Goldman Sachs: We Told You So

“When I heard that Goldman was being charged with fraud by the SEC, I thought it was my birthday, Christmas and New Year all rolled into one!” said a former colleague of mine gleefully down the phone. A few more calls to several other ex-colleagues confirmed the unrestrained schadenfreude that was being felt across the Square Mile (“Christ, if I’d been any happier I’d have exploded!” exclaimed another) as a result of Goldman’s woes. The sheer extent of their pleasure got me thinking about why this particular investment bank elicits such strong emotions from its competitors. Is it just envy or does Goldman get everything it deserves?

I first heard about the Goldman ‘machine’ a few days before joining the City in August 1996. My fund manager brother had just secured me an interview at Société Générale despite the fact I was a pony-tailed history graduate who wouldn’t have known what a PE ratio was if it had jumped up and bitten my bony arse. The ‘interview’ took place in a City bar and essentially involved drinking about nine bottles of champagne with a bunch of bladdered MDs who thankfully couldn’t be arsed to ask me any technical questions about pointless things like shares. On hearing that this one interview/piss-up was all that was required to get me a job as a junior analyst, my brother rolled his eyes and muttered something about ‘standards dropping’. He also informed me that an American bank called Goldman Sachs would have required about 14 separate interviews before they’d have offered me a role and would probably never have even considered my application owing to my lack of qualifications. As I waltzed into my cushy job I remember wondering what kind of hellish institution would require such a vetting process and thanking my lucky stars that there were still some European banks with a more ‘laissez-faire’ approach.

Over the next few years I invariably bumped into my competitors from Goldman regularly at company presentations. I came away with the strong impression that they had all received ‘personality bypass’ operations on being accepted into ‘the firm’ (which seemed to have a lot in common with the cult-like ‘Firm’ described by John Grisham in his book of the same name). Most of my fellow analysts in UK waters knew they were involved in a farcical little sector and didn’t take themselves too seriously. However, the Goldman boys walked around like they ran the show and had a gnarly stick permanently implanted up their arses. At annual results presentations they invariably asked the FD tedious technical questions solely designed to show attending buy-side analysts how smart they were. They also invariably viewed analyst dinners with utility companies’ managers merely as an opportunity to shove their tongue so far up the CEO’s arse he came out thinking he’d had a colonic to go with his salmon en croute. These buffoons really meant business, and failure simply didn’t seem an option for any of them. They were hyper-competitive, humourless cyborgs who learnt Sun Tzu’s The Art of War off by heart.

I once cornered an almost human Goldman analyst after yet another corporate jolly in some God-awful provincial town and, emboldened by a few £30 shots of whisky, asked him what he thought was so damn special about his ‘poncey little firm’.

His eyes immediately misted over and took on a far-away look as if he were discussing Helen of Troy’s matchless beauty, and he waxed lyrical for 20 minutes about the organisation he loved. The rigorous graduate trainee programme had weeded out the weaklings and his loyalty was now such that had the spiked Kool-Aid been passed around he’d have been the first to take a sup. Goldman at the time was still a partnership and all he coveted was to be one of the ‘big guys’ upstairs. It was this carrot that had made him willing to work late into the night and rarely experience a free weekend as he desperately sought ‘success’.

The main objective of the partnership was to make money, and these guys made this pursuit a veritable religion, which led to a strange ‘us and them’ perspective. When I enquired as to what his goals were, my Goldman counterpart’s response reminded me of Conan the Barbarian when he is asked by the Mongol general “what is best in life?”: “To crush your enemies, see them driven before you, and to hear the lamentation of their women.”

The only difference was the bit about women – who seemed of minor concern to this autistic alien. All that the Goldman boys appeared to dream of was the humiliation of those deluded uppity European banks like UBS and Deutsche who foolishly thought they could challenge them. They had some vague respect for Morgan Stanley and Citigroup but even these were viewed as clumsy, incompetent wannabes. Goldman was at the top of the tree, and they knew it.

There was another more scurrilous, less flattering explanation for the unremitting hard work the Goldman robots were willing to endure.

There is an apocryphal theory that Goldman’s HR department has a remit to look out for CVs from graduates who ‘were probably bullied at school’. The thinking behind such a policy, were it to exist, would be that only desperately insecure characters would have the necessary drive to work like demons through the best years of their lives so they can prove to themselves that they have ‘made it’.

Clearly untrue – but it is an insight to how Goldman is viewed that such a theory could even be postulated.

Surely, only the dream of driving a Ferrari with a fit blonde in the passenger seat around the estates of their former tormenters shouting ‘Do you see? I’m somebody now!’ can explain why these jokers worked 70+ hours a week? 

Whatever the psychological motivation, one thing became very clear early on in my City career. These charmless drones weren’t just desperate to win – they generally did. Pretty much every time I was involved in some pitch for corporate business some douche bags from Goldman would whup my sorry ass. Whether I was pitching to organise a rights issue for a UK electricity company or attempting to be the main adviser to some Continental gas company trying its hand at M&A, we kept on being pipped at the post by those dreadful automatons. It got so bad that when I heard that Goldman was competing against us for the same corporate work I gave up the ghost there and then.

Goldman consistently topped the Thompson M&A league tables and only Morgan Stanley or Citigroup ever came close. Its trading was also something to behold. In 2009 alone, their traders made at least $100m in net trading revenues on 131 days. This was a phenomenal record and a source of enormous bewilderment to all Goldman’s competitors. Even more impressive was their announcement in 2008 that they had actually made money out of the growing subprime mortgage debacle in the US over the previous year when all the other banks had posted serious losses. It was about at that point that City boys like me began to wonder if these robo-bankers had signed a pact with Beelzebub himself.

The six billion dollar question is whether this relentless success could really be a result of brilliance alone. Recent developments have certainly bolstered the long-held view that Goldman’s success can partly be attributed to the willingness of some of its employees to sail close to the wind.

The recent SEC fine of $550m may have been the biggest in the regulator’s history but, in reality, it merely represented just over 1% of Goldman’s annual revenues – and Goldman’s shares rose dramatically as soon as it was announced. It has also been alleged that, despite Goldman’s major role in selling mortgage-backed securities, its traders had bet against these products in the early part of the crisis. This practice was succinctly described by one US senator as “selling a car with faulty brakes and then buying an insurance policy on the buyer of those cars”.

These outrages have also been music to the ears of the conspiracy theorists. The most famous one, Matt Taibbi of Rolling Stone magazine, wrote an article concluding that Goldman had, throughout the last century, purposefully inflated and deflated asset price bubbles and in, so doing, made enormous profits on the way up and on the way down. Taibbi famously referred to Goldman as “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money”.

Whilst this is, of course, how a capitalist company works (and Goldman has shown an unerring ability to forecast the future rivalled only by the late Paul the Psychic Octopus), it is too easy with hindsight to see conspiracy in everything.

Indeed, there are even some crazies who see the hand of Goldman behind BP’s recent oil disaster. They point out that Goldman’s sold a sizeable stake in the company just before the Deepwater Horizon rig exploded and claim this disaster was the only way they could take themselves off the front pages and cease being the most hated corporation in America. Now, I know those boys get up to some questionable activities while executing ‘God’s business’ (as CEO Lloyd Blankfein has foolishly referred to his bank’s role) but this theory is stretching things a little.

Goldman is a top-class organisation that does pretty much everything better than all the other investment banks. But the financial crisis was crying out for a pantomime villain and the market – generally right in these things – pushed forward this venerable bank. It has become a symbol both of everything that is right in banking – intelligence, innovation and profitability – and everything that is wrong – greed, short-termism and selfishness.

Inevitably Goldman will overcome this little bump on the road to global domination and successfully restore its reputation. It’s a winner – and, what’s more, every banker knows it.

That’s why all those ex-colleagues of mine who were happy to be quoted about the joy they felt at Goldman’s recent troubles all demanded that their musings were anonymous – just in case, as one of them said, “I’m ever lucky enough to be asked to work for those dodgy bastards.” It seems Goldman may be a morally dubious “vampire squid” – but it’s the blood-sucking cephalopod that every banker still wants to work for.

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