More Bank and Fraud Stories © 2024 Mark McWiggins
Goldman Sachs during the Financial Crisis of 2008
Goldman Sachs came out smelling like a rose after a lot of its peers in investment banking fell into tatters in the fall of 2008.
“Blankfein travelled to Russia when oil was at $140 a barrel and mused on his fears What if oil were to slide, say to $70 a barrel? What then? And what of Goldman itself? Desipit his proven success, Blankfein admitted to being ‘paranoid’ as he often described himself.”
Thanks again to Andrew Ross Sorkin for this quote as well as a lot of the other pieces in this book.
After the book was published and the incident that ended my personal trading career (I was “long” oil futures, stupid me.), oil went not just to $70 but (briefly) below zero (meaning the holders of oil would have had to pay you to take it). I didn’t read of anything of anyone actually doing this.
Anybody not wiped out in the crash just could wait and watch the price recover.
It went back up quickly after that day, as anybody paying attention at the gas pump would see.
Back to Goldman Sachs:
Blankfein rose through the ranks in Goldman Sachs after losing 50 pounds and quitting smoking.
He’s a smart guy: “graduated valedictorian of his high school class and with the help of scholarships and financial aid, he attended Harvard, the first member of his [Jewish] family to attend college.”
After that he went to Harvard Law and joined a firm … apparently he learned pretty early that he wasn’t cut out for that life.
“For several years he practically lived on an airplane between Los Angeles and California. On the rare weekends he found time to relax, he would drive out to Las Vegas with a a colleague to play blackjack. They once left their boss a memo: “If we don’t show up MOnday it’s because we’ve hit the jackpot.”
Later he was headhunted by a firm called J Aron, later acquired by Goldman, getting Blankfein’s foot in the door there.
His first demonstration of his “trading prowess” was by “structuring a trade that allowed a Muslim client to obey the Koran’s proscriptions against interest payments” At the time, the complex $100 Milion deal, which involved heding Standard & Poor’s 500 contracts, were the biggest Gold man had ever done.”
He also read widely and his bookish and collaborative qualities fit in well at Goldman and led to his rise.
He was also smart enough to recognize the overconfident Old Guard around him Paulson predicted “I think we may come out of this by year’s end.”
The next day Blankfein was having breakfast with a Goldman director and said “I don’t know why he’d say that … it can only get worse”
How right he was!
