Founding and establishment

In 1869, Goldman Sachs was founded by Marcus Goldman in New York City in a one-room basement office next to a coal chute.^[6][7][8] In 1882, Goldman's son-in-law Samuel Sachs joined the firm.^[9][10] In 1885, Goldman's son, Henry Goldman, and his son-in-law, Ludwig Dreyfuss, joined the business and the firm adopted its present name, Goldman Sachs & Co.^[11] The company pioneered the use of commercial paper for entrepreneurs and joined the New York Stock Exchange (NYSE) in 1896.^[12] By 1898, the firm's capital stood at $1.6 million.^[12] It opened offices in Boston and Chicago in 1900, San Francisco in 1918, and Philadelphia and St. Louis in 1920.^[13]

Goldman entered the initial public offering market in 1906 when it took Sears, Roebuck and Company public.^[12] The deal was facilitated by Henry Goldman's personal friendship with Julius Rosenwald, an owner of Sears.^[12] Other underwriting work for initial public offerings followed, including those of General Cigar Company also in 1906, F. W. Woolworth Company in 1912, and Continental Can.^[13][12] The firm was an innovator at establishing the price–earnings ratio, instead of book value, as a method for valuing companies, and was therefore able to raise funds for retailers and companies with few hard assets.^[13]

In 1912, Henry S. Bowers became the first non-member of the founding family to become a partner of the company and share in its profits.^[12]

In 1917, under growing pressure from the other partners in the firm due to his pro-German stance, Henry Goldman resigned.^[12] The Sachs family gained full control of the firm until Waddill Catchings joined the company in 1918.^[12] By 1928, Catchings was the Goldman partner with the single largest stake in the firm.^[12] In 1919, the company acquired a major interest in Merck & Co. and in 1922, it acquired a major interest in General Foods.^[13]

On December 4, 1928, the firm launched the Goldman Sachs Trading Corp.Ad, a closed-end fund.^[14] The fund failed during the Wall Street Crash of 1929, amid accusations that Goldman had engaged in share price manipulation and insider trading.^[12]

1930-1980

In 1930, during the Great Depression, the firm ousted Catchings, and Sidney Weinberg assumed the role of senior partner. Weinberg shifted Goldman's focus away from trading and toward investment banking.^[12] His actions helped to restore some of Goldman's tarnished reputation. Under Weinberg's leadership, Goldman was the lead advisor on the $657 million initial public offering of Ford Motor Company in 1956, a major victory at the time, as well as the $350 million debenture offering by Sears Roebuck in 1958.^[13] Under Weinberg's leadership, the firm started an investment research division and a municipal bond department, and it became an early innovator in risk arbitrage.^[12]

In the 1950s, Gus Levy joined the firm as a securities trader, where two powers fought for supremacy, one from investment banking and one from securities trading. Levy was a pioneer in block trading and the firm established this trend under his guidance. Due to Weinberg's heavy influence, the firm formed an investment banking division in 1956 in an attempt to shift focus off Weinberg.^[12]

In 1957, the company's headquarters were relocated to 20 Broad Street, New York City.^[12]

In 1969, Levy took over Weinberg's role as Senior Partner and built Goldman's trading franchise once again.^[15] Levy is credited with Goldman's famous philosophy of being "long-term greedy," which implied that as long as money is made over the long term, short-term losses are bearable. At the same time, partners reinvested nearly all of their earnings in the firm.^[16] Weinberg remained a senior partner of the firm and died in July of that year.^[17]

Another financial crisis for the firm occurred in 1970, when the Penn Central Transportation Company went bankrupt with over $80 million (~$468 million in 2022) in commercial paper outstanding, most of it issued through Goldman Sachs. The bankruptcy was large, and the resulting lawsuits, notably by the SEC, threatened the partnership capital, survival, and reputation of the firm.^[18] It was this bankruptcy that resulted in credit ratings for every issuer of commercial paper today by several credit rating services.^[19]

Under the direction of Senior Partner Stanley R. Miller, the firm opened its first international office in London in 1970 and created a Private Wealth Management division along with a fixed income division in 1972.^[13][20] It pioneered the "white knight" strategy in 1974 during its attempts to defend Electric Storage Battery against a hostile takeover bid from International Nickel and Goldman's rival, Morgan Stanley.^[21] John Weinberg, the son of Sidney Weinberg, and John C. Whitehead assumed the roles of co-senior partners in 1976, once again emphasizing the co-leadership at the firm. One of their initiatives was the establishment of 14 business principles.^[22]

1981-2000

On November 16, 1981, the firm acquired J. Aron & Company, a commodities trading firm that merged with the Fixed Income division to become known as Fixed Income, Currencies, and Commodities.^[23] J. Aron was involved in the coffee and gold markets, and the former CEO of Goldman, Lloyd Blankfein, joined the firm as a result of this merger.^[24]

In 1983, the firm moved into a newly constructed global headquarters at 85 Broad Street and occupied that building until it moved to its current headquarters in 2009.^[25][26] In 1985, it underwrote the public offering of the real estate investment trust that owned Rockefeller Center, then the largest REIT offering in history.^[27] In accordance with the beginning of the dissolution of the Soviet Union, the firm also became involved in facilitating the global privatization movement by advising companies that were spinning off from their parent governments.^[28]

In 1986, the firm formed Goldman Sachs Asset Management, which manages the majority of its mutual funds and hedge funds.^[29] In the same year, the firm also underwrote the IPO of Microsoft, advised General Electric on its acquisition of RCA,^[29] and joined the London and Tokyo stock exchanges, where its mergers and acquisitions grew.^[13] During the 1980s, the firm became the first bank to distribute its investment research electronically and created the first public offering of original issue deep-discount bond.^[29] In 1988, it helped the State Bank of India obtain a credit rating and issue US$200 million in the US commercial paper market.^[30]

Robert Rubin and Stephen Friedman assumed the co-senior partnership in 1990 and pledged to focus on globalization of the firm to strengthen the merger & acquisition and trading business lines.^[31] In 1990, the firm introduced paperless trading to the New York Stock Exchange.^[32] Rubin left the firm in 1992 to work in the Presidency of Bill Clinton.^[13] In 1994, the company launched the Goldman Sachs Commodity Index (GSCI) and opened its first office in China in Beijing.^[33] That same year, Jon Corzine became CEO, following the retirement of Friedman as general partner.^[34]

Rubin had drawn criticism in Congress for using a Treasury Department account under his personal control to distribute $20 billion to bail out Mexican bonds, of which Goldman was a key distributor.^[35] On November 22, 1994, the Mexican Bolsa stock market admitted Goldman Sachs and one other firm to operate on that market.^[36] In 1994, the Mexican peso crisis threatened to wipe out the value of Mexico's bonds held by Goldman Sachs.^[37]

In 1994, Goldman financed Rockefeller Center in a deal that allowed it to take an ownership interest^[38] in 1996, and sold Rockefeller Center to Tishman Speyer in 2000.^[39] In April 1996, Goldman was the lead underwriter of the initial public offering of Yahoo!.^[40] In 1998, it was the co-lead manager of the ¥2 trillion (yen) NTT DoCoMo IPO.^[41] In 1999, Goldman acquired Hull Trading Company for $531 million (~$882 million in 2022),^[42][43] as part of its shift towards electronic trading.^[44] After decades of debate among the partners, the company became a public company via an initial public offering in May 1999.^[45] Goldman sold 12.6% of the company to the public, and after the IPO, 48.3% of the company was held by 221 former partners, 21.2% of the company was held by non-partner employees, and the remaining 17.9% was held by retired Goldman partners and two long-time investors, Sumitomo Bank Ltd. and Assn, the investing arm of Kamehameha Schools.^[46] The shares were priced at $53 each at listing. After the IPO, Henry Paulson became chairman and chief executive officer, succeeding Jon Corzine.^[47]

2000-2007

In September 2000, Goldman Sachs purchased Spear, Leeds, & Kellogg, one of the largest specialist firms on the New York Stock Exchange, for $6.3 billion (~$10.2 billion in 2022).^[48]

In January 2000, Goldman, along with Lehman Brothers, was the lead manager for the first internet bond offering for the World Bank.^[49]

In 2000, Goldman Sachs advised Jim and Janet Baker on the sale of Dragon NaturallySpeaking to Lernout & Hauspie of Belgium for $580 million in L&H stock. L&H later collapsed due to accounting fraud and its stock price declined significantly. The Bakers filed a lawsuit against Goldman Sachs, alleging negligence, intentional and negligent misrepresentation, and breach of fiduciary duty since Goldman did not uncover and warn Dragon or the Bakers of the accounting problems of the acquirer, L&H. Lawyers for Goldman said it was not Goldman's job to uncover the accounting fraud. On January 23, 2013, a federal jury rejected the Bakers' claims and found Goldman Sachs not liable to the Bakers, instead siding with Goldman in counterclaims.^[50]

In March 2003, the firm took a 45% stake in a joint venture with JBWere, the Australian investment bank.^[49] In April 2003, Goldman acquired The Ayco Company L.P., a fee-based financial counseling service.^[51]

In October 2003, in its Global Economics Paper No. 99 (Dreaming With BRICs: The Path to 2050), researchers at Goldman Sachs led by Jim O'Neill, Baron O'Neill of Gatley introduced the BRIC concept, identifying the developing countries of Brazil, Russia, India, and China, as rising economic powers..^[52]

In May 2006, Paulson left the firm to serve as United States Secretary of the Treasury, and Lloyd Blankfein was promoted to chairman and chief executive officer.^[53]

In January 2007, Goldman, along with CanWest Global Communications, acquired Alliance Atlantis, the company with the broadcast rights to the CSI franchise.^[54]

Subprime mortgage crisis: 2007–2008

As a result of its involvement in securitization during the subprime mortgage crisis, Goldman Sachs suffered during the 2007–2008 financial crisis,^[55][56] and it received a $10 billion investment from the United States Department of the Treasury as part of the Troubled Asset Relief Program, a financial bailout created by the Emergency Economic Stabilization Act of 2008. The investment was made in November 2008 and was repaid with interest in June 2009.^[57][58]

During the 2007 subprime mortgage crisis, Goldman profited from the collapse in subprime mortgage bonds in summer 2007 by short-selling subprime mortgage-backed securities. Two Goldman traders, Michael Swenson and Josh Birnbaum, are credited with being responsible for the firm's large profits during the crisis.^[59][60] The pair, members of Goldman's structured products group in New York City, made a profit of $4 billion by "betting" on a collapse in the subprime market and shorting mortgage-related securities. By summer 2007, they persuaded colleagues to see their point of view and convinced skeptical risk management executives.^[61] The firm initially avoided large subprime write-downs and achieved a net profit due to significant losses on non-prime securitized loans being offset by gains on short mortgage positions. The firm's viability was called into question as the crisis intensified in September 2008.

In October 2007, Goldman Sachs was criticized for packaging risky mortgages and selling them to the public as safe investments.^[62]

In 2007, former Goldman Sachs trader Matthew Marshall Taylor was fired after hiding an $8.3 billion unauthorized trade involving derivatives on the S&P 500 index by making "multiple false entries" into a Goldman trading system, with the objective of protecting his year-end bonus of $1.5 million. The trades cost the company $118 million. In 2013, Taylor plead guilty to charges and was sentenced to 9 months in prison and was ordered to repay the $118 million loss.^[63]

On September 21, 2008, Goldman Sachs and Morgan Stanley, the last two major investment banks in the United States, both confirmed that they would become traditional bank holding companies.^[64][65] The Federal Reserve's approval of their bid to become banks ended the business model of an independent securities firm, 75 years after Congress separated them from deposit-taking lenders, and capped weeks of chaos that sent Lehman Brothers into bankruptcy and led to the rushed sale of Merrill Lynch to Bank of America Corp.^[66] On September 23, 2008, Berkshire Hathaway agreed to purchase $5 billion in Goldman's preferred stock, and also received warrants to buy another $5 billion in Goldman's common stock within five years.^[67] The company also raised $5 billion via a public offering of shares at $123 per share.^[67] Goldman also received a $10 billion preferred stock investment from the U.S. Treasury in October 2008, as part of the Troubled Asset Relief Program (TARP).^[68]

Andrew Cuomo, then New York Attorney General, questioned Goldman's decision to pay 953 employees bonuses of at least $1 million (~$1.34 million in 2022) each after it received TARP funds in 2008.^[69] In that same period, however, CEO Lloyd Blankfein and six other senior executives opted to forgo bonuses, stating they believed it was the right thing to do, in light of "the fact that we are part of an industry that's directly associated with the ongoing economic distress".^[70] Cuomo called the move "appropriate and prudent", and urged the executives of other banks to follow the firm's lead and refuse bonus payments.^[70] In June 2009, Goldman Sachs repaid the U.S. Treasury's TARP investment, with 23% interest (in the form of $318 million in preferred dividend payments and $1.418 billion in warrant redemptions).^[71] On March 18, 2011, Goldman Sachs received Federal Reserve approval to buy back Berkshire's preferred stock in Goldman.^[72] In December 2009, Goldman announced that its top 30 executives would be paid year-end bonuses in restricted stock that they cannot sell for five years, with clawback provisions.^[73][74]

During the 2007–2008 financial crisis, the Federal Reserve introduced several short-term credit and liquidity facilities to help stabilize markets. Some of the transactions under these facilities provided liquidity to institutions whose disorderly failure could have severely stressed an already fragile financial system.^[75] Goldman Sachs was one of the heaviest users of these loan facilities, taking out many loans between March 18, 2008, and April 22, 2009. The Primary Dealer Credit Facility (PDCF), the first Fed facility ever to provide overnight loans to investment banks, loaned Goldman Sachs a total of $589 billion against collateral such as corporate market instruments and mortgage-backed securities.^[76] The Term securities Lending Facility (TSLF), which allows primary dealers to borrow liquid Treasury securities for one month in exchange for less liquid collateral, loaned Goldman Sachs a total of $193 billion.^[77] Goldman Sachs's borrowings totaled $782 billion in hundreds of revolving transactions over these months.^[78] The loans were fully repaid in accordance with the terms of the facilities.^[79]

In 2008, Goldman Sachs started a "Returnship" internship program after research and consulting with other firms led them to understand that career breaks happen and that returning to the workforce was difficult, especially for women. The goal of the Returnship program was to offer a chance at temporary employment for workers. Goldman Sachs holds the trademark for the term 'Returnship'.^[80]

According to a 2009 BrandAsset Valuator survey taken of 17,000 people nationwide, the firm's reputation suffered in 2008 and 2009, and rival Morgan Stanley was respected more than Goldman Sachs, a reversal of the sentiment in 2006.^[81] In 2011, Goldman took full control of JBWere in a $1 billion (~$1.29 billion in 2022) buyout.^[82]

Global Alpha

In September 2011, Goldman Sachs announced that it was shutting down Global Alpha Fund LP, its largest hedge fund, which had been housed under Goldman Sachs Asset Management (GSAM).^[83][84] Global Alpha, which was created in the mid-1990s with $10 million,^[85] was once "one of the biggest and best performing hedge funds in the world" with more than $12 billion assets under management (AUM) at its peak in 2007.^[86] Global Alpha used quantitative analysis and computer-driven models to invest,^[83] using high-frequency trading. It was founded by Cliff Asness and Mark Carhart, who developed the statistical models on which the trading was based.^[85] Global Alpha was described by The Wall Street Journal as a "big, secretive hedge fund"—the "Cadillac of a fleet of alternative investments" that had made millions for Goldman Sachs by 2006.^[87] By mid-2008, assets under management (AUM) of the fund had declined to $2.5 billion, by June 2011, AUM was less than $1.7 billion, and by September 2011, after suffering losses that year, AUM was approximately $1 billion.^[88]

2013-2015

In 2013, Goldman underwrote the $2.913 billion (~$3.63 billion in 2022) Grand Parkway System Toll Revenue Bond offering for the Houston, Texas area, one of the fastest-growing areas in the United States. The bond will be repaid from toll revenue.^[89][90]

In April 2013, together with Deutsche Bank, Goldman led a $17 billion bond offering by Apple Inc., the largest corporate-bond deal in history^[91][92] and Apple's first since 1996. Goldman Sachs managed both of Apple's previous bond offerings in the 1990s.^[92]

In June 2013, Goldman Sachs purchased the loan portfolio from Brisbane-based Suncorp Group, one of Australia's largest banks and insurance companies. The A$1.6 billion face amount loan portfolio was purchased for A$960 million.^[93][94]

In September 2013, Goldman Sachs Asset Management agreed to acquire the stable value business of Deutsche Asset & Wealth Management, with total assets under supervision of $21.6 billion (~$26.9 billion in 2022) as of June 30, 2013.^[95]

In 2014, Goldman Sachs acquired an 18% stake in DONG Energy (now Ørsted A/S), the largest electric utility in Denmark, from the Danish government after the company needed fresh capital but was unable to attract state funding.^[96] The sale led to protests by the public in Copenhagen and led to the of the resignation of six cabinet ministers and the withdrawal of the Socialist People's Party from Prime Minister Helle Thorning-Schmidt's leftist governing coalition.^[97] Protesters were wary of Goldman having an ownership stake due to its role in the 2007-2008 financial crisis and the possible shift of the company's earnings to tax havens.^[97] Additional protests occurred in 2016 when the initial public offering of the company resulted in a windfall profit for Goldman.^[98] Goldman purchased the 18% stake in 2014 for 8 billion kroner and sold just over a 6% stake in 2017 for 6.5 billion kroner.^[99] Goldman sold its remaining stake in the utility in 2017.^[100]

In January 2014, the Libyan Investment Authority (LIA) filed a lawsuit against Goldman for $1 billion after the firm lost 98% of the $1.3 billion the LIA invested with Goldman in 2007.^[101][102] The losses stemmed from derivatives trades that earned Goldman $350 million in fees.^[103][104] In court documents, Goldman admitted to having used small gifts, occasional travel and an internship to gain access to Libya's sovereign wealth fund.^[105] In October 2016, after a trial, Justice Vivien Rose entered a judgment in Goldman Sachs's favor, saying that the relationship "did not go beyond the normal cordial and mutually beneficial relationship that grows up between a bank and a client" and that Goldman's fees were not excessive.^[106]

In August 2015, Goldman Sachs agreed to acquire General Electric's GE Capital Bank on-line deposit platform, including US$8-billion of on-line deposits and another US$8-billion of brokered certificates of deposit.^[107]

2016–2020

Logo of Marcus by Goldman Sachs

In April 2016, Goldman Sachs launched GS Bank, a direct bank.^[108] In October 2016, Goldman Sachs Bank USA started offering no-fee unsecured personal loans under the brand Marcus by Goldman Sachs.^[109] In March 2016, Goldman Sachs agreed to acquire financial technology startup Honest Dollar, a digital retirement savings tool founded by American entrepreneur Whurley, focused on helping small-business employees and self-employed workers obtain affordable retirement plans. Terms of the deal were not disclosed.^[110]

In May 2017, Goldman Sachs purchased $2.8 billion (~$3.3 billion in 2022) of PDVSA 2022 bonds from the Central Bank of Venezuela during the 2017 Venezuelan protests.^[111]

In April 2018, Goldman Sachs acquired Clarity Money, a personal finance startup.^[112] On September 10, 2018, Goldman Sachs acquired Boyd Corporation from Genstar Capital for $3 billion (~$3.46 billion in 2022).^[113] On May 16, 2019, Goldman Sachs acquired United Capital Financial Advisers, LLC for $750 million (~$851 million in 2022).^[114]

Example of physical Apple Card, issued by Goldman Sachs

In March 2019, Apple, Inc. announced that it would partner with Goldman Sachs to launch the Apple Card, the bank's first credit card offering.^[115] The partnership opportunity had been turned down by other banks including Barclays, Citigroup, JPMorgan Chase and Synchrony Financial.^[116][117]

In March 2019, Goldman Sachs was fined £34.4 million by the London regulator for misreporting millions of transactions over a decade.^[118]

In December 2019, the company pledged to invest and finance $750 billion in climate transition projects and to stop financing oil exploration in the Arctic and some projects related to coal.^[119]

2020–present

In June 2020, Goldman Sachs introduced a new corporate typeface, Goldman Sans, and made it freely available. After Internet users discovered that the terms of the license prohibited the disparagement of Goldman Sachs, the bank was much mocked and disparaged in its own font, until it eventually changed the license to the standard SIL Open Font License.^[120]

Goldman Sachs was embroiled in the 1Malaysia Development Berhad scandal, related to Malaysia's sovereign wealth fund, 1Malaysia Development Berhad (1MDB). The bank paid a fine of $2.9 billion under the Foreign Corrupt Practices Act, the largest such fine to date. In July 2020, Goldman Sachs agreed on a $3.9 billion settlement in Malaysia for criminal charges related to the 1MDB scandal.^[121][122] For charges brought for the same case in other countries, Goldman Sachs agreed in October of the same year to pay more than $2.9 billion, with over $2 billion going to fines imposed in the US.^[123][124]

Effective July 1, 2020, the firm no longer manages initial public offerings of a company without "at least one diverse board candidate, with a focus on women" in the U.S. and in Europe.^[125][126]

In August 2021, Goldman Sachs announced that it had agreed to acquire NN Investment Partners, which had US$335 billion in assets under management, for €1.7 billion from NN Group.^[127]

In September 2021, Goldman Sachs announced to acquire GreenSky for about $2.24 billion (~$2.4 billion in 2022) and completed the acquisition in March 2022.^[128]

In March 2022, Goldman Sachs announced it was winding down its business in Russia in compliance with regulatory and licensing requirements regarding sanctions after the Russian invasion of Ukraine.^[129]

Also during that same month, Goldman Sachs announced it had acquired NextCapital Group, a Chicago-based open-architecture digital retirement advice provider.^[130]

In June 2022, Goldman Sachs offered its first derivatives product linked to Ether (ETH).^[131] Goldman Sachs was announced as an official partner of McLaren.^[132]

In September 2022, Goldman Sachs announced the layoff of hundreds of employees across the company, apparently as a result of the earnings report from July the same year that showed a significant reduction.^[133]

Role in the 2007–2008 financial crisis

Goldman was criticized for allegedly misleading its investors and profiting from the collapse of the mortgage market during the 2007–2008 financial crisis. This led to investigations from the United States Congress, the United States Department of Justice, and a lawsuit from the U.S. Securities and Exchange Commission^[140] that resulted in Goldman paying a $550 million settlement in July 2010.^[141] Goldman Sachs denied wrongdoing and stated that its customers were aware of its bets against the mortgage-related security products it was selling to them, and that it only used those bets to hedge against losses.^[142][143]

Goldman Sachs was "excoriated by the press and the public" according to journalists Bethany McLean and Joe Nocera.^[144] This was despite the non-retail nature of its business that would normally have kept it out of the public eye.^[145] In a story in Rolling Stone published in July 2009, Matt Taibbi characterized Goldman Sachs as a "great vampire squid" sucking money instead of blood, allegedly engineering "every major market manipulation since the Great Depression ... from tech stocks to high gas prices".^{[146][147][148][149]}

While all the investment banks were scolded by congressional investigations, Goldman Sachs was subject to "a solo hearing in front of the Senate Permanent Subcommittee on Investigations" and a critical report.^[145][150] In 2011, a Senate panel released a report accusing Goldman Sachs of misleading clients and engaging in conflicts of interest.^[151]

Benefits from the government bailout of AIG

American International Group received $180 billion in government loans during the financial crisis, much of which was used to pay counterparties under credit default swaps purchased from AIG. Goldman Sachs received $12.9 billion. However, due to the size and nature of the payouts, there was considerable controversy in the media and among some politicians as to whether banks, including Goldman Sachs, should have been forced to take greater losses and should not have been paid in full via government loans to AIG.^{[158][159][160][161][162][163]} If the government let AIG default, according to money manager Michael Lewitt, "its collapse would be as close to an extinction-level event as the financial markets have seen since the Great Depression".^[164]

Stock price manipulation

Goldman Sachs was charged for repeatedly issuing research reports with extremely inflated financial projections for Exodus Communications and Goldman Sachs was accused of giving Exodus its highest stock rating even though Goldman knew Exodus did not deserve such a rating.^[178] On July 15, 2003, Goldman Sachs, Lehman Brothers and Morgan Stanley were sued for artificially inflating the stock price of RSL Communications by issuing untrue or materially misleading statements in research analyst reports, and paid $3,380,000 (~$5.18 million in 2022) for settlement.^[179]

Goldman Sachs was accused of asking for kickback bribes from institutional clients who made large profits flipping stocks which Goldman had intentionally undervalued in initial public offerings it was underwriting during the dot-com bubble. Documents under seal in a decade-long lawsuit concerning eToys.com's initial public offering (IPO) in 1999 but released accidentally to The New York Times show that IPOs managed by Goldman were purposely underpriced to generate profits for clients of Goldman and that these clients were asked by Goldman to return some of the profits via increased business. The clients willingly complied with these demands because they understood it was necessary to participate in further such undervalued IPOs.^[180] Companies selling undervalued stock and their initial consumer stockholders were both defrauded by this practice.^[181]

Use of offshore tax havens

A 2016 report by Public Interest Research Group stated that "Goldman Sachs reports having 987 subsidiaries in offshore tax havens, 537 of which are in the Cayman Islands, despite not operating a single legitimate office in that country, according to its own website. The group officially holds $28.6 billion offshore." The report also noted several other major U.S. banks and companies use the same tax-avoidance tactics.^[182]

In 2008, Goldman Sachs had an effective tax rate of only 3.8%, down from 34% the year before, and its tax liability decreased to $14 million in 2008, compared to $6 billion in 2007.^[183] Critics have argued that the reduction in Goldman Sachs's tax rate was achieved by shifting its earnings to subsidiaries in low or no-tax nations, such as the Cayman Islands.^[184]

Involvement in the European sovereign debt crisis

Former Prime Minister of Greece Lucas Papademos

Goldman was criticized for its involvement in the 2010 European debt crisis. In 2001, to avoid non-compliance with the Maastricht Treaty, Goldman arranged a secret loan of €2.8 billion for Greece disguised as an off-the-books "cross-currency swap", hiding 2% of Greece's national debt. Goldman received a fee of €600 million for the complicated transaction.^[185][186] In September 2009, Goldman Sachs, among others, created a special credit default swap (CDS) index to cover the high risk of Greece's national debt.^[187] The interest-rates of Greek national bonds soared, leading the Greek economy very close to bankruptcy in 2010 and 2011.^[188]

Many European leaders with roles in the crisis had ties to Goldman Sachs.^[189] Lucas Papademos, Greece's former prime minister, ran the Central Bank of Greece at the time of the controversial derivatives deals with Goldman Sachs that enabled Greece to hide the size of its debt.^[189] Petros Christodoulou, general manager of the Greek Public Debt Management Agency was a former employee of Goldman Sachs.^[189] Mario Monti, Italy's former prime minister and finance minister, who headed the new government that took over after Berlusconi's resignation, was an international adviser to Goldman Sachs.^[189] Otmar Issing, former board member of the Bundesbank and the Executive Board of the European Bank also advised Goldman Sachs.^[189] Mario Draghi, then head of the European Central Bank, was the former managing director of Goldman Sachs International.^[189] António Borges, Head of the European Department of the International Monetary Fund in 2010–2011 and responsible for most of enterprise privatizations in Portugal since 2011, was the former vice chairman of Goldman Sachs International.^[189] Carlos Moedas, a former Goldman Sachs employee, was the Secretary of State to the Prime Minister of Portugal and Director of ESAME, the agency created to monitor and control the implementation of the structural reforms agreed by the government of Portugal and the troika composed of the European Commission, the European Central Bank and the International Monetary Fund. Peter Sutherland, former Attorney General of Ireland was a non-executive director of Goldman Sachs International.^[190]

Employees' views

Although the allegations against Goldman were later discovered to be lacking evidence, in March 2012, Greg Smith, then-head of Goldman Sachs U.S. equity derivatives sales business in Europe, the Middle East and Africa (EMEA), resigned his position via an op-ed in The New York Times criticizing the company and its executives and wrote a book titled Why I left Goldman Sachs.^{[134][191][192][193][194]} Almost all the claims made by Smith turned out to be lacking in evidence and Smith was alleged to be a con artist by The Observer. However, The New York Times never issued a retraction or admitted to any error in judgment in initially publishing Smith's op-ed.^{[194][195][196]}

Steven Mandis

In 2014, a book by former Goldman portfolio manager Steven George Mandis was published entitled What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences. Mandis also wrote and defended a PhD dissertation about Goldman at Columbia University.^[197] Mandis left in 2004 after working for the firm for 12 years.^[198] According to Mandis, there was an "organizational drift" in the company's evolution and Goldman came under a variety of pressures that resulted in slow, incremental changes to its culture and business practices. Those changes included becoming a public company, which limited the personal risk of Goldman executives and shifted it to shareholders and put pressure on the company to grow, leading to conflicts of interest.^[199]

Gender bias lawsuit

In 2010, two former female employees filed a lawsuit against Goldman Sachs for gender discrimination. Cristina Chen-Oster and Shanna Orlich claimed that the firm fostered an "uncorrected culture of sexual harassment and assault" causing women to either be "sexualized or ignored". The suit cited both cultural and pay discrimination including frequent client trips to strip clubs, client golf outings that excluded female employees, and the fact that female vice presidents made 21% less than their male counterparts.^[201] In March 2018, the judge ruled that the female employees may pursue their claims as a group in a class-action lawsuit against Goldman on gender bias, but the class action excludes their claim on sexual harassment.^[202]

In May 2023, Goldman Sachs agreed to pay $215 million (£170.5 million) to resolve claims made by nearly 2800 female staff. This settlement was made over accusations of the company's discriminatory practices, allegedly providing women with lower salaries and lesser opportunities. Government records have revealed that female employees at Goldman Sachs earned 20% less than their male counterparts, which is significantly higher than the 9.4% national gender pay gap. The settlement was reached a month before the scheduled trial of the class-action lawsuit.^[203]

Advice to short California bonds underwritten by the firm

On November 11, 2008, the Los Angeles Times reported that Goldman Sachs had both earned $25 million from underwriting California bonds, and advised other clients to short those bonds.^[204] While some journalists criticized the contradictory actions,^[205] others pointed out that the opposite investment decisions undertaken by the underwriting side and the trading side of the bank were normal and in line with regulations regarding Chinese walls, and in fact critics had demanded increased independence between underwriting and trading.^[206]

Personnel "revolving-door" with U.S. government

Several people on the list of former employees of Goldman Sachs have later worked in government positions. Notable examples include British Prime Minister Rishi Sunak, former U.S. Secretaries of the Treasury Steven Mnuchin, Robert Rubin, and Henry Paulson; U.S. Securities and Exchange Commission chairman Gary Gensler; former Under Secretary of State John C. Whitehead; former chief economic advisor Gary Cohn; Governor of New Jersey Phil Murphy and former Governor of New Jersey Jon Corzine; former Prime Minister of Italy Mario Monti; former European Central Bank President and former Prime Minister of Italy Mario Draghi; former Bank of Canada and Bank of England Governor Mark Carney; and the former Prime Minister of Australia Malcolm Turnbull. In addition, former Goldman employees have headed the New York Stock Exchange, the London Stock Exchange Group, the World Bank, and competing banks such as Citigroup and Merrill Lynch.

During 2008 Goldman Sachs received criticism for an apparent revolving door relationship, in which its employees and consultants moved in and out of high-level U.S. Government positions, creating the potential for conflicts of interest and leading to the moniker "Government Sachs".^[136] Former Treasury Secretary Henry Paulson and former United States Senator and former Governor of New Jersey Jon Corzine are former CEOs of Goldman Sachs along with current governor Murphy. Additional controversy attended the selection of former Goldman Sachs lobbyist Mark A. Patterson as chief of staff to Treasury Secretary Timothy Geithner, despite President Barack Obama's campaign promise that he would limit the influence of lobbyists in his administration.^[207] In February 2011, the Washington Examiner reported that Goldman Sachs was "the company from which Obama raised the most money in 2008", and that its "CEO Lloyd Blankfein has visited the White House 10 times".^[208]

Insider trading cases

In 1986, Goldman Sachs investment banker David Brown pleaded guilty to charges of passing inside information on a takeover deal that eventually was provided to Ivan Boesky.^[209] In 1989, Robert M. Freeman, who was a senior Partner, who was the Head of Risk Arbitrage, and who was a protégé of Robert Rubin, pleaded guilty to insider trading, for his own account and for the firm's account.^[210]

Rajat Gupta insider trading case

Main article: Raj Rajaratnam/Galleon Group, Anil Kumar, and Rajat Gupta insider trading cases

Rajat Gupta

In April 2010, Goldman director Rajat Gupta was named in an insider-trading case after allegedly informing Raj Rajaratnam of Galleon Group about the $5 billion Berkshire Hathaway investment in Goldman during the 2007–2008 financial crisis. Gupta had told Goldman the month before his involvement became public that he wouldn't seek re-election as a director.^[211][212] The United States Securities and Exchange Commission (SEC) announced civil charges against Gupta covering the Berkshire investment as well as for providing confidential quarterly earnings information from Goldman and Procter & Gamble, on which Gupta served as a member of the board of directors. Gupta was an investor in some of the Galleon hedge funds and he had other business interests with Rajaratnam. Rajaratnam used the information from Gupta to illegally profit in hedge fund trades; the information on Goldman made Rajaratnam's funds $17 million richer and the Procter & Gamble data created illegal profits of more than $570,000 for Galleon funds managed by others. Gupta denied the accusations. He was also a board member of AMR Corporation.^[213][214]

Gupta was convicted in June 2012 on insider trading charges stemming from the cases on four criminal felony counts of conspiracy and securities fraud. He was sentenced in October 2012 to two years in prison, an additional year on supervised release and ordered to pay $5 million (~$6.33 million in 2022) in fines.^[215] In January 2016, he was released from prison to serve his remaining sentence at home.^[216] Gupta challenged the conviction through the courts; it was upheld in 2019.^[217]

Abacus synthetic CDOs and SEC lawsuit

Unlike many investors and investment bankers, Goldman Sachs anticipated the subprime mortgage crisis.^[218] Some of its traders became "bearish" on the housing boom beginning in 2004 and developed mortgage-related securities, originally intended to protect Goldman from investment losses in the housing market. In late 2006, Goldman management changed the firm's overall stance on the mortgage market from positive to negative. As the market began its downturn, Goldman "created even more of these securities", no longer just hedging or satisfying investor orders but, according to business journalist Gretchen Morgenson, "enabling it to pocket huge profits" from the mortgage defaults and that Goldman "used the C.D.O.'s to place unusually large negative bets that were not mainly for hedging purposes".^[218] Authors Bethany McLean and Joe Nocera stated that "the firm's later insistence that it was merely a 'market maker' in these transactions – implying that it had no stake in the economic performance of the securities it was selling to clients – became less true over time"-^[219]

The investments were called synthetic CDOs because unlike regular collateralized debt obligations, the principal and interest they paid out came not from mortgages or other loans, but from premiums to pay for insurance against mortgage defaults – the insurance known as "credit default swaps". Goldman and some other hedge funds held a "short" position in the securities, paying the premiums, while the investors (insurance companies, pension funds, etc.) receiving the premiums were the "long" position. The longs were responsible for paying the insurance "claim" to Goldman and any other shorts if the mortgages or other loans defaulted. Through April 2007, Goldman issued over 20 CDOs in its "Abacus" series worth a total of $10.9 billion (~$14.9 billion in 2022).^[220] All together Goldman packaged, sold, and shorted a total of 47 synthetic CDOs, with an aggregate face value of $66 billion between July 1, 2004, and May 31, 2007.^[221]

But while Goldman was praised for its foresight, some argued its bets against the securities it created gave it a vested interest in their failure. These securities performed very poorly for the long investors and by April 2010, at least US$5 billion (~$6.58 billion in 2022) worth of the securities either carried "junk" ratings or had defaulted.^[222] One CDO examined by critics which Goldman bet against but also sold to investors, was the $800 million (~$1.12 billion in 2022) Hudson Mezzanine CDO issued in 2006. In the Senate Permanent Subcommittee hearings, Goldman executives stated that the company was trying to remove subprime securities from its books. Unable to sell them directly, it included them in the underlying securities of the CDO and took the short side, but critics McLean and Nocera complained the CDO prospectus did not explain this but described its contents as "'assets sourced from the Street', making it sound as though Goldman randomly selected the securities, instead of specifically creating a hedge for its own book".^[223] The CDO did not perform well, and by March 2008 – just 18 months after its issue – so many borrowers had defaulted that holders of the security paid out "about US$310 million to Goldman and others who had bet against it".^[218] Goldman's head of European fixed-income sales lamented in an e-mail made public by the Senate Permanent Subcommittee on Investigations, the "real bad feeling across European sales about some of the trades we did with clients" who had invested in the CDO. "The damage this has done to our franchise is very significant."^[224]

Alleged commodity price manipulation

A provision of the 1999 financial deregulation law, the Gramm-Leach-Bliley Act, allows commercial banks to enter into any business activity that is "complementary to a financial activity and does not pose a substantial risk to the safety or soundness of depository institutions or the financial system generally".^[254] Since the passing of the laws, Goldman Sachs and other investment banks such as Morgan Stanley and JPMorgan Chase have branched out into ownership of a wide variety of enterprises including raw materials, such as food products, zinc, copper, tin, nickel and, aluminum.

Some critics, such as Matt Taibbi, believe that allowing a company to both "control the supply of crucial physical commodities, and also trade in the financial products that might be related to those markets", is "akin to letting casino owners who take book on NFL games during the week also coach all the teams on Sundays".^[254]

Improper securities lending practices

In January 2016, Goldman Sachs agreed to pay $15 million after it was found that a team of Goldman employees, between 2008 and 2013, "granted locates" by arranging to borrow securities to settle short sales without adequate review. However, U.S. regulation for short selling requires brokerages to enter an agreement to borrow securities on behalf of customers or to have "reasonable grounds" for believing that it can borrow the security before entering contracts to complete the sale. Additionally, Goldman Sachs gave "incomplete and unclear" responses to information requests from SEC compliance examiners in 2013 about the firm's securities lending practices.^[275]

Conspiring to allow $1 billion in bribes to obtain business from 1MDB Malaysian sovereign wealth fund (2015–2020)

In July 2009, Prime Minister of Malaysia Najib Razak set up a sovereign wealth fund, 1Malaysia Development Berhad (1MDB).^{[276][277][278]}

In 2015, U.S. prosecutors began examining the role of Goldman in helping 1MDB raise more than $6 billion (~$7.28 billion in 2022). The 1MDB bond deals were said to generate "above-average" commissions and fees for Goldman amounting close to $600 million or more than 9% of the proceeds.^[279]

Beginning in 2016, Goldman was investigated for a $3 billion (~$3.6 billion in 2022) bond created by the bank for 1MDB. U.S. Prosecutors investigated whether the bank failed to comply with the Bank Secrecy Act, which requires financial institutions to report suspicious transactions to regulators.^[280] In November 2018, Goldman's former chairman of Southeast Asia, Tim Leissner, admitted that more than US$200 million (~$231 million in 2022) in proceeds from 1MDB bonds went into the accounts controlled by him and a relative, bypassing the company's compliance rules.^[281][282] Leissner and another former Goldman banker, Roger Ng, together with Malaysian financier Jho Low were charged with money laundering.^[283] Goldman chief executive David Solomon felt "horrible" about the ex-staff breaking the law by going around the policies^[284][285] and apologized to Malaysians for Leissner's role in the 1MDB scandal.^{[286][287][288]}

On December 17, 2018, Malaysia filed criminal charges against subsidiaries of Goldman and their former employees Leissner and Ng, alleging their commission of misleading statements to dishonestly misappropriate US$2.7 billion from the proceeds of 1MDB bonds arranged and underwritten by Goldman in 2012 and 2013.^[289][290]

On July 24, 2020, it was announced that the Malaysian government would receive US$2.5 billion in cash from Goldman Sachs,^[291] and a guarantee from the bank they would also return US$1.4 billion in assets linked to 1MDB bonds.^[292] Put together this was substantially less than the US$7.5 billion that had been previously demanded by the Malaysian finance minister. At the same time, the Malaysian government agreed to drop all criminal charges against the bank and that it would cease legal proceedings against 17 current and former Goldman directors. Some commentators argued that Goldman secured a very favorable deal.^[293]

In October 2020, the Malaysian subsidiary of Goldman Sachs admitted to mistakes in auditing its subsidiary and agreed to pay more than $2.9 billion (~$3.25 billion in 2022) in fines.^{[124][294][295][296]}

Financing of Venezuela despite human rights violations (2017)

In May 2017, Goldman Sachs purchased $2.8 billion (~$3.3 billion in 2022) of PDVSA 2022 bonds from the Central Bank of Venezuela during the 2017 Venezuelan protests,^[111] when the country was suffering from malnutrition and hyperinflation.^[297][298] Venezuelan politicians and protesters in New York opposed to President of Venezuela Nicolás Maduro accused Goldman of being of complicit of human rights abuses under the government and declared that the financing would fuel hunger in Venezuela by depriving the government of foreign exchange to import food, leading the securities to be dubbed "hunger bonds."^[297] The opposition-led National Assembly voted to ask the United States Congress to investigate the deal, which they called "immoral, opaque, and hypocritical given the socialist government's anti-Wall Street rhetoric".^[298] National Assembly president Julio Borges said that the funds would "strengthen the brutal repression" used against the protestors.^[299] Sheila Patel, CEO of Goldman Sachs Asset Management's international division, said that the incident was a learning experience that taught the bank to focus on environmental, social, and corporate governance issues.^[300]

Officers and directors

Non-employee members of the board of directors of the company are M. Michele Burns, Mark Flaherty, Kimberley Harris, Kevin Johnson, Ellen J. Kullman, Lakshmi Mittal, Adebayo Ogunlesi, Peter Oppenheimer, Jan E. Tighe, Jessica Uhl, and David Viniar.^[302] Non-employee directors receive annual compensation of $100,000 in cash and $350,000 in restricted stock, with an extra $25,000 for committee chairpersons.^[302]

List of chairmen and CEOs

1. Marcus Goldman (1869–1894)
2. Samuel Sachs (1894–1928)
3. Waddill Catchings (1928–1930)
4. Sidney Weinberg (1930–1969)
5. Gus Levy (1969–1976)
6. John C. Whitehead and John L. Weinberg (1976–1985)
7. John L. Weinberg (1985–1990)
8. Robert Rubin (1990–1992)
9. Stephen Friedman (1992–1994)
10. Jon Corzine (1994–1998)
11. Henry Paulson (1999–2006)
12. Lloyd Blankfein (2006–2018); Senior chairman (2019–present)
13. David M. Solomon (2018–present)