There are loads of great quotes in this book, but perhaps the best one goes to the previous president of the USA, George W. Bush. When he announced in May 2006 that Henry "Hank" Paulson would be his new treasury secretary Bush stated, "The American economy is powerful, productive and prosperous, and I look forward to working with Hank Paulson to keep it that way."
That was just before the financial catastrophe that is still happening started to hit Wall Street and the rest of the world economy. Henry Paulson had just resigned as CEO of Goldman Sachs, the most successful financial institution on Wall Street.
Paulson's appointment to one of the most important positions in Bush adninistration is one reason why so many people point an accusatory finger at Goldman: they rig the game. In the previous Clinton administration another former Goldman CEO, Bob Rubin, was also in the government. Can these people really be impartial?
Put it another way: Would Henry Paulson have considered an "aggressive" action that may have harmed Goldman Sachs (and other banks) and eased the pain on the American taxpayer? Goldman's aggressive mark-down of its mortgage securities in the spring of 2006 could have been countered with an equally aggressive counter-measure - by the Treasury and the Federal Reserve. All the government, and the Reserve did, was to give vast amounts of taxpayer's money to help the banks. Was this really Hank Paulson at his brilliant best?
If you want a (biased) rundown of the financial crisis try looking a chapter 14 of Bush's
Decision Points
, though former British Chancellor Alistair's Darling,
Back from the Brink: 1,000 Days at Number 11
is also good, and slightly less biased!
Cohan's book covers most of the major events that have shaped Goldman Sachs in the 20th and 21st centuris. Perhaps the major omission is Goldman's CDS (credit default swap) with the Greek government which fudged Greece's figures so that the country could enter the eurozone. But you can't have everthing.
The style is readable though sometimes the author gets trapped in using the normal argo of traders. As an accountant I can follow most of the stuff, but I am not an experienced (or any kind of) trader, so even I get a little lost. Hence I found Gillian Tett's
Fool's Gold: How Unrestrained Greed Corrupted a Dream, Shattered Global Markets and Unleashed a Catastrophe
a little easier to follow.
But why is Goldman Sachs so successful at making money, especially during a period (2007) when others were losing theirs. As one commentator expressed it: "Think about that statement: making a record amount of money in a year when everyone else was losing their shirts."
The answer is: They are disciplined and aggressive; they take the hard pain so that they avoid the even harder losses. Or they are simply borderline crooks who do whatever it takes to make money. As someone said in the book, "They are a little more comfortable lying to your face than other firms." Take your pick.
Perhaps they are just more confident that other firms; they simply know the (rigged) market better than everyone else:
"By the strength of my hand I have done this, and by my wisdom, because I have understanding. I removed the boundaries of nations, I plundered their treasuries; like a mighty one I subdued their kings [or presidents and prime ministers]. As one reaches into a nest so my hand reached for the wealth of nations. (Isaiah 10:13-14)
"It is the nature of modern politics in America that people who want to be president of the United States must first audition for people like the chairman of Goldman Sachs."
Can you work out why they make so much money, and why you don't?
Perhaps the only thing missing was some photographs of both past and current employees of Goldman Sachs, like in
All The Devils Are Here: Unmasking the Men Who Bankrupted the World
. But I suppose we can all see them on the Internet, should you want to!
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