash equivalents," she replies
without pausing for thought or breath. 

It is thanks to rat-tat-tat intellects like Beshel that Goldman Sachs
not only has so much money, but tends to be good at hanging onto it.
Staff rigorously price — "mark to market", in the jargon — the bank’s
assets every day, down to the last cent, and forensically examine daily
profit and loss. This helps the bank to see market trends clearly and
early and, it believes, to manage risk better than most other banks. "We
think we make better decisions," says Beshel. There’s evidence to
support the claim. Take the sub-prime mortgage sector, the ticking toxic
debt bomb that detonated the economic crisis. One year before bad home
loans brought down Lehman and Bear Stearns, forced shotgun marriages of
Merrill Lynch to Bank of America and HBOS to Lloyds, and made Royal Bank
of Scotland a national joke, Goldman’s daily valuations revealed it had
suffered modest losses in its mortgage holdings for just over a week. At
most banks, the losses might have gone unnoticed or been dismissed as a
rounding error, but Goldman convened a meeting of senior bankers to try
to find out what was going on. Even though the housing and mortgage
markets were still buoyant, the bank did not like what it saw and began
reducing its exposure. When the credit crunch hit, its losses in the
mortgage sector were only $1.7 billion, lower than any other big
investment bank. UBS lost $58 billion. 

Being smarter than the average bear is one thing, but to be a Goldmanite
you have to work harder than the average bear too. Ask Sarah Smith, 50,
a former convent schoolgirl from Bromley in Kent who left Britain to
become Goldman’s chief accountant. "It’s a 24/7 culture," she says.
"When you’re needed, you’re here. And if you’re needed and you’re not
answering your phone, you won’t be needed very long." 

Smith, whose office is a BlackBerry throw away from the Embassy Suites
hotel where Goldman staff go for an hour or two’s sleep when they have
been up so long that they start sleepwalking along the hallways, only
had a few days’ holiday last year. How many weeks off does she get a
year? 

"I don’t know. No one really knows how much holiday you get because
nobody ever takes it all." 

The big brains and brutal work ethic help to give Goldman the edge when
it comes to snagging the best, and richest, clients. One veteran Goldman
banker explains: "You are programmed at an early stage to go out more
than the other guy, to see more people — clients, hedge funds or private
equity guys." 

Goldman staffers are also trained to "brain pick" contacts and clients
harder than the other guy. "You ask what’s their best trade. How do they
see the market," says one. "You offer something in return, but you
always come back with something. Then you feed it to colleagues who go
to work trying to use the information to make money." Other banks do not
get such good information, and what information individual bankers do
get, they tend not to share because they regard it as power they can use
to benefit individually. "Goldman is not like that," the veteran banker
says. "It’s a team effort." Or, as one rival banker puts it, "They’re a
clever gang — of thugs."

Dane Holmes, 39, Goldman’s head of investor relations, is a 6ft 8in
tall, 260lb former college basketball player. He looks like he could run
straight through opponents — hell, through brick walls! — if he wanted
to. But, he says: "That’s not the way Goldman works. You can have a
great career in banking as an individual, but it won’t be here. The
system weeds out those who can’t play nicely with others." 

When Goldman gets behind something, everyone in the giant hive wants a
piece of the action. Take this article. Once the bank had agreed to
talk, it was hard to get senior executives to shut up. One, Michael
Sherwood, 44, co-boss of Europe, flew back to the firm’s London
headquarters from the IMF meeting in Istanbul, via Moscow, for a
40-minute interview, before jetting off again straight away to see
clients in the Gulf. 

The idea of teamwork goes right to the top. Goldman may not be a private
partnership any more — it went public a decade ago — but the bosses work
hard to foster a "we’re in this together", family-style approach. Others
say it feels more like a cult, but they mean it as a compliment. Some of
its practices make perfect sense. Bonuses, for example, are not based on
personal performance, as they are at many banks, but on the performance
of the firm as a whole, and partners receive a sizable chunk of their
remuneration in stock that they cannot sell until they leave the firm.
It weeds out what Dina Powell, 36, the firecracker Egyptian-American
boss of Goldman’s philanthropic arm, calls "egomaniac jerks" who might
be tempted to bet the farm on red in the hope of skewering a bigger
bonus. 

Other practices are distinctly creepy. Goldman-ites are forced to check
their secure voicemail morning, noon and night for the latest bon mots
of Blankfein and Eileen Dillon, 48, who is officially head of operations
for the executive office but unofficially camp counsellor. Goldman is
the biggest user of voicemail in the world. The "mind bullets" consist
of anything from the latest profit and loss figures, to reports of what
the chief executives of key clients have told Blankfein and his top team
over lunch, to instructions to "switch off on holiday, for goodness
sake". 

No calls to meet in the basement to club baby seals to death first thing
in the morning to get in the mood for a hard day’s banking? "God, no,"
one staffer says wryly. "We don’t club baby seals. We club babies." 

What makes people who are bright enough to do anything they want put up
with the days-into-nights-into-days working and the dorkish corporate
groupthink? There’s the money, of course. Goldman Sachs isn’t nicknamed
"Goldmine Sachs" for nothing. There’s so much of the stuff sloshing
around that in an average year a good investment banking partner will
make $3.5m, a good trading partner $7-10m and a management committee
member $15-25m. Some 953 employees got bonuses of at least $1m in 2008.
Blankfein may insist he is still a blue-collar guy, but he manages to
have a $30m apartment on Central Park West and a 6,500-square-foot home
in the Hamptons, the summer playground of New York’s elite. One former
Goldman banker describes the culture as "completely money-obsessed. I
was like a donkey driven forward by the biggest, juiciest carrot I could
imagine. Money is the way you define your success. There’s always room —
need — for more. If you are not getting a bigger house or a bigger boat,
you’re falling behind. It’s an addiction." Addiction is a word Sherwood
uses, too. He should know. He’s on his second multi-million-pound
super-yacht. "I like boats," he says. Not sailing, but boats. It’s his
way of keeping up with, and in with, his friend the BHS billionaire, Sir
Philip Green, who lives for part of the year on his 208ft, £32m yacht,
Lionheart, which is moored in Monaco. "How many boats have I bought?"
Sherwood says. "It’s not a good time to answer that. I’ll take the
Fifth."

But there’s another powerful motivator: doubt. There may be arrogance at
85 Broad Street — behind closed doors, Blankfein likes to joke (but not
really) that he has "attained perfection" — but behind the bravado,
Goldmanites, curiously, question their ability. "There is a deep and
constant paranoia about everything we do," says Sherwood. It applies to
an individual’s performance and the prospects for the firm as a whole. 

Insecurity is hard-wired into the system. You feel it even before you
are hired. Most applicants are interviewed at least 20 times before they
are made an offer and some more than 30 times. Once hired, each staff
member is constantly and confidentially reviewed by those they work
with. There’s a metric for every aspect of performance and each staffer
is measured against their department and the firm as a whole. Every
year, staff are put into one of four quartiles by the Human Capital
Management department. Note the "Capital". At Goldman, people are money.
The top are richly rewarded, while the fourth quartilers? Who cares?
They won’t be around much longer. It’s up, or out. "We say goodbye to
the bottom 3-5% every year [about 1,500 people]," says Richard Gnodde,
49, co-boss of the European operation, based in London. 

Taking type-A people, making them feel like type-B people and moulding
them into kick-ass teams that work every hour God — sorry, Goldman —
sends, is important, no doubt. But it’s not Goldman’s killer app. That
is its extraordinary networking ability. The firm is the greatest talent
network in the world. Unlike at other banks, top performers are
encouraged to get on, make all the money they will ever need in their
thirties, then get out to "do good". The average tenure of a partner is
eight years. "You don’t join for the retirement programme," says one
staffer. "You have your phase of the moon to make money and then f***
off." But doing good does not mean running an HIV clinic in Kinshasa, it
means getting top jobs in treasuries, central banks and stock exchanges
around the world. The list of former Goldman executives who have held
key posts in the US administration and vital global institutions in New
York and Washington alone is mind-boggling. It includes: the treasury
secretary under Bill Clinton (Robert Rubin); the treasury secretary
under George Bush (Hank Paulson); the current president and former
chairman of the New York Federal Reserve (William Dudley and Stephen
Friedman); the chief of staff to the treasury secretary Timothy Geithner
(Mark Patterson); the chief of staff under President Bush (Joshua
Bolten); the economic adviser to the secretary of state, Hillary Clinton
(Robert Hormats); the chairman of the US Commodity Futures Trading
Commission (Gary Gensler); the under-secretary of state for economic,
business, and agricultural affairs under President Bush (Reuben
Jeffery); the past and current heads of the New York Stock Exchange
(John Thain and Duncan Niederauer); the chief operating officer of the
Securities and Exchange Commission’s enforcement division (Adam Storch).
Moreover, Goldman’s new top lobbyist in Washington, Michael Paese, used
to work for Barney Frank, the congressman who chairs the House Financial
Services Committee. To put this in perspective, imagine that Alistair
Darling, the chancellor, and his key advisers, Mervyn King, governor of
the Bank of England, Xavier Rolet, the boss of the London Stock
Exchange, and Hector Sants, head of the Financial Services Authority,
all used to work at the same City firm before moving into government.
Small wonder that another of Goldman’s nicknames is "Government Sachs". 

Critics say having friends in high places gives the firm the vital edge.
Key government officials, they argue, discuss policy — privately — with
Goldman chiefs more than executives from other banks. In his new book,
Too Big to Fail, Andrew Ross Sorkin reports one meeting. Blankfein’s
predecessor, Paulson, had promised not to talk to Goldman when he moved
from the bank to the US treasury, but last June he happened to be in
Moscow at the same time that Goldman’s board of directors was having
dinner there with Mikhail Gorbachev. Paulson got approval from treasury
lawyers to meet his old chums, since it would be a "social event".
Paulson proceeded to regale them with stories about his time in the
treasury and his predictions for the global economy. Goldman’s board
questioned him about the possibility of another bank blowing up, like
Bear Stearns. Recently released documents reveal that a few months
later, at the height of the crisis when Paulson was working on the
bail-out of AIG, Blankfein’s name appeared on his call sheet 24 times in
six days. Big banks that held AIG insurance contracts, including
Goldman, were paid off in full, rather than at the 60 cents on the
dollar that AIG negotiators had been pressing for, prompting allegations
of a "sweetheart deal" between Paulson and Blankfein. 

Goldman vigorously denies that having so many former staffers in top
political posts means it receives special treatment. "These people are
highly principled," says Sherwood. The Moscow meeting and the AIG deal
call into question Sherwood’s claim, to put it mildly. 

The more time you spend in 85 Broad Street, the more you get the feeling
that Goldman is the overachieving child of globalisation. It has the
best, brightest and hardest-working in global finance and government in
its pocket. Even the critics agree. But they add that the well-greased
machine does other things that ensure its success, things that the bank
is less keen to talk about. While the whizzo teams might manage risk
well and get out of bull markets at just the right time, they play their
part in inflating the bubbles in the first place — and pocket a fortune
doing so. Goldman has benefited from the upside of all the recent booms
— dot.com, commodities, housing — and, critics say, was involved in
stoking them by handling share offerings for big clients and by trading
securities and debt before pulling back. 

Detractors also accuse the bank’s trading and investment-banking arms of
"playing both sides" of the market. Goldman trades securities for big
firms and pension funds. It also acts as adviser to many of the
companies whose securities it trades. This means the firm has a view on
what everyone in the market is doing. Say an investor approaches Goldman
and says it wants to buy into the oil market. Goldman can offer an
accurate view of what is likely to happen in that market because it
knows what its own corporate energy clients are doing on its advice and
what other big investors are trading. This also means the bank can do
well on its own oil trades. Critics liken this to a huge casino in which
the house knows every hand at the table and uses that information to
enrich itself at the expense of everyone else. Goldman dismisses charges
of "casino capitalism". The more market information it has, it argues,
the better it can advise companies and the better it can match buyers
with sellers and get the best prices in the markets. It emphatically
denies it misuses information or acts unethically. Strict "Chinese
walls" between traders and advisers prevent any conflicts of interest.
Regulations are so tight that if an investment banker so much as tries
to enter a trading floor using their electronic office pass, not only
will the pass not work, but he or she will be hauled in for
questioning. 

Whatever alchemy it uses, one thing is certain: Goldman has dodged the
credit-crunch bullet and is emerging from the crisis stronger than ever.
To the victor, the spoils. But the patient might find cheating death
easier than pacifying the public. Many remain unconvinced that, while
Goldman may be big and clever, it is a force for good. Vince Cable
warns: "If we’ve learnt anything, it’s that banks have too much power
over consumers and governments. Goldman Sachs has never been more
powerful. That should alarm all of us." 

World leaders and financial regulators are trying to draw up plans to
limit what bank like Goldman can do and how they can pay their staff.
With his bulldog-like belief in the purity and efficiency of the free
market, you would not imagine this would be a fight Blankfein would
relish. But the funny thing is, he’s up for it because he thinks it will
make banking safer and enable Goldman to make even more money in
future. 

"Those government pronouncements that have come out so far are on the
right track," he says. Paying staff for performance, and paying in
deferred stock awards as well as cash to ensure long-term success, is
"desirable and something we already do". "Greedy, but long-term greedy,"
is how Goldmanites describe the bank’s investment and payment policies.
Blankfein backs proposals to ensure banks are better capitalised. "If we
didn’t understand the limits of unfettered capitalism before, we sure do
now. Anything that makes the system better, safer, is good for us." He
might have added: just don’t impose any windfall tax on pay. 

For Blankfein, in the end, it all comes down to one thing: finding the
best, fastest, and safest way to make money with money, then make some
more money, with money on top. He’s not interested in a reality check,
just a bumper pay cheque for his clients, for his firm, for his staff,
for his shareholders and, eventually, he believes, for us. His almost
religious devotion to the dogma of finance is thrown into stark relief
just before I walk out of the building with no name and find myself back
in the autumn sunshine. I ask him the question that, in these troubled
times, you’d think anyone — from the guy outside 85 Broad selling
99-cent chilli dogs to the gazillionaire King of Wall Street sitting 30
storeys above — would pause before answering. And then, perhaps, offer
an equivocal, on-the-one-hand, on-the-other-hand answer, whether he
means it or not. Is it possible to make too much money? 

"Is it possible to have too much ambition? Is it possible to be too
successful?" Blankfein shoots back. "I don’t want people in this firm to
think that they have accomplished as much for themselves as they can and
go on vacation. As the guardian of the interests of the shareholders
and, by the way, for the purposes of society, I’d like them to continue
to do what they are doing. I don’t want to put a cap on their ambition.
It’s hard for me to argue for a cap on their compensation." 

So, it’s business as usual, then, regardless of whether it makes most
people howl at the moon with rage? Goldman Sachs, this pillar of the
free market, breeder of super-citizens, object of envy and awe will go
on raking it in, getting richer than God? An impish grin spreads across
Blankfein’s face. Call him a fat cat who mocks the public. Call him
wicked. Call him what you will. He is, he says, just a banker "doing
God’s work" 

How they make their money

Goldman Sachs’s name may not be on the high street, but if you bank with
HSBC, cook with gas, shop with Ocado, watch Big Brother, buy clothes at
Gap, use a TomTom satellite navigation system or simply enjoy the odd
cheese-and-pickle sandwich, Goldman is part of your life. 

The company is split into three divisions. It’s an investment bank that
raises money for clients and sometimes invests its own money in
businesses. In the UK, it has raised capital for HSBC, Centrica (owners
of British Gas), and Ocado, the online grocery business backed by
Waitrose that sells more than £400m-worth of food a year. 

It helped to fund Endemol, makers of Big Brother, and is the biggest
single investor in Eurotunnel. It has handled share issues for TomTom
and J Crew. It is banker to Gap. It restructured Premier Foods, one of
whose brands is Branston pickle. Goldman is also a trading house. It
trades commodities, such as oil and gold, equities (shares in companies)
and company debt. It raises money for governments by selling
interest-bearing bonds to investors. The bank’s third division is asset
management. It manages money on behalf of pension funds, insurance
companies and wealthy individuals. 

It makes money by charging hefty fees to the companies and clients it
advises and whose assets it manages — typically 2-4%. It also makes
profits from trading using its own cash, as it has done since its
inauspicious beginnings. 

The bank was founded in New York in 1869 by a Jewish immigrant from
Bavaria, Marcus Goldman. His son-in-law, Samuel Sachs, later joined him.
Shut out of the clubby, largely Protestant world of stock and bond
trading, Goldman established a profitable, if unglamorous, niche buying
and selling short-term corporate IOUs, known as commercial paper. By the
turn of the century, the firm was pioneering the market for initial
public offerings, handling the stock-market debuts of blue-chip
companies such as Sears and Ford. 

As Goldman started outside the cosy Wall Street establishment, it hired
the smartest, most driven people it could find, who learnt to exploit
market loopholes, snatch business from rivals and win favours from
friends in high places. Under Sidney Weinberg, chief executive from 1930
to 1969, the bank forged top business graduates into ad-hoc teams that
would work around the clock for clients 

Overworked, overpaid, over here

Goldman Sachs may be a Wall Street bank, but its role and influence in
London is huge. Around 5,500 people work in its Fleet Street office,
which is, in fact, two former newspaper offices joined together. Traders
sit where hot-metal printers used to lay out The Daily and Sunday
Telegraph and The Daily and Sunday Express. 

It is the most profitable bank in the City. Profits per employee
averaged £181,000 a year between 2000 and 2008. Average pay this year is
expected to be £458,000. 

It is one of the top tax-payers in the City. 

The Chancellor, Alistair Darling, stands to receive more than £2 billion
in corporation tax, VAT and income tax this year. 

Staffers enjoy lavish perks. The firm has its own chefs to make sure
visiting guests can eat and drink with Goldman partners in style — and
away from envious eyes. There is a company gym, a doctor’s surgery and a
crèche. Every staffer gets private health insurance as standard. Staff
can take a taxi on the firm pretty much whenever they want. Lines of
black cabs snake around the back of the building at night. 

The London office is run by Michael Sherwood (above) and Richard Gnodde.
Sherwood, known as Woody, is the hard man. The former trader seems to
model himself on his good friend, the BHS billionaire Sir Philip Green.
He talks fast, in a no-bullshit style. 

Like Sir Philip, his brash deal-making can get the better of him. In
2006, British Airports Authority asked Goldman to pitch for the brief to
fend off a hostile takeover bid from Ferrovial, Spain’s construction
giant. Goldman, whose team included Sherwood, said one tactic would be
for Goldman itself to buy BAA. The move outraged BAA and prompted
Goldman’s then CEO, Hank Paulson, to send a stern message upbraiding the
executives involved. The note became known as ‘the spank from Hank’. 

By contrast, Gnodde is a suave investment banker. He looks, and talks,
like he has stepped out of a 1970s men’s knitwear catalogue. He is the
velvet — or should that be cashmere? — glove to Woody’s iron fist. He is
best known for advising the Indian steel tycoon Lakshmi Mittal in his
£17-billion bid for the European producer Arcelor. 

Sherwood and Gnodde are advised by part-time eminences grises, such as
Lord (Brian) Griffiths, one-time special adviser to Margaret Thatcher
who ran the prime minister’s policy unit from 1985 to 1990 and is a
former director of the Bank of England. He is one of the bank’s
international advisers and also acts as company pastor. ‘I had one guy
who came to see me — I thought about his career — but he wanted to talk
about the morality of banking. That was a long conversation,’ Griffiths
recalls. 

As a committed Christian and a trustee of the Archbishop of Canterbury’s
Lambeth Fund, Griffiths is a useful PR tool. It was he, for instance,
who spoke out last month to defend big bonuses. ‘If we said we’re not
going to have as big bonuses or the same bonuses as last year, I think
you’d find that lots of City firms could easily hive off their
operations to Switzerland or the Far East,’ he told an audience at St
Paul’s Cathedral. 

Every year, at bonus time, Sherwood and Gnodde remind staff to keep a
low profile, not to advertise their wealth. Most do. They invest their
millions in property, mostly in secluded parts of Kensington, Regent’s
Park, Fulham, Notting Hill Gate, Chelsea, Highgate and Hampstead. For
many years, one partner, Julian Metherell, proudly drove around in a
beaten-up red Nissan Sunny. 

Not all Goldmanites avoid the headlines. An abiding tale of the boom
years is how three London executives, Jennifer Moses and her husband,
Ron Beller, and Scott Mead, had so much cash they did not notice when an
assistant, Joyti De-Laurey, stole more than £4m from their accounts. 

Goldmanites send their children to the same private schools and if they
don’t like the ones in their area, they set up their own. Mead
co-founded a prep school in Notting Hill, with 200 students from ages
4-14. The wives of Goldman Sachs employees also try to keep a low
profile, devoting themselves to charity work and competitive grooming. 

As in the US, the bank is closely linked to the government. Its former
chief economist and partner, Gavyn Davies, is married to Gordon Brown’s
special adviser Sue Nye. Under Tony Blair, Davies became chairman of the
BBC. His successor as chief economist at Goldman, the late David Walton,
was handed a seat on the Bank of England’s interest-rate setting
Monetary Policy Committee. Paul Deighton, who is running the London
Olympic Games organising committee, used to be Goldman’s chief operating
officer. 

Goldman is a key banking adviser to the government. Brown hired the bank
to advise him on the sale of Northern Rock last year. 

Friends in high places. Goldman's political web

US treasury secretaries, heads of the New York Stock Exchange, White
House and Downing Street advisers — you name it, they’ve worked for
Goldman Sachs. Here are just some of the Goldmanites with their fingers
in the worldwide political pie 

Sue Nye/Gordon Brown 

Gordon Brown’s special adviser, Nye is married to Goldman’s former chief
economist and partner Gavyn Davies. Under Tony Blair, Davies became
chairman of the BBC. He resigned in 2004 after the Hutton Report 

Robert Rubin/Bill Clinton 

Rubin spent 26 years at Goldman before joining the Clinton
administration as an economic adviser. He served as treasury secretary
for four years from 1995, and remains an adviser to President Barack
Obama 

Hank Paulson/George Bush 

Paulson was CEO of Goldman before becoming the US treasury secretary. At
the height of the credit crunch, when Paulson was working on the AIG
bail-out, Blankfein’s name appeared on Paulson’s call sheet 24 times in
six days 

Larry Summers/Barack Obama 

Obama’s economic adviser Summers never worked directly for Goldman, but
served in Clinton’s government under his mentor, Robert Rubin. Goldman
paid Summers $135,000 to appear at a one-day speaking event in 2008
before Barack Obama came to power 

Sachs in the City 

Michael Sherwood: The vice chairman and co-chief executive of Goldman
Sachs International. Known as Woody, he is renowned for his trading
skills. His basic salary in 2008 was £415,000. 

In a good year, he can expect a bonus to take his package to around £6m.
He is one of two head honchos in London. 

Richard Gnodde: The co-chief executive of Goldman Sachs International,
Gnodde’s 2008 salary was £1.3m. A large chunk of this may have been a
bonus. He is believed to have been the highest-paid director in London
in 2007, taking home £11.7m. He took a 90% pay cut last year. 

Matthew Westerman: The global head of equity capital markets. He should
take home up to £5m with a bonus in 2009. A former Rothschild banker who
cut his teeth in his thirties on stock-market flotations around Europe,
he was lured to Goldman Sachs in 2000 to lead the European new issues
division. He has been involved in company fundraisings this year, where
Goldman has reaped huge profits, so is in line for a bumper bonus. 

Yoel Zaoui: The head of European investment banking. He is likely to
receive up to £5m in 2009. 

An employee since 1988, Zaoui has had a meteoric rise. He achieved
coveted partnership in just 10 years. He has often locked swords in
European takeover battles with his older brother Michael, who had the
same role at the rival bank Morgan Stanley. 

Karen Cook: An MD of Goldman Sachs International and president of
Goldman Sachs, Europe, Cook’s salary with bonus in 2009 could be up to
£5m. A mother of six, she was co-head of UK corporate finance at the
blue-chip bank Schroders before moving to Goldman in 1999. She has been
involved in multi-billion-pound takeovers, such as Kraft’s £10.2 billion
tilt at Cadbury. 

Compiled by Philip Beresford 

Strenth in numbers

In 2007, the Goldman Sachs boss Lloyd Blankfein earned $68m, a record
for any Wall Street CEO. A good investment banking partner at Goldman
will make $3.5m a year, a good trading partner $7-10m a year, and a
management committee member $15-25m.

Goldman is not the biggest bank in the world. ICBC, the Industrial and
Commercial Bank of China, has 11 times the number of employees. Nor is
it the richest. HSBC has assets of $2.4 trillion, against Goldman’s $1
trillion. And it’s not the biggest by market capitalisation. It’s worth
$95 billion, compared with $201 billion for HSBC. But it is the most
profitable.

Goldman makes more money per employee than any other bank — $222,000 a
year on average between 2000 and 2008. JP Morgan Chase, its nearest
rival, made annual profits of $133,000 per employee in the same period.

Goldman’s profits in the second quarter of this year were a record $3.4
billion.

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