Goldman Sags


BY TRADITION, Goldman Sachs makes risky financial wagers and stays icy cool under pressure. A bad trade on Treasury bonds in 1986 almost killed it, but was eventually cauterised. The firm’s “big short” in early 2007, when it bet that subprime securities would tumble, helped it to book profits of $14bn in 2008-09 and to perform relatively well during the worst financial crisis for 80 years. Goldman also values candour, at least inside the firm. In this spirit it is time to acknowledge that the bank’s strategic direction is beginning to feel like a bum trade. Its defence is that it is no worse than its group of peers, but being average on Wall Street is a mug’s game and the antithesis of the Goldman way.

While outsiders think that Goldman’s alumni run the world, on Wall Street the firm’s aura has dimmed. Rival banks view it with indifference, not awe. After shining in the years after the crisis, since 2012 its total return (share price gain plus dividends) has lagged behind the…