Money and Power: How Goldman Sachs Came to Rule the World

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9780767928267: Money and Power: How Goldman Sachs Came to Rule the World

William D. Cohan's "Money and Power: How Goldman Sachs Came to Rule the World" is a chronicle of the most successful, iconic bank on Wall Street, from the firm's founding in 1869 to the present day. Goldman Sachs are the investment bank all other banks - and most businesses - want to emulate; the firm with the best talent, the best clients, the best strategy. But is their success just down to the gilded magic of the 'Goldman way'? William D. Cohan has gained unprecedented access to Goldman's inner circle - both on and off the record. In an astonishing story of clashing egos, backstabbing, sex scandals, private investigators, court cases and government cabals, he reveals what really lies beneath their gold-plated image. "The best analysis yet of Goldman's increasingly tangled web of conflicts". ("Economist"). "Startling ...lifts the lid on Goldman's pivotal role in the meltdown". ("Mail on Sunday"). "Cohan portrays a firm that has grown so large and hungry that it's no longer long-term greedy but short-term vicious. And that's the wonder - and horror - of Goldman Sachs". ("Businessweek"). "Cohan's book tells of bitter power struggles and business cock-ups". ("Guardian")."A definitive account of the most profitable and influential investment bank of the modern era". ("The New York Times Book Review"). William D. Cohan was an award-winning investigative journalist before embarking on a seventeen-year career as an investment banker on Wall Street. His first book, "The Last Tycoons, about Lazard", won the 2007 "Financial Times"/Goldman Sachs Business Book of the Year Award and was a "New York Times" bestseller. His second book, "House of Cards", also a bestseller, is an account of the last days of Bear Stearns & Co.

Les informations fournies dans la section « Synopsis » peuvent faire référence à une autre édition de ce titre.

Extrait :

Wall Street has always been a dangerous place. Firms have been going in and out of business ever since speculators ?rst gathered under a button­wood tree near the southern tip of Manhattan in the late eighteenth century. Despite the ongoing risks, during great swaths of its mostly charmed 142 years, Goldman Sachs has been both envied and feared for having the best talent, the best clients, and the best political connections, and for its ability to alchemize them into extreme pro?tability and market prowess.

Indeed, of the many ongoing mysteries about Goldman Sachs, one of the most overarching is just how it makes so much money, year in and year out, in good times and in bad, all the while revealing as little as pos­sible to the outside world about how it does it. Another— equally confounding— mystery is the ?rm’s steadfast, zealous belief in its ability to manage its multitude of internal and external con?icts better than any other beings on the planet. The combination of these two genetic strains— the ability to make boatloads of money at will and to appear to manage con?icts that have humbled, then humiliated lesser ?rms— has made Goldman Sachs the envy of its ?nancial- services brethren.
But it is also something else altogether: a symbol of immutable global power and unparalleled connections, which Goldman is shame­less in exploiting for its own bene?t, with little concern for how its suc­cess affects the rest of us. The ?rm has been described as everything from “a cunning cat that always lands on its feet” to, now famously, “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money,” by Rolling Stone writer Matt Taibbi. The ?rm’s inexorable success leaves people wondering: Is Goldman Sachs better than everyone else, or have they found ways to win time and time again by cheating?

But in the early twenty- ?rst century, thanks to the fallout from Goldman’s very success, the ?rm is looking increasingly vulnerable. To be sure, the ?rm has survived plenty of previous crises, starting with the Depression, when much of the ?rm’s capital was lost in a scam of its own creation, and again in the late 1940s, when Goldman was one of seven­teen Wall Street ?rms put on trial and accused of collusion by the federal government. In the past forty years, as a consequence of numerous scan­dals involving rogue traders, suicidal clients, and charges of insider trad­ing, the ?rm has come far closer— repeatedly— to ?nancial collapse than its reputation would attest.

Each of these previous threats changed Goldman in some meaning­ful way and forced the ?rm to adapt to the new laws that either the mar­ket or regulators imposed. This time will be no different. What is different for Goldman now, though, is that for the ?rst time since 1932— when Sidney Weinberg, then Goldman’s senior partner, knew that he could quickly reach his friend, President- elect Franklin Delano Roosevelt— the ?rm no longer appears to have sympathetic  high- level relationships in Washington. Goldman’s friends in high places, so crucial to the ?rm’s extraordinary success, are abandoning it. Indeed, in today’s charged political climate, which is polarized along socioeconomic lines, Goldman seems particularly isolated and demonized.

Certainly Lloyd Blankfein, Goldman’s ?fty-six- year- old chairman and CEO, has no friend in President Barack Obama, despite being invited to a recent state dinner for the president of China. According to Newsweek columnist Jonathan Alter’s book The Promise, the “angriest” Obama got during his ?rst year in of?ce was when he heard Blankfein justify the ?rm’s $16.2 billion of bonuses in 2009 by claiming “Goldman was never in danger of collapse” during the ?nancial crisis that began in 2007. According to Alter, President Obama told a friend that Blankfein’s statement was “?atly untrue” and added for good measure, “These guys want to be paid like rock stars when all they’re doing is lip- synching cap­italism.”

Complicating the ?rm’s efforts to be better understood by the American public— a group Goldman has never cared to  serve— is a  long-standing reticence among many of the ?rm’s current and former execu­tives, bankers, and traders to engage with the media in a constructive way. Even retired Goldman partners feel compelled to check with the ?rm’s disciplined administrative bureaucracy, run by John F. W. Rogers— a former chief of staff to James Baker, both at the White House and at the State Department— before agreeing to be interviewed. Most have likely signed con?dentiality or nondisparagement agreements as a condition of their departures from the ?rm. Should they make them­selves available, unlike bankers and traders at other ?rms— where  self-aggrandizement in the press at the expense of colleagues is typical— Goldman types stay ?rmly on the message that what matters most is the Goldman team, not any one individual on it.

“They’re extremely disciplined,” explained one private- equity exec­utive who both competes and invests with Goldman. “They understand probably better than anybody how to never take the game face off. You’ll never get a Goldman banker after three beers saying, ‘You know, listen, my colleagues are a bunch of fucking dickheads.’ They just don’t do that the way other guys will, whether it’s because they tend to keep the uni­form on for a longer stretch of time so they’re not prepared to damage their squad, or whether or not it’s because they’re afraid of crossing the powers that be, once they’ve taken the blood oath... they maintain that discipline in a kind of eerily successful way.” 
 
 
Anyone who might have forgotten how dangerous Wall Street can be was reminded of it again, in spades, beginning in early 2007, as the market for home mortgages in the United States began to crack, and then implode, leading to the demise or near demise a year or so later of several large Wall Street ?rms that had been around for generations— including Bear Stearns, Lehman Brothers, and Merrill Lynch— as well as other large ?nancial institutions such as Citigroup, AIG, Washington Mutual, and Wachovia.

Although it underwrote billions of dollars of mortgage securities, Goldman Sachs avoided the worst of the crisis, thanks largely to a fully authorized, well- timed proprietary bet by a small group of Goldman traders— led by Dan Sparks, Josh Birnbaum, and Michael  Swenson— beginning in December 2006, that the housing bubble would collapse and that the securities tied to home mortgages would rapidly lose value. They were right.

In July 2007, David Viniar, Goldman’s longtime chief ?nancial of?­cer, referred to this proprietary bet as “the big short” in an e-mail he wrote to Blankfein and others. During 2007, as other ?rms lost billions of dollars writing down the value of mortgage- related securities on their bal­ance sheets, Goldman was able to offset its own mortgage- related losses with huge gains— of some $4  billion— from its bet the housing market would fall.
Goldman earned a net pro?t in 2007 of $11.4 billion— then a record for the ?rm— and its top ?ve executives split $322 million, another record on Wall Street. Blankfein, who took over the leadership of the ?rm in June 2006 when his predecessor, Henry Paulson Jr., became treasury secretary, received total compensation for the year of $70.3 mil­lion.

The following year, while many of Goldman’s competitors were ?ghting for their lives— a ?ght many of them would  lose— Goldman made a “substantial pro?t of $2.3 billion,” Blankfein wrote in an April 27, 2009, letter. Given the carnage on Wall Street in 2008, Goldman’s top ?ve executives decided to eschew their bonuses. For his part, Blankfein made do with total compensation for the year of $1.1 million. (Not to worry, though; his 3.37 million Goldman shares are still worth around $570 million.)

Nothing in the ?nancial world happens in a vacuum these days, given the exponential growth of trillions of dollars of securities tied to the value of other securities— known as “derivatives”—and the extraordinar­ily complex and internecine web of global trading relationships. Account­ing rules in the industry promote these interrelationships by requiring ?rms to check constantly with one another about the value of securities on their balance sheets to make sure that value is re?ected as accurately as possible. Naturally, since judgment is involved, especially with ever more complex securities, disagreements among traders about values are common.

Goldman Sachs prides itself on being a “mark- to- market” ?rm, Wall Street argot for being ruthlessly precise about the value of the securities— known as “marks”—on its balance sheet. Goldman believes its precision promotes transparency, allowing the ?rm and its investors to make better decisions, including the decision to bet the mortgage market would collapse in 2007. “Because we are a mark- to- market ?rm,” Blank­fein once wrote, “we believe the assets on our balance sheet are a true and realistic re?ection of book value.” If, for instance, Goldman observed that demand for a certain security or group of like securities was chang­ing or that exogenous events— such as the expected bursting of a housing bubble— could lower the value of its portfolio of  housing- related securi­ties, the ?rm religiously lowered the marks on these securities and took the losses that resulted. These new, lower marks would be communi­cated throughout Wall Street as traders talked and discussed new trades. Taking losses is never much fun for a Wall Street ?rm, but the pain can be mitigated by offsetting pro?ts, which Goldman had in abundance in 2007, thanks to the mortgage- trading group that set up “the big short.”

What’s more, the pro?ts Goldman made from “the big short” allowed the ?rm to put the squeeze on its competitors, including Bear Stearns, Merrill Lynch, and Lehman Brothers, and at least one counter-party, AIG, exacerbating their problems— and fomenting the eventual crisis— because Goldman alone could take the  write- downs with impunity. The rest of Wall Street squirmed, knowing that big losses had to be taken on mortgage- related securities and that they  didn’t have nearly enough pro?ts to offset them.

Taking Goldman’s new marks into account would have devastating consequences for other ?rms, and Goldman braced itself for a backlash. “Sparks and the [mortgage] group are in the process of considering mak­ing signi?cant downward adjustments to the marks on their mortgage portfolio esp[ecially] CDOs and CDO squared,” Craig Broderick, Gold­man’s chief risk of?cer, wrote in a May 11, 2007, e-mail, referring to the lower values Sparks was placing on complex mortgage- related securities. “This will potentially have a big P&L impact on us, but also to our clients due to the marks and associated margin calls on repos, derivatives, and other products. We need to survey our clients and take a shot at deter­mining the most vulnerable clients, knock on implications, etc. This is getting lots of 30th ?oor”—the executive ?oor at Goldman’s former head­quarters at 85 Broad Street—“attention right now.”

Broderick’s e-mail may turn out to be the unof?cial “shot heard round the world” of the ?nancial crisis. The shock waves of Goldman’s lower marks quickly began to be felt in the market. The ?rst victims— of their own poor investment strategy as well as of Goldman’s marks— were two Bear Stearns hedge funds that had invested heavily in squirrelly mortgage- related securities, including many packaged and sold by Gold-man Sachs. According to U.S. Securities and Exchange Commission (SEC) rules, the Bear Stearns hedge funds were required to average Goldman’s marks with those provided by traders at other ?rms.

Given the leverage used by the hedge funds, the impact of the new, lower Goldman marks was magni?ed, causing the hedge funds to report big losses to their investors in May 2007, shortly after Broderick’s e-mail. Unsurprisingly, the hedge funds’ investors ran for the exits. By July 2007, the two funds were liquidated and investors lost much of the $1.5 billion they had invested. The demise of the Bear hedge funds also sent Bear Stearns itself on a path to self- destruction after the ?rm decided, in June 2007, to become the lender to the hedge funds— taking out other Wall Street ?rms, including Goldman Sachs, at close to one hundred cents on the dollar— by providing  short- term loans to the funds secured by the mortgage securities in the funds.

When the funds were liquidated a month later, Bear Stearns took billions of the toxic collateral onto its books, saving its former counter-parties from that fate. While becoming the lender to its own hedge funds was an unexpected gift from Bear Stearns to Goldman and others, nine months later Bear Stearns was all but bankrupt, its creditors res­cued only by the Federal Reserve and by a merger agreement with JPMorgan Chase. Bear’s shareholders ended up with $10 a share in JPMorgan’s stock. As recently as January 2007, Bear’s stock had traded at $172.69 and the ?rm had a market value of $20 billion. Goldman’s marks had similarly devastating impacts on Merrill Lynch, which was sold to Bank of America days before its own likely bankruptcy ?ling, and AIG, which the government rescued with $182 billion of taxpayer money before it, too, had to ?le for bankruptcy. There is little doubt that Goldman’s dual decisions to establish “the big short” and then to write down the value of its mortgage portfolio exacerbated the misery at other ?rms.

From the Hardcover edition.

Revue de presse :

“[The] definitive account of the most profitable and influential investment bank of the modern era.” —The New York Times Book Review

“The best analysis yet of Goldman’s increasingly tangled web of conflicts. . . . The writing is crisp and the research meticulous.” —The Economist

“[A] revelatory account of the rise and rise of Goldman Sachs. . . . A vast trove of material.” —Financial Times
 
“Well done and absorbing. Cohan’s grasp of the . . . recent inside politics of the firm is sure and convincing.” —The Washington Post

“The frankest, most detailed, most human assessment of the bank to date. Cohan portrays a firm that has grown so large and hungry that it's no longer long-term greedy but short-term vicious. And that’s the wonder—and horror—of Goldman Sachs.” —BusinessWeek

“Brings the bank’s sometimes ‘schizophrenic’ behavior to vivid life. . . . Cohan evinces an eye for telling images and an ear for deadpan quotations. . . . [and] puts his skepticism to good use.” —Bloomberg News
 
“[Cohan is] one of our most able financial journalists.” —Los Angeles Times
 
“A former Wall Street man and a talented writer, [Cohan] has the rare gift not only of understanding the fiendishly complicated goings-on, but also of being able to explain them in terms the lay reader can grasp.” —The Observer (London)
 
“Cohan writes with an insider’s knowledge of the workings of Wall Street, a reporter’s investigative instincts and a natural storyteller’s narrative command.” —The New York Times

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Description du livre Random House USA Inc, United States, 2012. Paperback. État : New. Reprint. 234 x 158 mm. Language: English . Brand New Book. The bestselling author of the acclaimed House of Cards and The Last Tycoons turns his spotlight on to Goldman Sachs and the controversy behind its success. From the outside, Goldman Sachs is a perfect company. The Goldman PR machine loudly declares it to be smarter, more ethical, and more profitable than all of its competitors. Behind closed doors, however, the firm constantly straddles the line between conflict of interest and legitimate deal making, wields significant influence over all levels of government, and upholds a culture of power struggles and toxic paranoia. And its clever bet against the mortgage market in 2007 unknown to its clients may have made the financial ruin of the Great Recession worse. Money and Power reveals the internal schemes that have guided the bank from its founding through its remarkable windfall during the 2008 financial crisis. Through extensive research and interviews with the inside players, including current CEO Lloyd Blankfein, William Cohan constructs a nuanced, timely portrait of Goldman Sachs, the company that was too big and too ruthless to fail. N° de réf. du libraire AAS9780767928267

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Description du livre Random House USA Inc, United States, 2012. Paperback. État : New. Reprint. 234 x 158 mm. Language: English . Brand New Book. The bestselling author of the acclaimed House of Cards and The Last Tycoons turns his spotlight on to Goldman Sachs and the controversy behind its success. From the outside, Goldman Sachs is a perfect company. The Goldman PR machine loudly declares it to be smarter, more ethical, and more profitable than all of its competitors. Behind closed doors, however, the firm constantly straddles the line between conflict of interest and legitimate deal making, wields significant influence over all levels of government, and upholds a culture of power struggles and toxic paranoia. And its clever bet against the mortgage market in 2007 unknown to its clients may have made the financial ruin of the Great Recession worse. Money and Power reveals the internal schemes that have guided the bank from its founding through its remarkable windfall during the 2008 financial crisis. Through extensive research and interviews with the inside players, including current CEO Lloyd Blankfein, William Cohan constructs a nuanced, timely portrait of Goldman Sachs, the company that was too big and too ruthless to fail. N° de réf. du libraire AAS9780767928267

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