The bestselling author of the acclaimed House of Cards and The Last Tycoons turns his spotlight on to Goldman Sachs and the controversy behind its success. Money and Power book. Read 68 reviews from the world's largest community for readers. From the bestselling, prize-winning author of THE LAST TYCOONS. Written by Current or Former Goldman Sachs Employees. • The Five Great Myths Money and Power: The History of Business by Howard B. Means. • The Great.
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Indeed, of the many ongoing mysteries about Goldman Sachs, one of the most overarching is just how it makes so much money, year in and year out, in good. Read Money and Power PDF - How Goldman Sachs Came to Rule the World by William D. Cohan Anchor | The bestselling author of the. Editorial Reviews. Review. "[A] definitve account of the most profitable and influential Money and Power: How Goldman Sachs Came to Rule the World - Kindle edition by William D. Cohan. Download it once and read it on your Kindle device.
They work for banks, brokerages, hedge funds, insurance companies and mortgage lenders. It is the largest single sector of the American economy, an industry that is almost double the size of America's manufacturing sector, a business with enormous power and global reach. It is the industry that led America and the world into its worst economic crisis since the Great Depression. The banks say they exist to create wealth, holding in trust our collective worth, promising to invest the trillions of dollars that stream in from businesses, pension funds and savings accounts that belong to all of us. One morning in the fall of , bankers arriving in Lower Manhattan were caught by surprise. We got sold out, banks got bailed out! You must go on the sidewalk!
Cohan is thorough, however, and it is a very capable account. It is more of a journalistic account, however, and a bit more explanation of how the business works and how the firm is organized would have been helpful. The Ellis book is better on this account.
These are not troubling concerns, however. If one is interested in the business, this is a useful book to read and an entertaining read as well.
As the investment bank that other firms aspire to be, this book is a peek behind the curtain of how Goldman Sachs really operates. In the late s, a partner named John C.
In many meetings detailed in the book, the clients were not even mentioned and when they were, the discussion was more toward how Goldman could make as much money from them as they can. The mission of Goldman seems to me to be that it is not sufficient to beat everyone—competitor, partner, client—in the great game of the financial markets, but, in the case of partners and competitors, to destroy them.
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The Making of Goldman Sachs. Charles D. King of Capital: David Carey. House of Cards: The Last Tycoons: Last Man Standing: Duff McDonald. Read more. Product details Paperback: Anchor; Reprint edition January 10, Language: English ISBN Start reading Money and Power: Don't have a Kindle? Try the Kindle edition and experience these great reading features: Share your thoughts with other customers.
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The definitive biography of Goldman. Very well written, very well researched, very well told, if a bit long, and perhaps too detailed in some areas. It is obvious that Goldman supported this book, as the author got broad access to pretty much all of the major figures in Goldman over the last several decades. That said, Mr. Cohan doesn't pull any punches in discussing the many scandals around Goldman, even going back to its earliest days. He says almost nothing negative about Mr.
Paulson and depicts him as a reluctant, country boy, with no ambition, who was brought to the head of Goldman by happenstance. Do you have any regrets about the way you spent the taxpayers' money? And whatever we did, whatever the standards of the time were, it didn't work out well. Maybe you could elaborate. I think our regulators and the industry have to focus on complexity.
In a synthetic, you pool reference securities that are indexed to specific more pools of mortgage. FRANK PARTNOY: —and that the managers of these large financial institutions in some ways have been given an impossible task, that they won't be able to comprehend what it is their institutions are doing.
And that is really, really scary. Trust us. You created credit default swaps that never existed a few years ago. Who was the brilliant person who came and said, "Let's do credit default swaps?
Fire him! Assembled here in June were a group of young bankers from JP Morgan. At the time, it all seemed innocent enough. They had parties. They threw each other in pools. You know, this is the normal stuff that happens at conferences. Some people drank, some people didn't. And I'm happy to say that, like, most people stayed reasonably sober.
But they also worked hard. They were striving to address an age-old problem in banking, how to reduce risk. We were thoughtful and deliberate and careful. We had a responsibility not just to make a profit for the shareholders, but to look after the financial system as a whole.
The first journalist to tell the full story was Gillian Tett. One way to do that was to sell loans. Another way, though, was to separate out the risk of a loan going bad from the loan itself. And out of that came this drive to develop credit default swaps.
This was a very new concept. Traditionally, derivatives were a way to bet on the future value of something. For hundreds of years, farmers have traded derivatives to protect themselves against fluctuating crop prices. It is this type of derivative that has been traded on the Commodities Exchange in Chicago, along with the futures of fuels, currencies and precious metals.
In Boca Raton, the JP Morgan team realized that they could use credit derivatives to trade their loan risks. This idea was essentially created under the banner of making the financial system safer. If Exxon were to fail on their obligations, then JP Morgan would have to step in and make good on those obligations on their behalf. There was a large amount of exposure, and there was a significant amount of risk associated with that.
Derivatives Trader: Every time a bank makes a loan, under banking regulations, they're required to set aside certain reserves of capital for the loan. So JP Morgan, when they made the loan to Exxon, would have had to set aside some capital.
Well, of course, if you don't have to do that and you're a bank, you— you'd prefer not to do that. You can take on more debt? And so risk was essentially dispersed.
And why did JP Morgan do that? Because we wanted to free up our capacity to do more business. Credit derivatives made it possible for a bank to skirt capital requirements.
And so banks became able to create more and more credit. They could make more loans. MARK BRICKELL: The innovative element of swaps is that they allow companies, financial institutions, governments, to shed the risks that they don't want to take and take on other risks that they would prefer to be exposed to.
JP Morgan had struck gold. In , they decided to ramp up their credit derivatives operation. That year, another young banker joined the team, Terri Duhon. That was what I was brought in to do. Duhon was asked to write swaps on bundles of debt. They had very low credit risk. And so we were giving investors an opportunity to, in effect, invest in our loan portfolio. And you can get it in one easy bite-sized piece.
Investors could choose how much risk they were willing to take. There were some investors that wanted to earn a big return on really risky stuff, and there were some investors that wanted to earn a little return on stuff that wasn't risky at all.
What if we could create a market where people were able to download and sell freely, independently of the companies themselves, the risk associated with lending to those companies? These products came to be known as synthetic collateralized debt obligations, synthetic CDOs. So there was a lot of— a lot of very positive reinforcement of the market. And it just grew.
It grew very naturally. Once the seed was planted, there wasn't any stopping it. It was amazing. It was clearly a product that was in need. We had identified a need. But with the creation of the credit default swap market, they had made banking history. And the thinking was that that would be an unambiguously positive thing.
Credit helps drive growth, helps companies deploy capital, helps employment, et cetera. It wasn't any longer just an idea in a room in Florida, it was the creation of an entire marketplace. It fueled a worldwide credit boom. Soon other banks got excited about the money to be made writing credit derivatives.
Paul LeBlanc was a derivative salesman at Morgan Stanley who remembers the pressure to get more deals done. I mean, I used to know all the statistics because they used to talk about it every meeting, how this is a growing market and you have to get your customers involved.
They can make money. We can make money. It was a massively important sector for us to focus on, derivatives. You can't look in the newspaper and get a price for them.
These are all private off-exchange markets. And nobody else in the market knows what's going on. NARRATOR: And because this market was opaque, the spreads — the difference between what banks could charge for derivatives and what it cost to provide them — could be huge. And that's why the banks trade them. If you were doing the same size deal in a derivative security, you might make 10 times the fee.
But there's a problem with all of this. Most people in finance assume risk can be eliminated, but all you can do is to move it around from one party to another party. That kind of risk overhanging the financial institutions of this country one day, with a thud, will wake everyone up. Dorgan, Brooksley Born was absolutely right because what she said is if you don't have transparency and regulation of derivatives, the risk is going to build up and they're going to lead to a financial crisis that's going to cause massive taxpayer bailouts.
They didn't want to have to quantify it on their balance sheet. They wanted to be able to push it off and hide it. And that was why they lobbied so hard to make sure that swaps and derivatives would be treated differently from other kinds of financial products. If you're going to— if you're going to write insurance, you have to have enough money to pay off that insurance.
And one thing we do know is that when a product of any type is designed with minimal regulation, capital and activity moves into that area and it expands dramatically. Keep your hands off everything. The markets will sort themselves out. And if there's a problem, then we'll clean up afterwards. And now that— that really was the way the Federal Reserve operated under— under his leadership for almost 20 years. And we do it by repealing Glass-Steagall.
It also symbolized when everything really started to go wrong. And what you see is this explosion in the growth of derivatives in the United States and throughout the world. Credit default swaps would now be introduced to new markets.