Fallout: The Financial Crisis

Goldman Sachs loses $5 a share

Alisa Roth Dec 16, 2008
HTML EMBED:
COPY
Fallout: The Financial Crisis

Goldman Sachs loses $5 a share

Alisa Roth Dec 16, 2008
HTML EMBED:
COPY

TEXT OF INTERVIEW

Scott Jagow: Among the Wall Street banks left, Goldman Sachs is the sturdiest. No quarterly losses since going public in 1999. Until this morning. Goldman lost about $5 a share, more than $2 billion last quarter.

We’re joined by our reporter in New York, Alisa Roth. Alisa, is this a sign of big trouble?

Alisa Roth: Not necessarily. I talked this morning with banking analyst Burt Ely, and he says you really have to put Goldman’s loses into the broader context of what’s been happening to banks and to Wall Street generally.

Burt Ely: Everybody’s performance in those companies involved in the financial markets are down. So one would expect Goldman to take some hits. But, you know, they still are performing quite well compared to many other financial companies.

Jagow: Well Alisa, it sounds like Goldman is in the best position among some of these banks. So what’s the problem?

Roth: Well, part of it as we just heard is the market itself is just in bad shape. And so even if you’re the best of the bad, you’re still not in a great position. Beyond that, Goldman Sachs just became a bank holding company — now that’s a company that holds or controls a certain amount of shares in other banks. And ultimately, that should make it more stable, partly because it let it access funds from the Federal Reserve. But this is a whole new business model for Goldman. And the old one was built on leverage, and the company just can’t hold that much risk anymore.

Jagow: So in this new world for Goldman, what is its strategy going to be?

Roth: Well, the first strategy is trying to sell off assets and get some cash that way. It is looking to buy a bank, but apparently hasn’t been able to find one that fits its needs and/or it can afford. And meanwhile, they’re trying to find other ways to cut back. So the executives have said they’re not taking any bonuses this year, something like 10 percent of the workforce has been laid off this year, and there have been rumors of more job cuts to come.

Jagow: All right, Marketplace’s Alisa Roth in New York. Thank you.

Roth: You’re welcome.

As a nonprofit news organization, our future depends on listeners like you who believe in the power of public service journalism.

Your investment in Marketplace helps us remain paywall-free and ensures everyone has access to trustworthy, unbiased news and information, regardless of their ability to pay.

Donate today — in any amount — to become a Marketplace Investor. Now more than ever, your commitment makes a difference.