Goldman Sachs

Goldman Sachs: A Century of Wall Street’s Most Controversial Firm

The Goldman Sachs Group, Inc. (SAKS) is an American multinational investment bank and financial services company founded in 1869 by Marcus Goldman in New York City.

Founding and Early Years

Imagine a time when the streets of New York City buzzed with the energy of commerce, and a young man named Marcus Goldman opened his doors to transform finance. Goldman Sachs was born in 1869, setting the stage for what would become one of Wall Street’s most influential players.

Growth and Milestones

The company has grown from a small investment bank into a global powerhouse with regional headquarters in international financial centers. From joining the New York Stock Exchange in 1896 to participating in several initial public offerings, Goldman Sachs has witnessed and shaped significant milestones.

Key Figures

Henry S. Bowers became the first non-member of the founding family to join as a partner in 1912, marking a pivotal moment in the firm’s history. Waddill Catchings joined in 1918 and by 1928 was a partner with the largest stake. The Sachs family maintained control until 1930 when Sidney Weinberg assumed senior partner role after ousting Catchings, steering Goldman into investment banking focus.

Financial Innovations

In 1970, the Penn Central Transportation Company bankruptcy led to credit rating services for commercial paper issuers. Goldman opened its first international office in London and created a Private Wealth Management division.

Notable Events

The firm’s philosophy of being ‘long-term greedy’ was introduced during this period, setting the stage for future success. In 1974, the firm pioneered the ‘white knight’ strategy, which would become a hallmark in corporate finance.

Leadership and Transformation

John Weinberg, son of Sidney Weinberg, and John C. Whitehead assumed co-senior partner roles in 1976, establishing 14 business principles as part of their initiative.

Key Leaders

Aron & Company merged with Fixed Income to become Fixed Income, Currencies, and Commodities. J. Aron was involved in coffee and gold markets. The firm underwrote public offerings for Rockefeller Center and Microsoft. Robert Rubin and Stephen Friedman became co-senior partners, focusing on globalization.

Public Offerings and IPOs

The firm launched a closed-end fund in 1928, which failed during the Wall Street Crash of 1929. In 1994, Jon Corzine took over as CEO, leading Goldman Sachs to finance Rockefeller Center and become a lead underwriter for Yahoo!’s IPO.

Global Expansion

In 2006, Lloyd Blankfein was promoted to chairman and CEO after Henry Paulson left to serve as U.S. Secretary of the Treasury. Under his leadership, Goldman Sachs expanded its reach into Russia, acquired NN Investment Partners, and launched GS Bank, a direct bank in Europe.

Critical Events

The subprime mortgage crisis saw Goldman profiting from short-selling subprime mortgage-backed securities, making a profit of $4 billion. The firm received a $10 billion investment from the U.S. Department of the Treasury in November 2008.

Settlements and Controversies

In 2013, Taylor pleaded guilty to charges and was sentenced to 9 months in prison for his role in a $118 million loss. The trades cost the company $118 million.

Recent Developments

Goldman Sachs has continued to expand its services, including acquiring financial technology startups and launching new products like derivatives linked to Ether. In 2024, it invested ₹72 crore for shares in Medi Assist Healthcare debuting in January.

Criticism and Controversies

Goldman Sachs has faced numerous criticisms over the years, including lack of ethical standards, working with dictatorial regimes, and driving up prices of commodities through futures speculation.

Legal Battles

The firm was criticized for allegedly misleading its investors during the 2007–2008 financial crisis. In July 2010, Goldman paid a $550 million settlement to the U.S. Securities and Exchange Commission.

Work Culture and Gender Issues

The company has been criticized for poor working conditions, including 100-hour work weeks and high levels of employee dissatisfaction. In July 2009, Matt Taibbi characterized Goldman Sachs as a ‘great vampire squid’ due to its role in market manipulation.

Gender Bias

In March 2018, a judge ruled female employees may pursue gender bias claims as a group, but not on sexual harassment. Goldman Sachs agreed to pay $215 million (£170.5m) in May 2023 over discriminatory practices.

Conclusion

Goldman Sachs has come a long way since its founding in 1869, evolving from a small investment bank into a global financial powerhouse. Despite facing numerous challenges and criticisms, the firm continues to shape the world of finance with its innovative products and services.