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Exclusive: A Forensic Reconstruction Of Goldman's 2008 Prop Trading

Tyler Durden's picture


Lately, Goldman has been extolling the virtues of its theological affiliations and humanistic aspirations to, well, high heaven. Curious to dig deeper through the firm's purported philanthropic efforts, we decided to take a detailed look at the 2007 and 2008 tax records of the charitable Goldman Sachs Foundation. We will not comment on the performance of the actual Foundation: to the chagrin of many needy children who look up to the St. Goldman cathedral in anticipation of a generous holiday season, the Goldman Sachs Foundation has lost gobs of money in the past two years: the fund started off with $275 million in 2007, $269 million in 2008 and ended the year with $161 million. Of course, it is Goldman's prerogative to trade with its money as it desires: while this loss is deplorable, its only outcome will be that fewer Cap 'N' Trade propaganda initiatives will get the due "charitable funding" courtesy of Goldman. Yet what the foundation's tax record do provide, is a very unique and open glimpse in the myriad trading patterns of Goldman's proprietary trading operations... And boy does the firm trade.

A quick tutorial into trade allocation.

Whenever a huge hedge fund such as Goldman's prop trading desk prints, or executes, a transaction, the physical or electronic ticket will request a split of the capital allocation to the various entities, funds, or LPs that make up the firm's "AUM" umbrella. Sometimes no capital is allocated to excluded strategies, but usually, and especially for product agnostic funds such as Goldman, each entity will be allowed its pro rata share based on the "fungible" capital that makes up the firm's entire Assets Under Management. Therefore, the GS Foundation ("GSF"), with its $270 million of capital at the beginning of 2008, would likely get its pro rata allocation as a percentage of the total capital backing the Goldman hedge fund (which can come from such places as Goldman Sachs Asset Management, and Goldman Sachs & Co., which in turn gets it funding via such taxpayer conduits as the Fed's repo operations and the Discount Window). So if Goldman for example had access to total capital of $50 billion last year (roughly), each trade, when allocated to GSF, would account for about half a percent (0.5%), absent special treatment, of the total capital invested or disposed. As an example, if Goldman were to trade $100 million notional in 10 year Index Swaps, GSF would thus be allocated about $500,000 of the trade.

Why is all this relevant?

Were one to comb through GSF's tax filings, one would uncover in 2007 over 500 pages worth of single-spaced trades, and over 200 in 2008, across absolutely every single asset class: equities, indices, futures, fixed income, currencies, credit swaps, IR swaps, FX, private equity, hedge fund investment, you name it (oddly absent are CDS trades). And this is in 2007 alone. These are a one-for-one proxy of absolutely every single trade that Goldman executed in its capacity as a prop trader in the last two years. The only question is what is the proration multiple to determine what the appropriate P&L for the entire firm would have been based on any one single trade allocated to GSF, and subsequently, disclosed in the foundation's tax forms.

We have compiled an extensive amount of the data and have attained some startling conclusions. In essence Goldman's prop group is woefully bad when it comes to trading, or at least it was in 2007 and 2008. Not only that, but Goldman is likely the biggest trader of futures in the world. The several product groups that account for the highest variation in P&L and are attributed the greatest amount of notional are exactly the high frequency traded ETF's that Zero Hedge has been focusing on since inception, and, to a lesser degree, trading in UST futures and 3 Month LIBOR futures. Goldman also executes numerous Interest Rate swaps daily, thousands each year, whose detail we will however ignore for the time being, although whose nominal gross value exceeds hundreds of billions of dollars (curiously in 2007 Goldman would disclose the counterparties on each and every IR swap trade; it has ceased to do so with the 2008 data).

Let's dissect these one at a time.

First, we take a look at the key ETFs/futures which Goldman trades on a daily basis, whose notional of tens if not hundreds of millions of dollars is traditionally broken down by "child" algos, both on open exchanges and on ATS's (think Sigma X), into millions of smaller blocks, thereby influencing markets either up or down, as momentum traders sense a given upcoming trade, and where, in the absence of incremental liquidity, the market has the potential to get caught up in a momentum vortex, which kills all non-Goldman participants, who lose not only capital if the market turns against them subsequently, but who get killed on their execution price, which is traditionally VWAP-based, and, as we will demonstrate tomorrow, VWAP algos end up being among the worst and most expensive market strategies available. In the meantime, we focus on Goldman's daily trading in the following products:

  • S&P 500 E-Mini
  • Dow Jones Mini
  • Russell 1000 Futures
  • Russell 2000 Mini

Zero Hedge has compiled the daily trading data as representative of GSF. We leave it up to our readers to apply to proper multiple to estimate what the full impact for GS is per each and every trade.

As the chart shows, the daily P&L variance is roughly +/-$800,000 as demonstrated by the P&L allocated to GSF. As Goldman's overall 2008 VaR was in the $200 million ballpark, our 0.5% pro rata estimate to get a reading of what the daily variance as represented at the mother ship is intuitively plausible.

How does this data look when extended on a cumulative basis? Not good, and especially not good if you are the trader who is in charge of the Russell 1000 Futures, which seems to have had the greatest capital allocation and (negative) P&L impact, at least in 2008.

If indeed our 200x GSF to GS step-up pro-rata factor is correct, then Russell 1000 Futures trading alone cost Goldman approximately $1.2 billion in 2008, and maybe much, much more (see below). The other ETF's had an average positive daily variance and in fact had a positive cumulative net contribution for 2008. We should note that one thing that the chart above omits is one trade that Goldman executed on November 17, 2008, precisely in Russell 1000 Futures, which cost the Goldman Sachs Foundation -$6,938,775 dollars! Again, this was merely one trade which was likely caused by the firm's need to exit all underwater Russell futures positions ahead of the November 30 fiscal year end (shortly to be rolled to December 31). By applying the same logic as above, did Goldman Sachs lose $1.4 billion trading Russell 1000 Futures in one single day almost a year ago? All signs point to that having in fact been the case. The chart below includes the outlier errant trade from November 17, 2008:

Continuing to other trading products, we next analyze Goldman's performance in the US Treasury futures arena. The chart below captures the trading performance among the core UST Futures categories:

  • 2 Year UST Futures
  • 5 Year UST Futures
  • 10 Year UST Futures
  • Treasury BD Futures
  • 10 Year Swap Notes Futures

It is notable that like in the example above where the biggest P&L delta was attributable to Russell 1000 Futures, in the Treasury arena, Goldman's 5 Year UST Futures did an admirable job in 2008. With all other products being effectively flat if not negative for the year, the 5 Year trader did an admirable job of keep his head above water. Yet after September 11 it seems virtually all products experience a substantial capital loss, most pronounced at the 5 Year Futures and 10 Year Swap Notes desks, even as 10 Year Futures managed to stage an impressive comeback. Nonetheless, Goldman's UST Futures trading desk ended the year down by almost $400,000 at GSF, which based on our back of the envelope calculation would mean at least a $800 million principal loss for the entire firm.

Daily UST Futures P&L below:

Cumulative UST Futures P&L below:

Next we look at what is apparently another favorite of Goldman's Futures trading desk: the 3 Month LIBOR futures. While the variance here is smaller than at both ETF futures and UST futures, the performance was substantially worse, and much more adversely impacted by Lehman's collapse.

And with hundreds of other data points, much more granularity can be derived. We challenge our more inquisitive readers to perform comparable analyses on some of the other Futures and non-Futures based products to obtain their own conclusions. Yet what is obvious no matter how the data set is sliced and diced, is that the firm was bleeding money across virtually all prop-traded groups in 2008. Is it any wonder that the firm's only source of revenue is courtesy of i) the near-vertical treasury curve (thank you taxpayers) and ii) the ability to demand usurious margins on Fixed Income and other products from clients trading in bulk who have no other middleman choices. We would not be surprised if a comparable analysis of the Goldman Sachs Foundation's 2009 results when these become available in one year demonstrates just how "lost" Goldman's prop trading desk has been once again, with the only true backstop to record, record revenues being the elimination of competitors Lehman and Bear, and the ability to demand monopolistic terms from anyone who wishes to transact in size in whatever passes for modern capital markets.

One last notable observation, is the data provided by Goldman's Futures cash Collateral margin: this is the money Goldman collects from Futures counterparties when various variation margin thresholds are impacted (or determined to have been so, as the case may be, if say a major investment bank were to file for Chapter 11). It would not be surprising to see a huge spike in the Cash Collateral Margin series just after Lehman implodes, as Goldman panics into survival mode and demands any and all cash owed immediately become payable. Indeed, looking at the chart below, one sees a spike which generated nearly $5 million in collateral collections for GSF in the two days after Lehman's bankruptcy. Pro rated, this implies Goldman proper pocketed over $1 billion in due variation margins once it got on the calls with every single counterparty it deemed unfit. And this is only in the futures arena! One wonders just how much of this amount was AIG. Curiously, the series ends on September 17th, a day when GSF foundation sucked up $2.2 million, and when Goldman Sachs pocketed who knows how much more via collateral calls (hint: orders of magnitude more), and, when AIG was nationalized. One can imagine what the collateralization drama must have been like in CDS, where the real feces were hitting the fan. Alas, that data set is not available courtesy of GSF.

2008 Futures Cash Collateral Margin

September 2008 futures collateral detail:

The observations above are troubling: Goldman's trading is by no stretch of the imagination better than average. In fact, in 2008, the firm's prop trading was on par with some of the worst performers on Wall Street. Which begs the question: just how has Goldman managed to transform itself into a behemoth that over the past 6 months has had only three trading days of losses? The answer is simple: with no Lehman and no Bear to curb its tentacular dominance of all aspects of the Fixed Income market, Goldman can now rely almost exclusively on its monopolist agency position vis-a-vis mutual, pension, and hedge funds who are desperate to maintain a good relationship and an open dialog with the firm which rewards its best clients with market moving information ahead of all others peasants. In exchange, Goldman can collect an arm and a leg in the form of wide spreads, child algos that get executed efficiently and, always, profitably, and a trading platform (REDI) which has become ubiquitous, and in which Goldman preaches the mantra of VWAP trading. Tomorrow we will analyze why VWAP has cost many asset managers hundreds of millions of dollars, and once and for all provide a quantification of the ever increasing cost of High Frequency Trading.


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Sun, 11/15/2009 - 19:04 | 131321 BennyBoy
BennyBoy's picture

Goldman will now make the ZH site go down in 3, 2, 1...

Sun, 11/15/2009 - 22:16 | 131418 Maximilien Robe...
Maximilien Robespierre's picture

And much like a P2P file & music sharing site, it would rise again.

It's the validity of an idea with overwhelming evidence that builds concensus, and attracts participation behind it that breeds success.

It doesn't matter how that idea is communicated, as Dr. Ian Malcom says in Jurassic Park "Life Finds a way".

But... That won't happen though, ZH has better nerds, stronger nerds, faster nerds.

Sun, 11/15/2009 - 23:28 | 131455 Anonymous
Anonymous's picture


Mon, 11/16/2009 - 10:45 | 131699 tip e. canoe
tip e. canoe's picture

napster is dead...long live napster

Mon, 11/16/2009 - 10:46 | 131700 tip e. canoe
tip e. canoe's picture

sorry another dupe

Sun, 11/15/2009 - 19:04 | 131322 spades434
spades434's picture

Good job explaining that TD. It pretty much confirms what has been suspected all along, that being the fact that with virtually no competition, GS now has a monopoly on most fixed income trading. With the whole deck stacked in their favor, how could they possibly have had 3 losing days the past 2 qtrs? The fixed income guys must have been out sick for those 3 days.

Sun, 11/15/2009 - 19:53 | 131343 knukles
knukles's picture

That's why they got preference with the N1A1 flu shots.  Betcha the Baxter stuff, too.

Sun, 11/15/2009 - 23:49 | 131449 Mazarin
Mazarin's picture

As Mike Milken always says: "All profitable sustainable businesses are based on un-leveraged spreads." Looks like GS's spreads have become an anti-trust-bustable $100M/day top-shelf-poonany bone-anaza. PS: Tyler and ZH, this digging and analysis are exemplary and worthy of highest commendations. 

Mon, 11/16/2009 - 10:01 | 131654 Anonymous
Anonymous's picture when will we see an anti-trust case for monopoly practices filed against the squid by the US DOJ?

I'm thinking not in my lifetime....

Sun, 11/15/2009 - 19:06 | 131323 theprofromdover
theprofromdover's picture

Tyler, rrrrrrrrrrrrrrespect.

Lateral thinking par excellence.

Long may Golman Sach's smug be-suited rodents keep thinking they are the smartest kids on the block and fail to cover their tracks; their ultimate gory meltdown will taste all the more sweeter to those of us not managing to do God's work most of the time.

Sun, 11/15/2009 - 19:18 | 131326 Stevm30
Stevm30's picture

Wow - great stuff... thanks.

Sun, 11/15/2009 - 19:28 | 131328 Comrade de Chaos
Comrade de Chaos's picture

when a few major players (IB) have 60% of industry share, I think it's called an oligopoly. When one player clearly dominates and sets the game rules, it's a monopoly. However since the number of connections into the exchange floor servers is limited by a physical constrain, I am sure they'll call themselves a natural monopoly, hence they require a license to kill for the benefit of us all.. tech innovation, liquidity provision, you name it & only a natural monopoly can handle it.


Now can corresponding regulators handle the truth or at least their duties and obligations?


Sun, 11/15/2009 - 19:56 | 131345 Daedal
Daedal's picture

'Natural monopoly' my ass (I'm not directing the snide remark at you, but rather at such a claim, if one exists). There's nothing natural about GS even operating today -- much less dominating the market place.

Sun, 11/15/2009 - 20:23 | 131357 Comrade de Chaos
Comrade de Chaos's picture

it was sarcasm; (cable , water & phone landlines are defined as natural monopolies, )

Sun, 11/15/2009 - 23:26 | 131452 Anonymous
Anonymous's picture

GS might prefer the term "divinely-ordained monopoly"

Sun, 11/15/2009 - 19:32 | 131330 Comrade de Chaos
Comrade de Chaos's picture



Marla, there is a good theme for the next weekend:


GS, take one look at yourself, realize ....cause it's getting closer...


Sun, 11/15/2009 - 20:40 | 131374 Cognitive Dissonance
Cognitive Dissonance's picture

I fully agree with the prevailing sentiment that GS needs to be taken down, or at least down to size. But this monster clearly has major support in high places, meaning from the powers that be. Which means "they" won't let GS fail unless and until it's in their best interest to do so.

IMHO this farce will probably run much longer than we would prefer. When the fall finally happens, it will most likely be less than satisfying.

Sun, 11/15/2009 - 19:41 | 131332 tom a taxpayer
tom a taxpayer's picture

TD, thank you for this monumental analysis and scholarship.

You are doing God's work...David bringing down Goliath.

Sun, 11/15/2009 - 19:41 | 131333 Anonymous
Anonymous's picture

Doing God's work is very lucrative.

Sun, 11/15/2009 - 19:42 | 131335 hbjork1
hbjork1's picture

Terrific analysis.

Winter is coming.  As analysis and publication continues, the  king is going to get very cold without his clothes.


Sun, 11/15/2009 - 19:46 | 131338 buzzsaw99
buzzsaw99's picture

God helps them that helps themselves, and boy, do they help themselves.

The Lloyd is my Blankfein

I shall not want...

Sun, 11/15/2009 - 19:47 | 131339 Anonymous
Anonymous's picture

ZH was cited in today's Business section re: the post on Rodgin Cohen, as the Man Behind the curtain.

The article spent 99% of the time relating stuff about how well connected and deeply loved he is.

It spent practically zero time talking about his involvement in creating the circumstances that resulted in last and this year's financial disasters.

Apparently the writer only talked to people who think the the world of the guy with a 'heart as big as Chicago' by none other than Paulson, the scourge of billions all over the planet. I wonder why?

Sun, 11/15/2009 - 19:49 | 131341 g8lice
g8lice's picture

EGGzellent THX.

Sun, 11/15/2009 - 19:51 | 131342 Daedal
Daedal's picture

Hey Cuomo, I see an antitrust lawsuit at 85 Broad in your future.

Great job TD!


Sun, 11/15/2009 - 21:08 | 131365 spekulatn
spekulatn's picture

Well done, TD.


85 Bro is unstoppable.

Its a bummer, man.


F*** it, let's go bowl.



Sun, 11/15/2009 - 20:13 | 131352 Zé Cacetudo
Zé Cacetudo's picture

Excellent work!

Sun, 11/15/2009 - 20:13 | 131353 Anonymous
Anonymous's picture

What do you recommend happens to GS?

Sun, 11/15/2009 - 20:14 | 131354 Anonymous
Anonymous's picture

GSF may be a money loser but it is a huge (I mean HUGE) leap to extrapolate this data 200x to actual trading by Goldman.

Thanks for the filings and the analysis. I was curious about them when NYT mentioned it.

Sun, 11/15/2009 - 20:21 | 131358 . . .
. . .'s picture

 In fact, in 2008, the firm's prop trading was on par with some of the worst performers on Wall Street. Which begs the question: just how has Goldman managed to transform itself into a behemoth that over the past 6 months has had only three trading days of losses? . . .  Goldman can now rely almost exclusively on its monopolist agency position ....  Goldman can collect an arm and a leg in the form of wide spreads, child algos that get executed efficiently and, always, profitably, and a trading platform (REDI) which has become ubiquitous, and in which Goldman preaches the mantra of VWAP trading.


Daedal is right.  If Goldie's trading for itself is as bad as it was for its charity, and its profits are derived from a monopoly position, Cuomo ought to investigate them for antitrust violations.

Godspeed to anyone getting into competition with Goldie on the agency front to erode monopoly rents, if there are any.

Sun, 11/15/2009 - 21:18 | 131359 Fibozachi
Fibozachi's picture

Great work, TD, yet again. 

Eagerly anticipating your follow-up piece about VWAP and what appears to be the bane of 'professionals' within the "Stochastics Default Club" ...  click anywhere in this sentence and scroll 3/4 down for a quick technical profile of Goldman with only 1 simple daily chart of GS ... will try to put together a more complete snapshot during the morning.

Fantastic research, great work .. thank you for it TD / ZH.

Sun, 11/15/2009 - 20:27 | 131364 Anonymous
Anonymous's picture

The Skynet Funding Bill is passed. The system goes on-line. Human decisions are removed from strategic defense. Skynet begins to learn at a geometric rate. It becomes self-aware. In a panic, they try to pull the plug.

Oh crap - that's just a movie right?

Sun, 11/15/2009 - 21:10 | 131394 Fibozachi
Fibozachi's picture

ha ha, hilariously apt!

Sun, 11/15/2009 - 22:30 | 131428 Maximilien Robe...
Maximilien Robespierre's picture

There's a scene in Close Encounters where the computers take over the communications with the aliens because it's too fast for the laypeople to keep up on their keyboards.

Oh, HFT'ing and computers playing music to communicate.... Marla Marla Marla.

The possibilities are endless here folks, endless.

Watch this video, and at about 1:30 in you'll see what I mean.  That's Goldmans HFT computer, taking over the communication, while we all just stand there and watch in awe.

Sun, 11/15/2009 - 23:11 | 131445 Fibozachi
Fibozachi's picture

Thanks for the clip Maxi... as well as your Reign of Terror ... reminds me of the movie "Pi".

Mon, 11/16/2009 - 15:00 | 132099 Anonymous
Anonymous's picture

"Pi" was an interesting flick, tho I despised the fact that the genius "disables" himself in order to get out of his predicament. Getting more stupid is not a solution, it's a weak-ass method of avoidance. God, that should be on a billboard for all proles to see and grock...

Sun, 11/15/2009 - 20:29 | 131366 yy
yy's picture

Great job TD, the conclusion is the crux of the story. It simply  is impossible to have the GS track record in 2009 unless the market has broken down, or put differently does not exist as a free market anymore. This is for all of us to ponder going forward.

The cause is NOT GS, GS is a gang of opportunists that are in a position to fleece the market, the main problem is the FED and to a lesser degree the incompetent congress and government.


Can't wait for tomorrow's follow up.

Sun, 11/15/2009 - 21:54 | 131409 skippy
skippy's picture

YY said...The cause is NOT GS, GS is a gang of opportunists that are in a position to fleece the market, the main problem is the FED and to a lesser degree the incompetent congress and government.

Skippy here...please check my comment below.


Mon, 11/16/2009 - 07:09 | 131602 yy
yy's picture

thanks skippy, we are doomed are we not!

Sun, 11/15/2009 - 20:34 | 131368 Careless Whisper
Careless Whisper's picture

Props to ZH

I think there are a lot of things that are disgraceful about GoldSach but the biggest disgrace is the lack of charitable giving. A few hundred million in the GS Foundation??? puhleeze that's two days of trading profits.


Sun, 11/15/2009 - 20:39 | 131372 Anonymous
Anonymous's picture

And most of it goes to places like Harvard, Princeton, Duke etc. to get the next generation of "the best and brightest" ready for God's work.

Sun, 11/15/2009 - 22:16 | 131417 Anonymous
Anonymous's picture

Actually, the offensive thing about GS is not the absence of charitable donation. The most offensive thing is that they have all forgotten that they are simply employees. The shareholders should make the call about what to do with the profits. Of course, that's not how the world works anymore apparently...

Sun, 11/15/2009 - 22:20 | 131420 Thomas
Thomas's picture

What is disgraceful is that these guys have lost sight of the fact that they are only employees. Ya think maybe the owners--the shareholders--maybe should decide what to do with the profits?

Sun, 11/15/2009 - 23:16 | 131448 Careless Whisper
Careless Whisper's picture

ahh no. I think the taxpayers should decide. GS wouldn't be here if it weren't for the taxpayers and the Federal Reserve window. GS is really a hedge fund with taxpayer/Fed money. Don't try and pretend that they are here due to free market conditions.

Mon, 11/16/2009 - 11:41 | 131772 Missing_Link
Missing_Link's picture


Sun, 11/15/2009 - 20:41 | 131375 Anonymous
Anonymous's picture

For an organization the size of GS the task of predicting market direction should be as easy as a bull elephant in a packed room predicting when the humans will flee for the exits. Certainly size creates liquidity problems but their trading egos clearly suffer from too many readings of their own press releases when doing nothing so soundly beats their trading results.

Sun, 11/15/2009 - 21:05 | 131391 Anonymous
Anonymous's picture

Sincere compliments, TD, on another signal puncturing of the pompass ass known as Goldman Sachs. It is even clearer now that they would not have survived 2008 without stealing from the Treasury and conspiring to kill their competitors. Keep up the (real) "Lord's work" in ripping down the curtain behind which they hide. Sunlight is the best disinfectant and it is vitally important to disinfect these vultures into oblivion. Cap and trade would be a Goldman tax on the very air we breathe. The Beast of Broad Street must be taken down before it's too late.

Sun, 11/15/2009 - 23:29 | 131456 ARJ
ARJ's picture

Stealing what? Conspiring how?

Sun, 11/15/2009 - 21:18 | 131397 lizzy36
lizzy36's picture

Wow, talk about Tyler finding neverland. 

I assume that the  Goldman Sachs Charitable Foundation (private grant-making foundation) partakes of the appropriate private charity tax breaks (which may not have mattered in 2007/2008 but will most definitely matter in 2009).  Further i assume that the individuals (employees of GS) also receive the appropriate beneficial tax breaks for donating to the Companies charitable foundation. 

I can imagine the critical decision making process an employee of GS makes at this time of year: " how much money does one doing gods work donate to The United Way & the Goldman Sachs Charitable Foundation". 

ZH has to one of the few places that always manges to simultaneously feed my internal cynicism and give me hope. I look forward to tomorrows piece. 

Mon, 11/16/2009 - 16:15 | 132216 Anonymous
Anonymous's picture

Well said in your last sentence. It is a strange feeling.

Mon, 11/16/2009 - 16:20 | 132221 Anonymous
Anonymous's picture

It is a strange feeling.

Sun, 11/15/2009 - 21:42 | 131404 skippy
skippy's picture

Sorry in advance for the size, decided for your self.

Hoi Polloi says:

November 15, 2009 at 11:53 am

Unless the UK the US Bank lobby is much more powerfull. Look at all the ex Goldman alumni in the past and current government.
Henry Paulson: Served as Treasury Secretary under President George W. Bush.
Was CEO of Goldman from 1999 to 2006.

Robert Rubin: Served as Treasury Secretary under President Clinton.
Previously, he was co-chairman of Goldman from 1990 to 1992.

Robert K. Steel: Served as Under Secretary of the Treasury for Domestic Finance, the principal adviser to the secretary on matters of domestic finance and led the department’s activities with respect to the domestic financial system, fiscal policy and operations, governmental assets and liabilities, and related economic and financial matters.
Retired from Goldman as a vice chairman of the firm in 2004, where he worked as head of equities for Europe and head of the Equities Division in New York.

Mark Patterson: Chief of Staff to Secretary Tim Geithner
Was director of government affairs at Goldman.

Dan Jester: Key adviser to Geithner, who played a key role in shaping the takeover of Fannie Mae and Freddie Mac.
Was strategic officer at Goldman.

Steve Shafran: Adviser helping to shape Treasury’s effort to guarantee money market funds.
Was expert in corporate restructuring at Goldman.

Kendrick Wilson: Brought in to advise former Treasury Secretary Henry Paulson, another Goldman alum — after a personal call from his old Harvard Business School classmate, George W. Bush — to advise him on how to fix the financial markets. Paulson brought Wilson to Goldman in 1998 from Lazard Freres. Before that, Wilson was president of Ranieri & Co., which was established by Lew Ranieri. While at Salomon Brothers in the 1970s, Ranieri pioneered mortgage-backed securities, the exotic financial instruments that helped stoke the mortgage bubble. In other words, the man brought in to fend off a financial crisis appears to be a protege of one of the men who helped cause it.
Was senior investment banker at Goldman.

Neel T. Kashkari: Appointed by Paulson to oversee the $700 billion TARP fund and was considered Paulson’s right hand man during the crisis, all at the tender age of 35. Kashkari was criticized for the lack of oversight of the funds disbursement, which he said would have been impossible since the funs are fungible. This assertion has been largely refuted by Neil Barofsky, the Special Inspector General for the Troubled Asset Relief Program. Kashkari was also responsible for recruiting Reuben Jeffrey.
Was technology investment banker for Goldman in San Francisco from 2004 to 2006.

Reuben Jeffrey: Selected by fellow Goldman alum Kashkari as the interim chief investment officer for the bailout. He was formerly the chairman of the CFTC, a role currently held by fellow Goldmanite Gary Gensler, as well as Under Secretary of State for Economic, Energy, and Agricultural Affairs.
Was executive for 18 years at Goldman, beginning in 1983.

Edward C. Forst: Left his post as executive vice president at Harvard to serve as an advisor on setting up TARP, but has since returned to the school.
Was global head of the Investment Management Division at Goldman for 14 years.

William Dudley: President of the Federal Reserve Bank of New York.
Was former chief economist and advisory director at Goldman where he worked from 1986 to 2007.

Stephen Friedman: Was chairman of the Federal Reserve Bank of New York until May 2009, when he was pressured to resign after buying Goldman shares in December and January. Previously, he was director of President George W. Bush’s National Economic Council.
Joined Goldman in 1966 and was co-chairman from 1990 to 1994.

Gary Gensler: Appointed by Obama to head the CFTC. This was the commission headed by Brooksley Born in the late 1990’s, when Alan Greenspan and Robert Rubin overruled her attempts to regulate credit-default swaps; fellow Goldmanite Reuben Jeffrey also held this position. Gensler worked in the Treasury Department as Assistant Secretary of the Treasury from 1997-1999 and as Under Secretary from 1999-2001, a position he received from Lawrence Summers.
Was partner in Goldman from 1979-1996

Sonal Shah: Appointed to Office of Social Innovation and Civic Participation and an Advisory Board Member for the Obama-Biden Transition Project in 2008. Shah had previously held a variety of positions in the Treasury Department from 1995 to early 2002.
Was a former Vice President at Goldman from 2004 to 2007.

Joshua Bolten: Former chief of staff with the Bush administration as well as former director of the Office of Management and Budget until 2006.
Was executive director of Government Affairs for Goldman Sachs from 1994 to 1999. Bolten was instrumental in recruiting his fellow Goldman alum Henry Paulson as Treasury Secretary.

Jon Corzine: A strong supporter and political ally of Obama, Corzine is currently the governor of New Jersey. Before being elected governor, he served as the New Jersey representative to the U.S. Congress from 2001-2006, where he served on the Banking and Budget Committees.
Began working for Goldman in 1975 and worked his way up to chairman and co-CEO before being pushed out in 1998.

Robert Zoellick: Currently serves as president of the World Bank and previously was deputy secretary of state.
Was previously a managing director at Goldman, which he joined in 2006.

James Johnson: Was involved in the vice-presidential selection process for the Obama campaign and served as president and CEO of Fannie Mae.
Board member of Goldman.

Kenneth D. Brody: Was former president and chairman of the Export-Import Bank of the US.
Worked for Goldman for 20 years, founded and heading up its high-technology investment banking group and leading the firm’s real-estate investment banking group.

Sidney Weinberg: Served as vice-chair for FDR’s War Production Board during World War II.
The head of Goldman from 1930 to 1969, nicknamed “Mr. Wall Street,” he worked his way up at the firm after starting as a $3-a-week janitor’s assistant.

Richard Gephardt: Was House Majority Leader from 1989 to 1995 and House Minority Leader from 1995 to 2003.
His lobbying firm was hired by Goldman to represent its interests on issues related to TARP.

Michael Paese: Former top staffer to Rep. Barney Frank, the chairman of the House Financial Services Committee.
Is Goldman’s new top lobbyist. He will join the firm as director of government affairs – last year, that position was occupied by Mark Patterson, now the chief of staff at the Treasury Department. Paese has swung through the revolving doors several times – he previously worked at JPMorgan and Mercantile Bankshares and was senior minority counsel at the Financial Services Committee.

Faryar Shirzad: Former top economic aide to President George W. Bush and Republican counsel to the Senate Finance Committee.
He now lobbies the government on behalf of Goldman Sachs as the firm’s Global Head of the Office of Government Affairs.

Richard Y. Roberts: Former SEC commissioner.
Now working as a principal at RR&G LLC, which was hired by Goldman to lobby on TARP.

Steven Elmendorf: Former chief of staff to then-House minority Leader Rich Gephardt.
Now runs his own lobbying firm, where Goldman is one of his clients.

Robert Cogorno: Former Gephardt aide and one-time floor director for Steny Hoyer (D-Md.), the No. 2 House Democrat.
Works for Elmendorf Strategies, where he lobbies for Goldman and Citigroup.

Chris Javens: Ex-tax policy adviser to Iowa Senator Chuck Grassley.
Now lobbies for Goldman.

E. Gerald Corrigan was president of the New York Fed from 1985 to 1993. He joined Goldman Sachs in 1994 and currently is a partner and managing director; he was also appointed chairman of GS Bank USA, the firm’s holding company, in September 2008.

Lori E Laudien: Former counsel for the Senate Finance Committee in 1996-1997
Has been a lobbyist for Goldman since 2005.

Marti Thomas: Executive Floor Assistant to Dick Gephardt from 1989-1998, he went on to serve in the Treasury Department as Deputy Assistant Secretary for Tax and Budget from 1998-1999, and as Assistant Secretary in Legal Affairs and Public Policy in 2000.
Joined Goldman as the Federal Legislative Affairs Leader from 2007-2009.

Kenneth Connolly: Was staff director of the Senate Environment & Public Works Committee).
Became a Vice President at Goldman in 2008.

Arthur Levitt: The longest-serving SEC chairman (1993 to 2001).
Hired by Goldman in June 2009 as an adviser on public policy and other matters

Skippy...take it out behind the barn and end it please!

Mon, 11/16/2009 - 01:04 | 131502 tom a taxpayer
tom a taxpayer's picture


Thanks, Skippy, for this list of Good Samaritans. 

Since GS is doing God's work, I guess these Good Samaritans must be Goldman Sachs missionaries...spreading the Goldman gospel, converting the natives to live by the Goldman rule, helping Goldman gather and leverage heathen donations to do more of God's work. 

It's a wonder that Goldman Sachs does not apply for a charitable organization exemption from taxes.


Mon, 11/16/2009 - 02:44 | 131541 Anonymous
Anonymous's picture

Corzine is no longer NJ's Governor.

Sun, 11/15/2009 - 21:51 | 131406 jedwards
jedwards's picture

Very interesting idea, however am I correct that the premise is that the article is using the  Goldman charitable fund as a proxy for the Goldman trading desk?  That is a huge leap to make, I cannot believe those vultures on the prop desk would care about charitable endeavors.

Sun, 11/15/2009 - 22:27 | 131422 Thomas
Thomas's picture

They may be treating GS like a big endowment and simply give the charitable trust shares.

Sun, 11/15/2009 - 22:12 | 131414 Missing_Link
Missing_Link's picture

Any chance that there's actually something else going on here?  Any chance Goldman could be putting the bad trades on the books of its Foundation and keeping the good trades for itself?  Just a guess, and probably wrong, but I'm curious if there's any chance that could be the explanation for this.

Mon, 11/16/2009 - 00:50 | 131498 Anonymous
Anonymous's picture

That was my first thought. Like the old days before segregated accounts, sorting out the trades at the end of the day - like Hillary's favorable Whitewater trades.

Sun, 11/15/2009 - 22:30 | 131427 Anonymous
Anonymous's picture

I would be more interested to find that the allocations to the foundation are GREATER on LOSING days. After all, wouldn't that be a sweet way to slime the system? Donate money (deductible) to a foundation, then use it to bolster the for-profit trading company by allocating more to it on losing days.... :D

Sun, 11/15/2009 - 22:33 | 131429 max2205
max2205's picture

According to The Washington Post, 33 companies that received a portion of TARP's $700 billion have not paid the federal government their most recent dividend payments. Those payments are required by the terms of the bailout and signal that the firms are strained for cash, according to the Post.
If those companies fail, US taxpayers stand to lose billions.

Sun, 11/15/2009 - 22:41 | 131433 FLETCH
FLETCH's picture

everyone needs and investment banker


the US Treasury has the Fed

The Fed has Goldman

Goldman does the dirty work because no one needs to get elected


My 3 year old could make billions moving the gov't credit without any competition



Sun, 11/15/2009 - 22:41 | 131435 peterpeter
peterpeter's picture

I'm unclear as to why you keep referring (in both the legends in the graphs as well as the text) to futures trades as ETFs.  They are quite different beasts.

It's certainly an interesting tax filing to look at, but I doubt this is representative of the firm at large on a pro-rata basis.  Were that the case, I think you would have expected to see trades reported in all of the assets that GS makes a market in, and on every day that they traded those assets, and that is more certainly not the case.

I looked through the 2007 filing and about 1/2 way in, I counted I think 8 days on which any ishares ETFs were traded (hey, maybe they are all backloaded for some reason, but I doubt it).

In fact, most of the items reported are not traded on the majority of days that the filing covers - so this is not what you would expect to see if it were a pro-rata slice of HFT in the firm.... so while it is still interesting stuff, I think your assumption that this is a pro-rata analysis of the larger firm's operations is mistaken... and it certainly does not seem to be a pro-rata slice of any their US equities HFT.

Sun, 11/15/2009 - 23:13 | 131447 Tyler Durden
Tyler Durden's picture

So you believe the foundation has a dedicated trader on the GS floor who trades billions in about 40 different products daily? Ok...

By the way, I believe you will be interested by the VWAP post coming tomorrow.

Mon, 11/16/2009 - 00:34 | 131491 peterpeter
peterpeter's picture

I don't have any pre-conceived notions about which GS staff does which trading for the account in question - but I am just pointing out that this can not logically be a pro-rata slice of the overall company.  It simply makes no sense and does not pass the most basic sniff test.

On the 2008 filing, there are 212 pages of trades.  I counted on 1 page 45 entries, and a quick skim through looks like the same font was used throughout - so assuming that number is constant, you have a total of 9,540 entries or so.

Say there are 250 trading days per year (it varies based on which country they are trading in, but that's a good ballpark figure the world over).

If GS was making a market in just 200 equities day in and day out, they would have something to the tune of 1,110 pages of trade data (200 * 250 / 45).  And, of course GS is making a market in much more than 200 equities (I don't buy it when you guys say that they have a monopoly on trading... but now you are grossly understating their trading!).

This is but a small subset of what GS is doing overall, and does not appear given their market making activies to be a subset that is a pro-rata slice of the rest of the firm's business....  That underlying assumption behind your post simply does not stand up to the most basic of sanity tests.

Still interesting data - but the assumptions about it are wrong, and therefore the conclusions you draw off of those assumptions are unsupported.

I'm still interested in why you kept referring to their trading in futures as ETFs, and additionally look forward to seeing what you have to say about VWAP tomorrow.


Mon, 11/16/2009 - 00:43 | 131495 Tyler Durden
Tyler Durden's picture

The assumption is perfectly valid when you read what i wrote: that GSF is basically an allocated portion of any ticket across specific product lines: the exception of CDS and cash bonds, as well as various single name equities is notable. What it does indicate is a sample of is the high frequency products that GSF is apparently a proxy of the broader Goldman's prop performance: the include futures, etfs, treasury derivatives, currencies and currency futures, etc. I suggest you reread the post.

Mon, 11/16/2009 - 01:07 | 131503 peterpeter
peterpeter's picture

You wrote "These are a one-for-one proxy of absolutely every single trade that Goldman executed in its capacity as a prop trader in the last two years. The only question is what is the proration multiple to determine what the appropriate P&L for the entire firm would have been based on any one single trade allocated to GSF, and subsequently, disclosed in the foundation's tax forms."

That is simply incorrect.  Previously, you pointed out that missing were credit default swaps - however now you are saying also absent are single name equities... but there are in fact single named equities in the filing (pages 44-46 of the 10a contain positions in publicly traded names and page 83 lists "Publicly Traded Securities" with a healthy loss and proceeds of approximately $70M USD).

I can't say what the subset of data we are looking at represents, but if you really believe that this was a pro-rata slice of their trading in 2007/2008, you are wrong.

Take the $70M listed in proceeds from publicly traded companies (top of page 83 on the 2008 filing) - if we apply your 0.5% figure, that would imply trading proceeds of $14B for the year (70M * 200).  That is a laughably small amount.

Again, I don't have any preconceived notions about who is making these trades within GS, nor how they relate to the larger organization - but to think that this is pro-rata of their prop trading including their market making / HFT activities is just - well - a mistake.


Mon, 11/16/2009 - 02:09 | 131534 Tyler Durden
Tyler Durden's picture

GSF, as an entity whose only purpose is capital fungibility, has no independent trading silo and no dedicated/standalone trader. thus it piggybacks on the broad prop infrastructure.

Mon, 11/16/2009 - 10:08 | 131660 peterpeter
peterpeter's picture

Might be (and I am not disputing that since I can't say one way or another).

However, even if it is piggybacking - it is most certainly not a pro-rata slice of the overall company as you claim, so the conclusions you draw about the profitability of overall GS in 2007 and 2008 are unlikely to be correct.

Additionally, the media reports on GS from 2007 and 2008 indicate that there was a prop trading profit in both years.

I'm not sure how you can believe that they are losing money on prop trading / HFT, and still go after them as frequently as you do for having a monopolistic trading position.  The 2 positions are both wrong IMO - but they certainly should be in obvious conflict with each other to even the most casual reader who stops for a moment to think.

Sun, 11/15/2009 - 22:47 | 131437 CB
CB's picture

in other words, something stinks at GS...

Sun, 11/15/2009 - 22:48 | 131438 RobotTrader
RobotTrader's picture

Looks like every losing trade was dumped into GSF.

I doubt the Mother Ship did that badly.

I bet those allocations went astray most of the time, giving the Prop Desk most of the juice and GSF gets dinged with the crappy trades.

Sun, 11/15/2009 - 23:23 | 131450 Missing_Link
Missing_Link's picture


That's what I suggested above  ^^^

Is that likely the case?  And is it legal?

Sun, 11/15/2009 - 22:55 | 131440 Fritz
Fritz's picture

Props to TD on this - Great thoughts that you won't find elsewhere in mainstream or interwebs.


Goldman Squid's volumes steamrolls everything in the markets. Like a Black Hole, they will swallow all surrounding resources.

In my minds that eliminates "free" markets.

Congress should shut down that fucking bucket shop.


Sun, 11/15/2009 - 23:09 | 131444 Anonymous
Anonymous's picture

Good job....... GS is next ENRON of HF market......

Sun, 11/15/2009 - 23:38 | 131459 Anonymous
Anonymous's picture

hmmm...interesting and informative post. Someone should do this for a little shop called Getco. Word on the street is they had access to the CME's firewall and were gamed the autospreaders to the tune of several billion. Worth taking a peak at, wouldn't you say...

Mon, 11/16/2009 - 00:18 | 131484 Tyler Durden
Tyler Durden's picture


Mon, 11/16/2009 - 10:53 | 131704 Anonymous
Anonymous's picture

Notice the improved liquidity and market depth in the futures over the past few weeks,?

Mon, 11/16/2009 - 00:02 | 131471 laughing_swordfish
laughing_swordfish's picture

Great article.

And, as many others suspect, I think GSF gets stuck with more than its share of losing positions, so as to make Mama Squid look better.

Waiting for the VWAP article


KptLt laughing swordfish

9er Unterseeboote Flotille

Mon, 11/16/2009 - 00:04 | 131472 andrew123
andrew123's picture

Tyler, I am a little confused.  Am I correct that based on this data, GS is not making a huge bonanza on its HFT?  This contradicts everything I have been reading about HFT on this and other websites for the past 6 months. What about the direct and inderect benefits of the SLP?  Am I missing something?

Mon, 11/16/2009 - 00:29 | 131490 Anonymous
Anonymous's picture

A tiny percentage of GS profits come from HFT... somewhere around $100M YTD (not counting profits from REDI, which isn't remotely prop HFT).

Mon, 11/16/2009 - 00:04 | 131473 andrew123
andrew123's picture

Tyler, I am a little confused.  Am I correct that based on this data, GS is not making a huge bonanza on its HFT?  This contradicts everything I have been reading about HFT on this and other websites for the past 6 months. What about the direct and inderect benefits of the SLP?  Am I missing something?

Mon, 11/16/2009 - 00:10 | 131480 Tyler Durden
Tyler Durden's picture

i) the bulk of the data here ends around October 2008

ii) SLP was launched in October 2008

iii) HFT is a contributor but by no means the main beneficiary to GS's trading success.

iv) GS' recent trading record is combination of fewer competitors, concentrated and more credit-worthy clients (GS dropped the "bad" clients), an economy of scale in equities and derivatives trading, a virtual monopoly in FI trading, and the ability to borrow at 0% to fund any and every investment idea.

Mon, 11/16/2009 - 00:04 | 131474 andrew123
andrew123's picture

sorry for accidental double post.

Mon, 11/16/2009 - 00:09 | 131477 Anonymous
Anonymous's picture

I've been saying for a while how terrible GS is at prop trading... I interviewed a guy who was head of a major "Prop" desk at GS - he claimed they made X dollars executing customer orders and Y dollars trading prop, both of which were huge numbers. With some investigating it turned out almost all of their "prop" profits were just collecting retardly big spreads through REDI, and further using information from the customer orders - their true prop profits where in the ballbark of Y/10. They called their phone orders to be customer profits, and their REDI platform to be prop profits... what a joke.

Right now all the other banks are scared turtles, just making money from arbing the govt's cheap lending, and GS is the only one left standing to charge whatever spread they want to the institutional orders.

Mon, 11/16/2009 - 00:45 | 131496 Anonymous
Anonymous's picture

They put the losers into the charity write off the face amount and then liquidate them at the loss. Just goes to show that Goldman can't do a straight deal. Ever. The staffing policies have hurt the place. It would not break my heart if they were liquidated.

Mon, 11/16/2009 - 01:16 | 131508 Anonymous
Anonymous's picture

Who would like to guess that the 2009 GS foundation tax return will not include all its trading data in such

Mon, 11/16/2009 - 01:37 | 131520 chindit13
chindit13's picture

This is the most intriguing article I have yet seen in the ten months of this site.  It will take several more readings to fully grasp its implications, factoring in peterpeter's posts.  In the meantime, I look forward to the response you will surely receive from GS' PR man, especially if other media such as WaPo, NYT, Barrons or even HuffPo pick up on it.

I do not know about pro rata allocation, but either way this does not look good.  It is either a window into the overall picture of GS' Prop Desk (unless the various desks share no opinions/information), or else GS allocated trades inequitably and tossed a preponderance of losers into their "charitable account".

A few things, however, seem certain on initial inspection:

---It is undeniable that GS still exists today merely because of the bailouts and backstops, no matter how smart they all like to think they are

---A lot of people at 85 Broad are grossly, make that obscenely overpaid (if they're really so good, they'd go to a HF and prove it---minus the 0% funding and hotline to Geithner and Bernanke)

---It helps inordinately to have friends in high places

---There are two ways to solve TBTF:  one is to break up large firms, the other is to eliminate the competition and become Too Big Not to Succeed....obviously this latter alternative has been chosen for Goldman, and its quantum leap from Bad Trader to God-like trader owes more to oligopolistic position than anything resembling talent

Reading this, then looking at the list provided by Skippy above, says everything a taxpayer needs to know.

Mon, 11/16/2009 - 01:46 | 131526 chindit13
chindit13's picture

Yahoo! is carrying a NYT article, naming one Stephanie Bell-Rose (by any other name) as the charitable fund's overseer.  The NYT article says nothing about losses, an is, in afct, rather complimentary, awed by the number of trades, but mentioning nothing about P&L.


Mon, 11/16/2009 - 01:59 | 131529 Agent Orange
Agent Orange's picture

Goldman bought everything in March. They understand bubbles and they love them. They did the trade in such size, they dragged the whole world with them, literally.  Simple as that. I get so angry because they turned at brutally simple Dollar carry trade into a mint. All you had to do was buy SPX when it touched the 21-day moving average.

Mon, 11/16/2009 - 02:39 | 131540 Anonymous
Anonymous's picture

I have commented on all of this before to no avail. Given today's response to this great piece, I will say it again. GS makes all their money from "fixed income trading"....that is plain for anyone to see in any quarterly report...this is done by 1. The spreads and 2. No effective chinese wall between the customer orders and the agency "prop" desk taking positions based on these orders....I'm heading somewhere with this....considering that the fixed income market along with all of ots tenticles is 20x the size of the equity market, why does the still not exist a nasdaq like ecn for fixed income with listed bids and offers for all to see?? Why the need for the otc intermediary to make both sides of the mkt? I am an equity guy but I don't believe TRACE does this. This would prevent the obnoxious spreads in what should really be miniscule sreads given the notional value of the bond mkt vs. Equities!!! Yes Cuomo should be made aware of this.....and secondly, who wants to join me in setting up an ecn/mkt data bid/ask quote system to countyer

Mon, 11/16/2009 - 13:39 | 131960 Anonymous
Anonymous's picture

I agree, some equity and etf desks at Goldman were profitable, however most of the guys running them have left over the last 6 months as they were merged into the main desk. Have people forgotten the poor performance of goldmans internal funds which the prop desk manages and the fact that their own partners needed loans last year. And in 2007 doesnt anyone remember global. Goldman is the house now and keeps losing money on its trades to keep the spreads tight and the customers giving inside.

Mon, 11/16/2009 - 02:51 | 131544 Anonymous
Anonymous's picture

Interesting article but would make the following comments
1. Having worked at various IBs (not GS) on both buy and sell-side I think it unlikely that there is a pro-rata allocation from any sell-side activity into the GSF

2. The GSF website only contains annual reports for the years 2002-2006 - I am surprised they are not showing later reports. Whilst they do not give exact details broadly speaking their investments were split between fixed income, equities, funds and private equities.

3. My guess is that quite a bit of the money went to GSAM and within that to Global Alpha their, once huge, macro hedge fund. These guys did trade everything and 2007 and 2008 results were appalling which could explain why GSF is down so much. The two heads were replaced in April this year.

4. Finally your individual trade analysis is flawed I think because many of those trades will have been relative value trades (ie long 5 yr UST short 10 yr UST as a curve trade).

Mon, 11/16/2009 - 06:03 | 131591 Anonymous
Anonymous's picture

This deserves a Pulitzer prize.

Mon, 11/16/2009 - 08:27 | 131622 Anonymous
Anonymous's picture

What is becoming clearer is that size matters in any marketplace whether it be cars, houses, sinks, computers, food, securities, differing types of securities....

And what I thought was clear is that the US has laws in place that would insure a competitive marketplace....

Since these laws/rules are no longer enforced....then there must be a clear answer as to why....

And here it is....

The politicos will take a road....any road....and this road leads to nowhere.....any ole road will long as it is a road....THEY are just happy to have a road....So that THEY will not have to walk....

Mon, 11/16/2009 - 10:54 | 131706 Anonymous
Anonymous's picture

yes, to quote the famous Charlie Kelly:

"I'm a full on know, I help old people and kids and stuff."

"Um, don't you mean philanthropist?"

"Yeah, that's it"

Goldman = philanthropist = full on rapist

Mon, 11/16/2009 - 13:41 | 131793 Fibozachi
Fibozachi's picture

Fantastic idea Anon ... Tiny Tim as Dennis, Uncle Ben as Mac and Volcker as Frank !!  I suppose Sheila Bair could play Dee, but we'd need someone a littler sexier.

Mon, 11/16/2009 - 12:34 | 131844 orca
orca's picture

"which rewards its best clients with market moving information ahead of all others peasants"

Forgive me if above this is already mentioned, I haven't read all the comments, but my question is if everyone is their client (since LEH et al have disappeared), who the fuck is the counterparty to their trades? JPM? Hedgies? PE? I think that a significant portion of their trading is intra-GS, imho there is just no way with the low volume that significant others are trading against them. So it's either that, or they are lying, but either way I don't believe there are counterparties willing any more to take a trade (any trade) against them.

Mon, 11/16/2009 - 14:13 | 132016 philmink
philmink's picture

Great work Tyler. Awesome!



Mon, 11/16/2009 - 14:14 | 132018 JR
JR's picture

Sorry for the length of this.  But to understand Goldman’s ticket to monopoly, the key is the Fed’s chain of command.

Since the days of Alexander Hamilton the investment banks have made their home and impact in the Empire State.  There, the concentration of big banks has made the NY Federal Reserve Bank powerful enough to outmaneuver, outvote and override all other regional interests. The position of Goldman Sachs guarantees it the leverage when needed to direct the Federal Reserve System. 

It boils down to this: when you have the kind of leverage Goldman and the TBTFs have, this Wall Street money trust can make the critical decisions.  The consortium tells the NY Fed what to do; it tells the FOMC and it relays its decision to Bernanke, representing 90 percent banking power. It means the government of the United States is under the direction of the Wall Street money trust.

The Federal Reserve Bank of New York is the feature of how centralized, incestuous and tyrannical America’s financial system has become. It is the New York Fed that literally gives the first and last word on who gets what and when in financial America. In other words, when Paulson or Bernanke or Geithner or Summers pick their winners and losers, it’s here’s where the decisions are made....

Because of the extensive holdings and connections of New York based investment banks, what influence could a St. Louis or Dallas banker possible make on Fed policy? And since the domination of the Fed by Ben Strong of J.P. Morgan Trust and Governor of the New York Fed from 1914 until his death in 1928, no Fed decision is made without the New York stamp.

The president of the New York Fed is a permanent voting member of the FOMC and traditionally is selected as its vice chairman. The other presidents serve one-year terms on a rotating basis. All of the presidents participate in FOMC discussions, but only the five who are members of the Committee vote on policy decisions.

The Federal Reserve Bank of New York has several unique responsibilities associated with its presence in the financial capital of the United States.

At the direction of the Federal Open Market Committee (FOMC), the Federal Reserve's top monetary policy-making group, the New York Fed executes domestic open market operations on behalf of the System.

Open market operations—the buying and selling of U.S. government securities in the secondary market—are the principal means through which the System implements monetary policy. Although the FOMC decides what policy to follow, the System's portfolio is directed, on a daily basis, by the Manager of the System Open Market Account at the New York Fed. The Manager, along with the rest of the Open Market Department, constantly monitors bank reserves and acts to ensure that the FOMC's directive is being fulfilled.

In addition to its domestic trading desk responsibilities, the New York Fed, at the direction of the FOMC and U.S. Treasury, conducts all foreign exchange trading for the Treasury and the Federal Reserve System. In this role, the New York Fed intervenes in foreign exchange markets to achieve dollar exchange rate policy objectives and to counter disorderly conditions in foreign exchange markets.

The New York Fed also is responsible for maintaining relations with, and providing financial services for, foreign central banks and international organizations. One of these services is the New York Reserve Bank's unique custodial responsibility for the gold reserves of about five dozens countries, central banks, and international organizations. The New York Fed's gold vault stores approximately one-quarter of the world's official gold supply—the largest concentration of monetary gold in the world.

Foreign official gold reserves have been held at the New York Fed since 1924 for numerous reasons, including the stability of the U.S. political system, the concentration of international trade and finance in New York City, and the convenience of centralizing gold holdings in a place where international payments can be made quickly.

Mon, 11/16/2009 - 17:42 | 132361 tip e. canoe
tip e. canoe's picture

i'll be the 1st to admit that i might have too much tinfoil on the brain, but the 1st thing i thought of when i heard that they were gonna try the gitmo crew in lower manhattan was that it was going to be a veritable fortress down there, ergo much easier to get any gold out the NY FED and onto a ship to whichever country (cough, deutschland, cough) that wants it back without arising too much attention.

plus, the added bonus of NO PROTESTS ALLOWED anywhere near wall street...for security reasons of course.

Mon, 11/16/2009 - 20:32 | 132538 tom a taxpayer
tom a taxpayer's picture

JR - Thanks for explaining the workings of the NY Fed and its boss role in the overall Fed Reserve system.

Mon, 11/16/2009 - 14:17 | 132027 Anonymous
Anonymous's picture

As a newbie..from the perspective of the futures products acting as a vehicle for hedging purposes..would it really show the GS trading prowess based on e-mini futures p&l?..

Mon, 11/16/2009 - 14:20 | 132031 Anonymous
Anonymous's picture

Interesting play on #'s today 1112 is up 67% from March lows of 667....ummmmmm hummmmm

Mon, 11/16/2009 - 16:39 | 132262 Anonymous
Anonymous's picture

Fortunately GS can afford to preserve this excellent cadre of talented traders by paying them very generous retention bonuses. Well worth the billions.

Mon, 11/16/2009 - 17:05 | 132303 chancee
chancee's picture

I think the reason their future trading shows a loss is because they merely use those instruments to move the market in whichever direction will aid their larger positions favorably - equities, commodities, etc.  They're not really trying to make their money there.

Mon, 11/16/2009 - 17:40 | 132358 Anonymous
Anonymous's picture

Rest assured future 990s for the foundation are going to be much slimmer

Mon, 11/16/2009 - 18:50 | 132446 Unscarred
Unscarred's picture

Great stuff, Tyler.  Can't wait to see what the 2009 edition looks like compared to the bond/commodity/currency desks which tallied 150 days of $100M+ profits and only 3 days worth of losses.

Mon, 11/16/2009 - 21:17 | 132582 Anonymous
Anonymous's picture

O U T S T A N D I N G !!!
This is the type of work you call free investigative journalism, rendering honour to the Watergate boys of good memory.
If it helps bring them down...the better, but it is outstanding work by itself!!

Mon, 11/16/2009 - 21:20 | 132586 Budd Fox
Budd Fox's picture

O U T S T A N D I N G !

Investigative journalism at Watergate levels.

If it helps to bring them down...the better, but is great journalism anyway

Mon, 11/16/2009 - 22:24 | 132674 celticgold
celticgold's picture

 from a total un tech , un savvy , dirty old man , thanks TD and team for getting down for truth ,justice and the american way last ..real supermen  thankyou

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