Goldman posts worst quarter since 2008

Stock prices whiz by on a ticker near the Goldman Sachs booth on the floor of the New York Stock Exchange in New York.

TEXT OF STORY

Kai Ryssdal: Goldman Sachs used to be different. Used to be above the fray if you will. Able to make billions of dollars without even tryin'. That's part of why today's profit report landed with such a thud. It was, to put it kindly, a bit disappointing. Earnings dropped 83 percent. Sure, part of that can chalked up to the $550 million the company owes the Securities and Exchange Commission to settle a lawsuit. Also, the $600 million that went to pay taxes in the UK. But even so, things look pretty bleak. Profits in Goldman's trading division were down almost 40 percent making the bank look almost human. And making us wonder whether Goldman's woes might be a reflection of the state of the economy.

Marketplace's Alisa Roth reports.


Alisa Roth: Goldman's traders are supposed to be the super heroes of Wall Street. But last quarter, their superpowers failed them.

Jeff Harte follows Goldman at Sandler O'Neil. He says with the market going up and down all quarter, it was hard for the traders to guess which way to bet. So it's no surprise they lost money.

Jeff Harte: If there's a bad trading and banking quarter, there's a bad trading and banking quarter all over. I don't know that there's a management team or trader or banker out there that can consistently overcome a really bad, really tough marketplace.

Goldman was hardly the only big bank whose trading divisions got beaten up in the second quarter. Traders at JP Morgan, Citigroup and B of A all did. Harte says in a crazy market like this one, though, winning isn't the point.

Harte: The key there tends to be managing risk exposure for the firm to make sure that you know, there's no major blowups, that they're controlling risk well.

And he says by that measure, Goldman's traders did a fine job. Hugh Johnson is chief economist at his own asset management company. He says for once, Goldman's performance is in sync with the economy.

Hugh Johnson: The earnings really reflect the fact that things changed in this world of ours in the second quarter and they changed for the worse, unfortunately. Investors became very very concerned about what the future has in store.

He says investors are pretty good at predicting the future. And if they're right about the way things look now, we can expect another bumpy quarter next time around.

In New York, I'm Alisa Roth for Marketplace.

Comments

I agree to American Public Media's Terms and Conditions.
With Generous Support From...