Money and Power: How Goldman Sachs Came to Rule the World [Englisch] [Taschenbuch]

In his now famous - infamous? - Rolling Stone article Matt Taibbi refers to Goldman Sachs as a "...great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells of money." Cohan,whose earlier books gave you the inside scoop on Lazard Freres and Bear Stearns now turns his searchlight on Goldman Sachs, arguably one of the most powerful financial institutions that ever existed.

It is not really a Goldman "bashing" book but there is plenty of hard reporting that lead one to wonder how Goldman can get away with proclaiming itself to be a temple of team play and a firm where customer interests always come first. Team playing culture? Cohan gives you details about the unusually sharp knives that came out frequently in succession struggles from earlier days - Gus Levy clashing with Sid Weinberg - to more recent events - Hank Paulson ousting Jon Corzine - and paint a picture quite at variance with Goldman PR.

Customer comes first? Cohan reveals that way back in the sixties Goldman was sued for "...fraud, deception, concealment, suppression and false pretense..." in connection with the Penn Central fiasco. Creditors claimed that Goldman "...made promises and representations as to the future (of the company) which were beyond reasonable expectations and unwarranted by existing circumstances." You make up your mind about whether this was a disgruntled customer trying to splash mud or a depiction of Goldman's approach. It certainly was a harbinger of later developments such as the firms disingenuous statement that it was not "betting against its customers" during the sub-prime crisis but merely and prudently managing its risk profile. If you believe that may I interest you in a solid gold brick I found on Fifth Avenue the other day? I will let you have it real cheap because I like you.

Whether you like it or not Goldman executives - past and present - play larger than life roles on a global stage. Cohan gives you engaging details about the real person behind the persona. Did you know that Robert Rubin dropped out of Harvard Law to bum around Europe and persuaded the dean of the school to hold his admission for a year by getting a psychiatrist to testify that he was making a "reasonable" decision?

Cohan does a splendid job of describing how Goldman grew from a small but influential investment bank - and a partnership where the partners were liable to the full extent of their personal net worth - to the titan that it is today with the ability to shake the central banks of major nations and tentacles into the inner political circles of many countries and where Croesus may envy the amount of moolah the senior guys rake in with limited liability.

It is possible, indeed likely, that Goldman is actually the "good guy" in the field in which it plays and that its competitors are far worse in morality and tactics. And that, my friend, is the really scary story.

Every now and then, someone comes along and writes a book, and in the process lays out a new framework of understanding with such exquisite detail that the average reader's generalized understanding of how the world works is blown away, and a new understanding becomes the norm. This is EXACTLY what author William Cohan has achieved with "Money and Power: How Goldman Sachs Came to Rule the World."

Such a book was Carroll Quigley's "Tragedy and Hope". Quigley understood how the world worked and the dark forces that can exert undue enormous power behind the scenes. President Clinton in his inauguration speech specifically mentioned the power that Carroll Quigley had over him when he was student at Georgetown and Quigley lectured about those who truly control the world. Clinton understood the power structure, and their assumed ruthlessness, and was forever changed by it. Now we have in Cohan's book the thorough exposure of the less seemly side of Goldman Sachs.

Today there are only two firms that have the cache value to make an MBA's dream of working for them. They are Goldman Sach's in the financial world and McKinsey & Company in management consulting. If you work for either entity, it is the equivalent of having a halo over your head. You are anointed. Goldman Sachs now stands alone as the ultimate financial wheeler dealer in our time. With 35,000 employees, they still manage to be able to cut and slash like an institution a tenth of their current size.

Being a former alumnus of both Lehman Brothers and Bear Stearns, and currently managing several billions of dollars of private money, I have always had the utmost respect for Goldman. I believed then as now that only Goldman could possibly have been better run than either Bear or Lehman. The rest of the players were a joke compared to these three firms.

Now it appears that Goldman was head and shoulders above the other two. I only say this on the basis of survival. No matter how smart you are, if you manage to have your business platform destroyed like Bear and Lehamn, even if it takes a tsunami type event, you simply did not manage well. Goldman demonstrated the ultimate in management style by surviving the financial crisis of 2008 completely intact. Some would argue including the author of this book that perhaps Goldman completely planned the coming debacle to knock out their two arch rivals Lehman and Bear Stearns and have the playing field basically to themselves. Keep in mind that the three of them dominated the fixed income arena for a century.

Back in the old days of the late 1800's and 1900's, German-Jewish firms were not allowed in investment banking, and therefore exploited those areas where they could shine, like fixed income trading. The so called "White Shoe" firms headed by JP Morgan at the top of the list, completely controlled the banking side of the business. Big corporate America would only deal with Christian dominated Wall Street, corporate America was held captive by the big firms. They had a lock on the business. You must read Stephen Birmingham's exquisite book "Our Crowd" for the details of this period. Slowly but surely, absolutely brilliant German-Jewish minds came into Wall Street including but not limited to August Belmont, Felix Warburg, Otto Kahn, Jacob Schiff, and many, many more. They built firms that intellectually were magnitudes smarter and better run than the White Shoe houses like Dillon Read, White Weld, Kidder Peabody, Brown Brothers Harriman and others. Of course JP Morgan stood alone.

Where the German-Jewish firms took off and completely dominated was fixed income, and to this day Bear, Lehman, and Goldman dominated this vast, quiet, non-publicized multi-trillion dollar market, and then with Bear, and Lehman gone there is one left - Goldman. Author William Cohan does an extraordinary and exemplary job of documenting the rise, and dominance of Goldman Sachs. I do not see how this book could have been done any better. I have thought about how to criticize it, where is it lacking, could it have been done tighter (less pages) or better edited. I keep coming up empty. This work is simply superb.

There are 610 pages of superbly written, entertaining narrative spread over 24 chapters. The book reads like lightening. There is not a dull page in the book. If you have read a corporate thriller like the "Smartest Guys in the Room," which is the story of Enron, you will know what I mean by thrilling. If you have any desire to know how Wall Street is really run, about how the world works, and what power is, than you must read this book. Here are just a few things that I found fascinating:

* For 142 years this firm has been the envy of corporate America - its ability to move swiftly from area to area and to cloak its moves has been unequalled. With each generation, Goldman gets stronger and stronger, and more entranched in the financial world.

* The way they manage conflicts, make money, and deal with global power is second to none.

* Goldman can come at you from the short side as well as the long side. They are masters of hedging, and then disguising it. Nobody knew they were hedged during the financial crisis which is why they came out of the crisis unscathed.

* In September of 2008 when Lehman was filing bankruptcy, Goldman had already refinanced the firm with $5 billion of Warren Buffett's money, and another $5 billion raise from the public. They did not need a dollar of government bailout money.

* In October of 2008, they were forced to take $10 billion of government money at the insistence of the Secretary of the Treasury. Less than a year later they would pay it back with interest and buy back the warrants that were issued. For the government it was a 23% profitable annual rate of return.

* You will recall that the government brought legal charges against Goldman for their marketing of the Abacus 2007-AC1 CDO underwriting. They would wind up paying a $550 million fine for this act of greed.

* They also demonstrated to the world during this period that the firm was beyond greedy. They put their own interests and the interests of another client ahead of the clients who were buying the underwriting. Their reputation would never be the same again, but no one served time, and they could easily write the check.

CONCLUSION:

My favorite chapter is entitled POWER which is chapter 13. It is the story of Robert Rubin who would become Co-Chairman of the firm and then shortly thereafter retire from Wall Street to become assistant to President Clinton for economic affairs. Ultimately Rubin would become Secretary of the Treasury in his own right, and establish an illustrious career in government. Do not think about reading any other book on Wall Street until you have read the history of Goldman Sachs by reading Cohan's book. The depth, the insights, the exhaustive research that was done on this book is second to none. I promise you that you will love it, and thank you for reading this review.

Richard Stoyeck

For anyone who is looking for a balanced and in-depth understanding of the financial world, and the role Goldman Sachs has played in it over the past 100 years, Bill Cohan's riveting new book is a must-read. Without a doubt this book deleves into a fascinating history and ends with an up-to-the minute account of jsut what Goldman is today. Superb!