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Backgrounder: Goldman Sachs Group, Inc.
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15:11, October 14, 2008

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The Goldman Sachs Group, Inc., or simply Goldman Sachs, is a large global bank holding company that engages in investment banking, securities and investment management.

Goldman offers its clients mergers & acquisitions advice, underwriting services, asset management, and engages in proprietary trading, and private equity deals. It is a primary dealer in the U.S. Treasury securities market. 

Founded in 1869 by Marcus Goldman, the company made a name for itself pioneering the use of commercial paper for entrepreneurs and was invited to join the New York Stock Exchange in 1896.  

In the early 20th century, Goldman was a major player in establishing the initial public offering market. It managed one of the largest IPOs to date, that of Sears, Roebuck and Company in 1906.

During the 1970s, the firm expanded in several ways. Under the direction of Senior Partner Stanley R. Miller, it opened its first international office in London in 1970, and created a private wealth division along with a fixed income division in 1972. It also pioneered the "white knight" strategy in 1974 during its attempts to defend Electric Storage Battery against a hostile takeover bid from International Nickel and Goldman's rival Morgan Stanley.

In the 1980s, the firm made a major move by acquiring J. Aron & Company, a commodities trading firm which merged with the Fixed Income division to become known as Fixed Income, Currencies, and Commodities.

One of the largest events in the firm's history was its own IPO in 1999. Goldman offered a small portion of the company to the public, with some 48 percent still held by the partnership pool.

22 percent of the company is held by non-partner employees, and 18 percent is held by retired Goldman partners and two longtime investors, Sumitomo Bank Ltd. and Hawaii's Kamehameha Activities Assn (the investing arm of Kamehameha Schools). This leaves approximately 12 percent of the company as being held by the public. With the firm's 1999 IPO, Henry Paulson became Chairman and Chief Executive Officer of the firm.

In 1999 Goldman acquired Hull Trading Company, one of the world's premier market-making firms, for 531 million dollars. More recently, the firm has been busy both in investment banking and in trading activities. It purchased Spear, Leeds, & Kellogg, one of the largest specialist firms on the New York Stock Exchange, for 6.3 billion dollars in September 2000.

It merged with JBWere, the Australian investment bank and opened a full-service broker-dealer in Brazil. It expanded its investments in companies to include Burger King, McJunkin Corporation, and in January 2007, Alliance Atlantis alongside CanWest Global Communications to own sole broadcast rights to the CSI franchise.

The firm is also heavily involved in energy trading, including the oil speculation market, on both a principal and agent basis.

Its sizable profits made during the 2007 subprime mortgage financial crisis led the New York Times to proclaim that Goldman Sachs is without peer in the world of finance. The firm's viability was later called into question as the crisis intensified in September 2008.

On Sept. 21, 2008, Goldman Sachs received Federal Reserve approval to transition from an investment bank to a bank holding company.

On Sept. 22 2008, the last two major investment banks in the United States, Morgan Stanley and Goldman Sachs, both confirmed that they would become traditional bank holding companies, bringing an end to the era of investment banking on Wall Street. The Federal Reserve's approval of their bid to become banks ended the ascendancy of the securities firms, 75 years after Congress separated them from deposit-taking lenders, and capped weeks of chaos that sent Lehman Brothers Holdings Inc. into bankruptcy and led to the rushed sale of Merrill Lynch & Co. to Bank of America Corp.


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