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There is only one topic for discussion on Wall Street at the moment, and that's Goldman Sachs. For those inside the firm, this week's announcement of blow-out quarterly profits, along with the surge in the firm's stock price and the promise of large bonuses, doubtless came as a huge relief.
Last autumn, there seemed to be a real chance Goldman would follow Bear Stearns and Lehman down the plughole of history. Goldman's bankers were panicking, watching the value of their investments in their employer's stock and investment pools shrivel.
Some had to beg the bank for loans to cover their monthly expenses. And now? profits of $3.44 billion (£2.11 billion) in a single quarter and the big-time bonuses are back.
Even within the financial industry, people are at odds over what Goldman has done. On the one hand, they are full of admiration. In this Darwinian struggle, Goldman has proved itself the fittest.
Others could have taken similar risks and reaped similar rewards. But they lacked the nerve, capital or brains. Others could have played the US government the way Goldman has, pressing for bailout money and cheap credit. But not all did so with the same relentless verve.
Goldman produced these profits even while reducing its leverage ratio by half, borrowing just $14 for every $1 it invests, down from $28 a year ago. As one former partner put it: “Right now, [Goldman is] one of only a few people on the beach, so they're getting all the girls.”
On the other hand, Goldman has painted another very large bull's-eye on the forehead of Wall Street. Even before these results, there was a strong sense that Wall Street had robbed ordinary American taxpayers to ensure its survival. While the government found billions of dollars instantly to support Goldman, ordinary people have to wait years for help. I doubt there is a more unpopular firm in America today.
* Rick Wagoner, the former CEO of General Motors, sacked by President Obama, will receive a retirement package worth $1.64 million a year for the next five years, and then $74,030 for the rest of his life. Not bad for leading what was once the world's largest firm into bankruptcy.
* Harvard Business School, Wagoner's old school, is feeling the crunch as much as anyone. It will be admitting its largest-ever class of MBA students this September — 942, up from last year's 900. With the value of its endowment falling, and staff having to be cut, it can use the extra $1 million or so in tuition fees.
