Goldman Sachs Finally Has To Stop Being So Smug That It Avoided Subprime, After $2.2bn Quarterly Loss Announced Today

Goldman Sachs, one of the very, very few American banks not to get hurt by the subprime crisis thanks to now-legendarily hedging on a failure in the sector, is nevertheless sat in the soup kitchen with the rest of us this winter – analysts are suggesting Goldman’s fourth-quarter loss could be $2.2bn, its first loss since floating on the stock exchange back in 1999.

UBS are predicting massive loss of $5.50 a share, shocking when you consider that a poll of analysts by Reuters just last month suggested Goldman would earn $1.62 a share. They’re currently selling at $63, a fall along with the rest of the banks this week (though the market picked up yesterday), but at least it’s better than a couple of weeks back, when the price went below $50, lower than the price it was originally sold at for its IPO. If that doesn’t say “the dream has died”, I don’t know what does.

Goldman became a common-or-garden bank this year, out of concern that, post-Lehman, just being an investment bank might not be very stable. The FT reports today that it’s still at the cutting edge of investment though – they’ve created a new, credit-crunch-flavoured business model for investing in the pharmaceutical industry. Rather than pump cash directly into a single company, whose drugs may or may not make it through the hoops to market, Goldman is now suggesting a “research pool” where different companies would share resources to make the financial impact of drug development softer.

And in other Goldman news, its new commercial bank arm needs a chairman, and it looks like they’ve got one in the form of Gerald Corrigan, former head of the New York Fed (the same position that Obama’s Treasury Secretary, Tim Geithner, held until recently). Corrigan has been managing director of Goldman since 1996, so it’s not really earth-shattering news to be honest. But we can wait and see whether Corrigan, whose risk assessment skills helped Goldman avoid subprime troubles and once won him “Risk Manager Of The Year 2005″ (sick!) will get his wallet out amid the crisis and buy another bank in order to increase customer numbers…

Posted by Ben Beaumont-Thomas in Hot Money | December 3, 2008 11:00AM |