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Goldman Sachs: Superstar firm falls back to Earth

Goldman Sachs posts higher-than-expected loss of $428 million. Quarterly loss is only the second since the firm went public.

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Despite the latest quarterly losses, Viniar indicated Goldman wasn't planning to change its long-term strategy. The bank has "a strong track record" for making investment decisions, Viniar said.

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Goldman also has a long history for standing when other banks fall. It safely weathered the financial crisis that crippled or killed many of its competitors, posting only one quarterly loss, at the end of 2008. Bank of America and Citigroup have each lost money in six quarters since the beginning of 2008.

Goldman has also churned out a number of senior government officials, including former Treasury Secretaries Hank Paulson and Robert Rubin and former New Jersey Gov. Jon Corzine.

At the same time, Goldman has become a lightning rod for the wrath of regulators, lawmakers and protesters. Some have come to view the bank as the epitome of the greed and risky practices that led to the financial crisis. Goldman, which set aside $59 million in the third quarter for litigation and regulatory proceedings, has been subject to regulatory fines, probes and other headaches.

The bank has been retrenching in some areas. In July it said it would eliminate as many as 1,000 jobs to shore up cash. Tuesday it said had 34,200 employees, down 1,300 from the previous quarter.

The loss of $428 million was equivalent to 84 cents per share. The bank earned $1.7 billion, or $2.98 per share, in the same period a year ago.

Revenue slumped 60 percent to $3.6 billion, missing analysts' estimates. Year-over-year revenue has fallen for each of the past six quarters, and in the second quarter, Morgan Stanley took in more revenue thanGoldman.

Some observers have questioned whether Goldman will try to shed its status as a bank holding company, which could free it up to make more money in certain investment banking services. Goldman and Morgan Stanley both converted to bank holding companies in September 2008, which gave them easier access to capital but also placed them under stricter federal regulations.

"If they remain a bank holding company, the future for them is not as bright," said Mark Williams, a former Federal Reserve bank examiner. Bank spokesman Stephen Cohen said Goldman has "no plans" to change its status as a bank holding company.

Investors were unfazed by the quarterly loss, which had been widely expected due to the turmoil in financial markets this summer. Goldman's stock rose 5.5 percent to close at $102.25.

Analysts said the stock, which is down from more than $128 when second-quarter earnings were reported, had already priced in Tuesday's dismal earnings report.

Thomas, the banking consultant, acknowledged that Goldman might be unpopular on Main Street but said that wouldn't affect its long-term strength.

"They're the Gordon Gekkos of today," Thomas said. "But that doesn't mean they're in any way diminished of their abilities."