The history of Goldman Sachs and its rise from Manhattan basement to ‘global juggernaut.’
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During his leadership – 1930 to 1969 – Weinberg served on more than 40 corporate boards and oversaw the largest initial public offering in history: the Ford Motor Company, which earned him the title “Mr. Wall Street.” Along the way, Weinberg established the corporate culture focused on client service that became Goldman Sachs’s trademark.Skip to next paragraph
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Under Weinberg, Gustave (Gus) Levy, a New Orleans native and Tulane dropout, was Goldman Sachs’s force behind “block trading,” the buying and selling of blocks of as many as tens of thousands (and eventually hundreds of thousands) of shares of stock for its institutional clients.
During the 1950s, Levy sought to dominate this field. Despite Weinberg’s reservations and attempts to rein him in, this admittedly risky business remained highly profitable for Goldman Sachs for decades following.
With the arrival of the 1980s, there was a desire to “move away from limiting the firm to ... Weinberg’s focus on client service by adding increasingly bold use of capital in disciplined, risk taking proprietary business.” Robert Rubin and Steve Friedman, now senior partners, launched a new division, Goldman Sachs Asset Management (GSAM), which they hoped would put them in the forefront of investment management.
By the time Rubin left to lead the National Economic Council in Washington in 1993 and was later named secretary of the Treasury in 1995, GSAM had a variety of mutual funds under management that were nicely exceeding S&P 500 averages.
Senior partner Jon Corzine, appointed in 1994, was seduced into disaster with Long Term Capital Management.
This secretive, complex system of derivatives and other risky financial devices, unraveled after the Russian government defaulted on its debt in 1998 and had to be rescued by the New York Federal Reserve.
This, combined with what Ellis calls Corzine’s “informal, intuitive, undisciplined way of making senior level decisions,” resulted in Corzine’s being forced out of the firm in 1999.
Under the direction of new head Henry (Hank) Paulson, however, GSAM steadily gathered assets and by 2004, its profits reached $1 billion annually. Paulson demonstrated an ability to match people and positions and acted successfully and quickly to stabilize organization of the firm’s senior management, including appointing John McNulty to head GSAM.
Simultaneously, Paulson worked to take the company in another profitable direction as both principal and client agent and to expand its investments into both private equity and real estate.
With Paulson’s appointment to Secretary of the Treasury under President Bush in 2006, Goldman Sachs has become the central player in managing the largest governmental rescue of the financial markets in American history.
And with a profusion of Goldman Sachs alumni, including Neel Kashkari, the recently appointed interim assistant secretary of the Treasury for financial stability, involved in its implementation, Goldman Sachs continues to asserts its prominence in the field of investment banking.
Christopher Hartman is the author of "Advance Man: The Life and Times of Harry Hoagland" and has written extensively on the history of venture capital in the high-tech industry.