Goldman pledges disclosure overhaul to rebut criticism
By Dan Wilchins |
January 13, 2011, Thursday
|
Print Edition
Print Edition
GOLDMAN Sachs Group Inc pledged to be more open about how it makes money and to put the interests of clients ahead of its own in an effort to rebut criticism it acted more like a hedge fund than a bank during the credit boom and misled investors.
Goldman revealed for the first time how much it made from trading and investing on its own behalf, which many investors have suspected is a key source of the bank's profits, during the first three quarters of 2010.
The bank also made structural changes to its divisions, but there was no major management shake-up, leaving in place Chief Executive Lloyd Blankfein.
Blankfein and his firm came under siege last April after United States securities regulators sued Goldman and bond trader Fabrice Tourre for selling repackaged mortgage bonds to investors without disclosing key information about the securities.
Tourre referred to himself as "fabulous Fab" and to a collateralized debt obligation product he helped create as "a little like Frankenstein turning against his own inventor." To many critics of Goldman, he embodied the firm's willingness to put its own interests ahead of clients.
Soon after the SEC lawsuit, Goldman commissioned a report to determine how it should change the way it does business.
The report, released on Tuesday, recommends creating at least three internal committees and focuses mainly on disclosure and oversight. It makes few recommendations for how Goldman will change the way it does business day to day and some observers questioned how much will really change.
"I'm not terribly convinced it produces a new culture," said Cornelius Hurley, a professor and director of Boston University's Morin Center for Banking and Financial Law. "It seems to be part of their concerted public relations effort."
Still, Goldman did shed new light on the heretofore murky realm of proprietary trading profits, revealing that its investment and lending group - which includes the bank's bets with its own money - accounted for nearly 30 percent of pre-tax earnings in the first three quarters of 2010.
Goldman revealed for the first time how much it made from trading and investing on its own behalf, which many investors have suspected is a key source of the bank's profits, during the first three quarters of 2010.
The bank also made structural changes to its divisions, but there was no major management shake-up, leaving in place Chief Executive Lloyd Blankfein.
Blankfein and his firm came under siege last April after United States securities regulators sued Goldman and bond trader Fabrice Tourre for selling repackaged mortgage bonds to investors without disclosing key information about the securities.
Tourre referred to himself as "fabulous Fab" and to a collateralized debt obligation product he helped create as "a little like Frankenstein turning against his own inventor." To many critics of Goldman, he embodied the firm's willingness to put its own interests ahead of clients.
Soon after the SEC lawsuit, Goldman commissioned a report to determine how it should change the way it does business.
The report, released on Tuesday, recommends creating at least three internal committees and focuses mainly on disclosure and oversight. It makes few recommendations for how Goldman will change the way it does business day to day and some observers questioned how much will really change.
"I'm not terribly convinced it produces a new culture," said Cornelius Hurley, a professor and director of Boston University's Morin Center for Banking and Financial Law. "It seems to be part of their concerted public relations effort."
Still, Goldman did shed new light on the heretofore murky realm of proprietary trading profits, revealing that its investment and lending group - which includes the bank's bets with its own money - accounted for nearly 30 percent of pre-tax earnings in the first three quarters of 2010.
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