Streetwise — Chapter 24: How Did You Do It?

1. 1. Goldman Sachs returned to profitability in the first quarter of 2009 and had another record year, having managed risk and hedged properly while other firms lost tens of billions.
2. 2. Blankfein argued that the financial crisis would have been less severe if other banks had managed risk like Goldman, because a banking crisis makes recessions longer and more brutal by impairing banks' ability to lend.
3. 3. Goldman Sachs alumni played crucial roles in solving the crisis, including Hank Paulson, Tim Geithner, Neel Kashkari, Mario Draghi, and Mark Carney, but Blankfein insisted they did not prioritize the firm's interests.
4. 4. Blankfein's comment about doing 'God's work' in a 2009 Sunday Times interview became a public relations disaster, overshadowing the article and fueling hostility toward Goldman.
5. 5. Blankfein testified before the Financial Crisis Inquiry Commission in January 2010, defending the ABACUS transaction as legitimate intermediation between sophisticated investors, not a bet against clients.
6. 6. The Senate Permanent Subcommittee on Investigations, led by Carl Levin, held a show trial in April 2010, accusing Goldman of unethical behavior and dishonesty for shorting the mortgage market while marketing mortgage securities.
7. 7. After the crisis, Goldman created a business standards committee that issued 39 recommendations, shifting the firm's approach from 'Can we?' to 'Should we?' and emphasizing reputational risk.
8. 8. Blankfein criticized post-crisis regulation like Dodd-Frank and the Volcker Rule for being overly complex, reducing risk in some areas but potentially increasing systemic risk elsewhere.
9. 9. Blankfein faced a criminal investigation by the US Attorney's office, which was dropped in August 2012 after an FBI agent told him 'We know there's nothing there.'
10. 10. Goldman paid over $5 billion in a 2016 omnibus settlement covering all remaining state and federal claims related to residential mortgage-backed securities, including $2 billion for a homeowner relief fund.