Tornado Alley (PROG)

[BullNBear52]

Goldman avoided getting involved in the subprime mortgage mess that the banks were deep into.

You're forgetting they were an investment bank. It was the banks that screwed up once Glass Steagall was repealed and started selling junk on Wall Street.

...For the full year, Goldman earned $2.04 billion, or $4.47 per share. Goldman had remained profitable through the beginning of the year, while other financial firms posted huge losses tied to the troubled housing and credit markets.



The loss proves the turmoil in the financial markets has tripped up even the best-run financial institutions. The New York-based bank has long been considered the premier investment bank on Wall Street, and in recent quarters, the sturdiest amid the turmoil.

...The investment banking sector was turned on its head in September when Lehman Brothers filed for bankruptcy and Goldman and Morgan Stanley became bank holding companies. Like most banks, Goldman was hurt by the plunging value of its investments, especially at its principal trading desk.

Goldman reported negative revenue of $4.36 billion in its trading and principal investments unit. Negative revenue occurs when a company must reverse some previously recognized revenue because its value has declined. Overall, Goldman reported negative revenue of $1.58 billion, compared with revenue of $10.74 billion during the year-ago quarter.

The principal investment division lost $2 billion on corporate investments, $961 million from real estate investments and $631 million tied to the firm's investment in Industrial and Commercial Bank of China. Goldman purchased a minority stake in the Chinese bank in 2006. The loss tied to that investment was due to a decline in ICBC's share price.

Negative revenue from fixed income totaled $3.4 billion, as losses were widespread across the division, Goldman's chief financial officer, David Viniar, said during a conference call.

...Ratings agency Moody's Investors Service said the losses were in line with expectations, but showed the bank is vulnerable to the current market downturn. Moody's cut Goldman's long-term senior debt rating to "A1" -- still investment-grade -- from "Aa3."

Goldman's quarterly loss came during a three-month period that brought sweeping changes to the investment banking sector -- a sector essentially being rebuilt after the September collapse of Lehman Brothers and the sale of Merrill Lynch & Co. to Bank of America Corp.

With investors lacking confidence in the stand-alone banking model, both Goldman and Morgan Stanley quickly gained federal regulatory approval to become bank holding companies.

Morgan Stanley is scheduled to report fiscal fourth-quarter results Wednesday. Analysts predict the bank will post a loss, though not as severe as Goldman.

The banking structure change allows the pair to build large deposit bases to help fund operations -- considered vital as credit markets have essentially shut down.

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http://biz.yahoo.com/ap/081216/earns_goldman_sachs.html?.v=22