Goldman Sachs - subprime crisis

For more than three months, as turmoil in the credit market has swept wildly through Wall Street, one mighty investment bank after another has been brought to its knees, levelled by multibillion-dollar blows to their profits.
And then there is Goldman Sachs Group Inc.
Rarely on Wall Street, where money tends to travel in a thundering herd, has one firm gotten it so right when nearly all its peers were getting it so wrong. Three banking chief executives have already been forced to resign because of the debacle and the pay for nearly all the survivors is expected to be deeply cut.
But for Goldman’s chief executive, Lloyd Blankfein, this is turning out to be a very good year. He will surely earn more than the $54.3 million (Rs213 crore) he made last year. If he gets a 20% raise—in line with the growth of Goldman’s compensation pool—he will take home at least $65 million.
Many expect his pay, which is tied directly to the firm’s performance, to reach as high as $75 million. Goldman’s good fortune is not due simply to good luck. Late last year, with the markets roaring along, David Viniar, Goldman’s chief financial officer, called a “mortgage risk” meeting in his meticulous 30th floor office in the firm’s New York headquarters. At that point, Goldman’s mortgage desk was down somewhat but the notoriously nervous Viniar was worried about bigger problems. After reviewing the full portfolio, his message was clear: the bank should reduce its stockpile of mortgages and mortgage-related securities and buy expensive insurance as protection against further losses, a person briefed on the meeting said.
With its mix of swagger and contrary thinking, it was just the kind of bet that has long defined Goldman’s hard-nosed, go-it-alone, risk-taking style. Meanwhile, most of the firm’s competitors, with the exception of the smaller and more specialized Lehman Brothers, appeared to barrel headlong into the mortgage markets. They kept packaging and trading complex securities for high fees and more market share without hedging, or protecting themselves against the positions they were buying.
When the credit markets seized up in late July, Goldman was in the enviable if not quite believable position of having offloaded the toxic products that Merrill Lynch & Co. Inc., Citigroup Inc., UBS, Bear Stearns Cos. Inc. and Morgan Stanley, among others, had kept right on buying until it was too late.
“If you look at their profitability through a period of intense credit and mortgage market turmoil,” said Guy Moszkowski, an analyst at Merrill Lynch who covers the investment banks, “you’d have to give them an A-plus.”
This stark contrast in performance has been a struggle for competitors to swallow. The bank that seems to be in every corner, with a hand in so many deals and products and regions, made more money in the boom and—at least so far— managed to go right on making money in the bust.

via Mint