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Why Goldman Sachs Went From Investing For The Rich To Targeting Everyone

CNBC・2 minutes read

Goldman Sachs, a prominent investment bank with a rich history, has evolved from underwriting successful IPOs to facing legal challenges like accusations of theft and bribery. Despite controversies, the company expanded into consumer banking and fintech with the launch of Marcus, a digital bank offering personal loans and high yield savings accounts.

Insights

  • Goldman Sachs, founded in 1869 by Marcus Goldman, evolved from valuing companies based on potential earnings to becoming a major player in underwriting IPOs and various financial sectors, transitioning to a public company in a significant IPO that raised $3.7 billion.
  • Goldman Sachs demonstrated foresight by profiting from the 2008 financial crisis through strategic bets against the mortgage market, receiving investments from Warren Buffett during the crisis, but faced criticism and legal challenges for selling mortgage-backed securities to clients while betting against them, leading to public scrutiny and legal settlements.

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Recent questions

  • When was Goldman Sachs founded?

    1869

  • Who reshaped the financial world by valuing companies based on potential earnings?

    Henry Goldman

  • What significant role did Goldman Sachs play in underwriting successful IPOs?

    United Cigar and Sears Roebuck

  • How did Goldman Sachs profit from the 2008 financial crisis?

    Betting against the mortgage market

  • What led to ongoing investigations and legal issues for Goldman Sachs?

    Involvement in bond deals in Malaysia for 1MDB

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Summary

00:00

Goldman Sachs: A Financial Powerhouse with History

  • Goldman Sachs is a top investment bank with nearly a trillion dollars in total assets.
  • The bank has a rich history, founded in 1869 by Marcus Goldman, an immigrant from Bavaria.
  • Henry Goldman, Marcus's son, reshaped the financial world by valuing companies based on potential earnings.
  • Sidney Weinberg, a future leader, joined Goldman as an assistant to the janitor and later became known as Mr. Wall Street.
  • Goldman Sachs played a significant role in underwriting successful IPOs, like United Cigar and Sears Roebuck.
  • In the 1950s, Goldman was allowed to underwrite Ford Motor Company's IPO, despite Henry Ford's anti-Semitic reputation.
  • The firm transitioned from a partnership to a public company in a massive IPO that raised $3.7 billion.
  • After going public, Goldman's influence extended into politics, with former partners holding key government positions.
  • The company's revenue was divided into investment banking, asset management, and trading, with trading being a significant profit driver.
  • Goldman Sachs foresaw the 2008 financial crisis and profited by betting against the mortgage market, making a substantial profit of $4 billion.

14:51

Goldman's Resilience and Controversies in Finance

  • Goldman received a $5 billion investment from Warren Buffett after Lehman Brothers went bankrupt, showcasing their strength during the financial crisis.
  • In 2009, Goldman made over $30 billion in trading, outperforming competitors and causing resentment in the marketplace.
  • The company faced criticism for selling mortgage-backed securities to clients while betting against them, leading to public scrutiny and legal settlements.
  • As part of a settlement with the Department of Justice, Goldman provided $1.8 billion in consumer relief by restructuring distressed mortgages acquired from Fannie Mae.
  • Goldman's involvement in bond deals in Malaysia for 1MDB led to accusations of theft and bribery, resulting in ongoing investigations and legal issues.
  • Despite legal challenges, Goldman launched Marcus, a digital bank offering personal loans and high yield savings accounts, reflecting a shift towards consumer banking and fintech.
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