Money And Power: How Goldman Sachs Came To Rule The World (2011) - Plot & Excerpts
Goldman Sachs (GS) has become iconic, attracting both superlatives and expletives. To members of Wall Street they are the pinnacle; to Rolling Stone Magazine they are “a great vampire squid wrapped around the face of humanity.” According to business author William Cohan, “The firm’s inexorable success leaves people wondering: Is Goldman Sachs better than everyone else, or have they found ways to win time and time again by cheating?” Cohan answers in a comprehensive, compelling, and insightful book that lets readers know where the firm has innovated and excelled, and where it has misstepped, entered into conflicts of interest, or simply lost its way.Far more to-the-point than Charles Ellis’ long-winded (and almost sycophantic) book, The Partnership, each major character is introduced with a short biography Neither does Cohan have an axe to grind like Greg Smith in his 'tell-all' autobiography, Why I Left Goldman Sachs. Without either of his fellow authors' baggage, Cohan is more objective and provides valuable perspective on Goldman's ethical lapses and regulatory trouble.For example, in telling Goldman Sachs’ history Cohan explains the investment trusts that were popular in 1929 - at the height of that stock market bubble – and then draws parallels to the both the 2008 sub-prime shenanigans and to centuries old events such as the South Sea bubble, illustrating that both investors’ herd mentality and the investment banks’ complicity are time-honoured traditions.The first one hundred years of Cohan’s book focuses on the rise of GS, the (good) relationship they had with their clients, and their increasing stature amongst their peers, but from subprime onwards, it is a story of profit and antagonistic or conflicted relationships. With a shift of this magnitude, it’s no surprise that Smith chose to air his views publicly.Cohan writes at length about the inner workings of Goldman’s subprime mortgage machine which, along with Andrew Ross Sorkin’s Too Big To Fail (which focuses on the government and central bank’s roles) and Michael Lewis’ The Big Short (which highlights the outsiders who would bet against and profit handsomely from the machine's output), gives an excellent understanding of the 2008 financial crisis. It is almost surreal to read Cohan’s play by play of Goldman trader Fabrice Tourre’s (‘The Fabulous Fab’) coordination of the ABACUS structured products that then became part of The Greatest Trade Ever for John Paulson. Despite Goldman’s reputation for having turned a profit on the subprime mess - at times betting directly against its clients - it's interesting to read of the internal confusion that reigned at the firm. Goldman, however, was able to take action. As Cohan writes, “… even if Goldman Sachs had a conflict, and even if they were the first to cry wolf, it seems all of the other Wall Street firms just stared at the wolf, ignoring it, and blaming Goldman Sachs for calling it a wolf. Goldman Sachs was the only firm to run from the wolf, even though that wolf was a frankenwolf created by their own sheep herd.” Reading about Goldman’s internal conflict with clients and external competition with peers makes one wonder how the crisis might have played out had GS not had such large financial incentives in creating sub-prime products and then later in betting against them.Cohan has written the definitive book about Goldman Sachs, leaving readers to judge for themselves whether it is the pinnacle of finance or a vampire squid. Great history of one of the key players in the US/world banking industry. An informative inside look both at how the industry operates, including the many conflicts inherent in the related and competing businesses, as well as the personal side of how such a competitive and high-flying firm actually operates - and how that has served it both well and poorly when going through different experiences in Wall Street history.
What do You think about Money And Power: How Goldman Sachs Came To Rule The World (2011)?
It wasn't particularly well written, but it had great information.
—lhandfield
