Quick Stats

Type – Public (NYSE: GS)
Founded – 1869
Founder(s) – Marcus Goldman
Headquarters – New York City, US
Area served – Worldwide
Key people – Lloyd C. Blankfein(Chairman) & (CEO)
Industry – Financial Services
Products – Investment banking,Prime brokerage,Investment management,Commercial banking,Commodities
Revenue – US$ 45.173 billion (2009)
Operating income – US$ 2.34 billion (2008)
Net income – US$ 13.39 billion (2009)
Total assets – US$ 849 billion (2009)
Total equity – US$ 64.369 billion (2008)
Employees – 32,500 (December 2009)
Website – GS.com

Net Income when compared with 86 peers in the Investment Services sector. Blankfein earned a $67.9 million bonus in his first year.

Brief History

Goldman Sachs was founded in 1869 by German immigrant Marcus Goldman. In 1882, Goldman’s son-in-law Samuel Sachs joined the firm. In 1885, Goldman took his son Henry and his son-in-law Ludwig Dreyfuss into the business and the firm adopted its present name, Goldman Sachs & Co.

In the early 20th century, Goldman was a player in establishing the initial public offering market. It managed one of the largest IPOs to date, that of Sears, Roebuck and Company in 1906. It also became one of the first companies to heavily recruit those with MBA degrees from leading business schools, a practice that still continues today and makes Goldman Sachs careers one of the most sought-after

One of the largest events in the firm’s history was its own IPO in 1999. The decision to go public was one that the partners debated for decades. In the end, Goldman decided to offer only a small portion of the company to the public, with some 48% still held by the partnership pool. 22% of the company was held by non-partner employees, and 18% was held by retired Goldman partners and two longtime investors, Sumitomo Bank Ltd. and Hawaii’s Kamehameha Activities Assn. This left approximately 12% of the company as being held by the public.

Goldman Sachs And The Financial Crisis

Despite the 2007 subprime mortgage crisis, Goldman was able to profit from the collapse in subprime mortgage bonds in the summer of 2007 by selling subprime mortgage-backed securities short. Two Goldman traders, Michael Swenson and Josh Birnbaum, are credited with bearing responsibility for the firm’s large profits during America’s sub-prime mortgage crisis.

The pair, who are part of Goldman’s structured products group in New York, made a profit of $4 billion by “betting” on a collapse in the sub-prime market, and shorting mortgage-related securities. By summer of 2007, they persuaded colleagues to see their point of view and talked around skeptical risk management executives.

The firm initially avoided large subprime writedowns, and achieved a net profit due to significant losses on non-prime securitized loans being offset by gains on short mortgage positions. Its sizable profits made during the initial subprime mortgage crisis led the New York Times to proclaim that Goldman Sachs is without peer in the world of finance. (See Goldman Sachs Private Wealth Management)

On September 21, 2008, Goldman Sach and Morgan Stanley, the last two major investment banks in the United States, both confirmed that they would become traditional bank holding companies, bringing an end to the era of investment banking on Wall Street.

Divisions

Goldman Sachs is divided into three businesses units, Investment Banking, Trading and Principal Investments, and Asset Management and Securities Services.

Investment banking –

Financial Advisory (mergers and acquisitions (M&A), investitures, corporate defense activities, restructuring and spin-offs) and Underwriting (public offerings and private placements of equity, equity-related and debt instruments).

Goldman Sachs, for a long time during the 1980s, was the only major investment bank with a strict policy against helping to initiate a hostile takeover, which increased the firm’s reputation immensely among sitting management teams at the time. The investment banking segment accounts for around 17 percent of Goldman Sachs’ revenues.

Trading & principal investments –

Trading and Principal Investments is the largest of the three segments, and is the company’s profit center.
The segment is divided into three divisions and includes Fixed Income, Currency and Commodities (
Equities and Principal Investments. Most trading done by Goldman is not speculative, but rather an attempt to profit from bid-ask spreads in the process of acting as a market maker. On average, around 68 percent of Goldman’s revenues and profits are derived from trading.

Goldman Sachs Asset management and securities services –

The unit primarily generates revenues in the form of management and incentive fees. The Securities Services division provides clearing, financing, custody, securities lending, and reporting services to institutional clients, including hedge funds, mutual funds, and pension funds. The division generates revenues primarily in the form of interest rate spreads or fees.

In 2006, the Goldman Sachs Asset Management hedge fund was the 9th largest in the United States, with $20.58 billion under management. This was down from $32.5 billion in 2007, after client redemptions and weaker investment performance.

For more Goldman Sachs news visit their website.