If it so desired, Goldman Sachs could use its income for the year to fund the entire Chinese army -- and, if the run-up to Christmas went well, it would have a few billion dollars left over.
The investment bank expects to rake in some US$45 billion for the year to November, roughly equivalent to the budget for the world's biggest fighting force. In the year to date, some US$17 billion has gone toward a staggeringly cash-rich bonus fund for Goldman's 26,000 employees.
While much of the financial industry will be keen to forget an angst-ridden northern summer of stock market lurches and credit gridlock, Goldman Sachs has judged dismal conditions like a champion poker player. After employee costs and overheads, its profits leapt by 80 percent to US$4.26 billion in the three months to August -- its third-best performance in 138 years, achieved in a period that saw plunges in earnings at Wall Street rivals Bear Stearns, Morgan Stanley and Lehman Brothers.
Notoriously opaque, Goldman has revealed little about how it made its money. Its earnings statement shows that revenue from "trading and principal investments" jumped 70 percent to US$8.23 billion. This is explained away in three paragraphs of the broadest generalities. Even seasoned banking experts have been scratching their heads.
"I wish I knew how they'd done it," said Brad Hintz, a banking analyst at stockbroker Sanford C Bernstein & Co in New York. "This is one where as an equity analyst you are certainly puzzled."
He points out that Goldman Sachs delivered a return on shareholders' investments of 31 cents in the dollar.
"If Goldman are able to retain that 31 percent level then by the time I retire, by my calculations they will be bigger than the US economy," he said.
Goldman's successful summer has sent its shares up by a third in six weeks and has enriched the aura of mystique around the institution. It takes, they say, at least 10 interviews to get a job at the bank. The Economist reported last year that one vice-chairman underwent 150 cross-examinations before Goldman hired her from a law firm.
The bank's office in London's Fleet Street has outside it one of the British capital's most lucrative taxi ranks, with up to 200 cabs lining up at going-home time. A Goldman secretary, Joyti De-Laurey, lodged the firm in the public's consciousness in 2004 when it emerged that she had stolen ?3.3 million (US$6.7 million) from the personal account of her boss, Scott Mead, who was so rich that he did not notice for five months.
Depending on your point of view, Goldman Sachs is either the ultimate embodiment of visceral Wall Street greed or the closest thing to perfection among free enterprise money factories. Its asset management arm looks after US$796 billion -- more than the GDP of Australia.
ATTENTION-GRABBER
A single sentence in Goldman's financial statement has grabbed attention. It reveals that net revenues from mortgages were "significantly higher," continuing: "Significant losses in non-prime loans and securities were more than offset by gains on short mortgage positions."
In other words, Goldman Sachs suspected that a collapse in the subprime mortgage market was imminent and it bet billions of dollars that thousands of hard-up US homeowners would be thrown out on the street.
"We decided what we wanted to do was protect our downside," a Goldman source said. "We took a very different view [from rival banks] on how best to hedge our exposure and it clearly paid off."
This was against a backdrop in which Morgan Stanley's profit dropped by 7 percent, Lehman Brothers revealed a 3 percent decline and Bear Stearns disclosed a catastrophic 61 percent collapse in earnings.
So how did Goldman get things right while so many of its rivals were going so badly wrong?
Richard Bove, an analyst at Punk, Ziegel & Co, said it comes down to the sheer volume of capital committed to Goldman's trading operation. He said Goldman pumps more into information technology, trading algorithms, staffing capability and global presence than its rivals -- making it hyper-alert to subtle changes in the financial environment and nimble enough to adapt.
"They focus very much on trading -- 66 percent of their revenue is from trading," Bove said. "If you took everything else Goldman does and multiply it by two, it wouldn't match the amount they make from trading."
Historically, Goldman's exposure to mortgage-backed securities was narrower than that of its rivals. Its global reach has helped it to take advantage of esoteric, yet lucrative, opportunities in Chinese banks, commodities and emerging market equities.
One big earner has been Goldman's 5 percent stake in the Industrial & Commercial Bank of China (ICBC), which cost US$2.58 billion in May last year and has more than doubled in value.
Charles Geisst, a specialist in Wall Street history at Manhattan College, said Goldman's edge developed in the 1960s and 1970s when the bank became one of the first to ditch street-smart "barrow boy" traders in favor of the brightest, sharpest graduates.
"Back in the 1950s and 60s, if you even had a degree it was considered on a trading desk a complete anomaly," Geisst said. "They just tend to hire smarter people than everybody else. They were hiring MBAs and generally smart people to be traders long before it came into vogue on Wall Street."
To lure the brightest, Goldman has to be among the most generous of employers. Its chief executive, Lloyd Blankfein, took home a record-breaking US$53 million last year and, along with his staff, he is likely to get even more this year.
PUBLIC SERVICE `ETHOS'
Recognizing that such pay checks don't play well with the public, Goldman propounds an ethos of public service. Having made a fortune, many of its stars have left in mid-career to take jobs in government.
Its alumni include US Treasury Secretary Hank Paulson, White House Chief of Staff Josh Bolten, New Jersey Governor Jon Corzine, the former BBC chairman Gavyn Davies -- plus, perhaps surprisingly, the comedian Sacha Baron Cohen, who plays Borat.
Goldman's success has led to accusations of arrogance and of glaring conflicts of interest. The bank has acted as both investor and adviser to firms, which, critics say, means its obligation to clients could be colored by its own financial interests. It was for this reason that officials in Beijing blocked Goldman from advising on ICBC's flotation.
Last year, Goldman sparked outrage by advising both sides on a merger between the New York Stock Exchange (NYSE) and the electronic market Archipelago. Aggravating the issue, the NYSE's boss, John Thain, is a former Goldman banker.
These concerns, suggest some commentators, could limit long-term growth.
"They're being seen to be on too many sides of the same deal," Geisst said.
But for Goldman's bankers, those are distant problems. Thoughts at this time of year turn to the size of their bonus packets, which are typically revealed in December.
All the indications suggest that Goldman's troops will enjoy the most comfortable Christmas in the City of London or on Wall Street.
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