December 6, 2023

Books of The Times: Diving in Search of the ‘Great Vampire Squid’

Mr. Cohan, whose title signifies nothing more fine-tuned than “The Goldman Sachs Story,” even puts the squid on his opening page. He juxtaposes it with his own calmer version of the same idea: that Goldman Sachs is “a symbol of immutable global power and unparalleled connections, which Goldman is shameless in exploiting for its own benefit, with little concern for how its success affects the rest of us.” But that hint of combativeness is misleading. Most of his long, carelessly shaped, jargon-filled book is far more conciliatory than that.

In the wake of his tightly constructed “House of Cards,” about the collapse of Bear Stearns, Mr. Cohan (who is a regular contributor to the Opinionator blog of The New York Times) has taken on a much broader and more daunting subject. However much enthusiasm he brought to the task, he does not inspire optimism by writing in an author’s note that he and his editor deemed Goldman Sachs “the next mountain we needed to climb.”

What a big mountain it is. The span of “Money and Power” extends from the firm’s founding in 1869 to the April 2010 hearing of the Senate Permanent Subcommittee on Investigations, at which an angry Senator Carl Levin, Democrat of Michigan, presided, and browbeaten Goldman Sachs executives were the main attraction. Most of this terrain has been traveled by others, whose books are abundantly cited in Mr. Cohan’s “ibid.”-filled endnotes.

He draws on sources from Stephen Birmingham’s 1967 “Our Crowd: the Great Jewish Families of New York City,” to John Kenneth Galbraith’s “Great Crash, 1929,” from 1954, to Charles Ellis’s thorough, elegant and much better-explicated 2008 Goldman Sachs history, “The Partnership.” Mr. Cohan’s most important material is that which extends beyond Mr. Ellis’s and documents the firm’s recent history. This is uncharted territory, thanks to the proliferation of opaque mortgage-backed securities, the decline of corporate accountability, the damage inflicted by the Great Recession (though not to Goldman Sachs) and the existence of embarrassingly candid e-mail. There are Goldman Sachs staff members who write “$$$” when they mean money. That’s not even the embarrassing part.

Mr. Cohan, who received the 2007 FT/Goldman Sachs Business Book of the Year Award, was able to interview many of the firm’s recent leaders, most notably Lloyd Blankfein, its current chief executive and chairman. Mr. Blankfein talks about himself humorously and well. But the book digs up minutiae like Mr. Blankfein’s ability to sing sitcom theme songs from the 1970s and a rabbi’s comment that Mr. Blankfein “was brilliant as a 12-year-old boy.”

Despite this level of detail, “Money and Power” remains relatively impersonal about the people it profiles, even when Mr. Cohan has interviewed the participants in bitter he said/he said Goldman Sachs disputes. (Jon Corzine versus Henry Paulson is the book’s most heated bout.) Its many thumbnail biographies tend to concentrate on educational background and favorite sports.

Interviewees range from Mr. Paulson, who is said to have a “heavily book-filled” office, to Robert Freeman, who speaks angrily about the insider trading scandal in which he was embroiled and vehemently accuses the writer James W. Stewart of unfair reporting in The Wall Street Journal. (“I think he’s absolutely dishonest,” Mr. Freeman says.) But this book does its hardest hitting when the interviewees are allowed to remain anonymous. Their candor is conspicuously different from the schmoozy yet careful information provided by those with clear Goldman Sachs connections.

About Goldman Sachs’s present-day business practices, one “private equity investor” says this: “They view information gathered from their client businesses as free for them to trade on … it’s as simple as that. If they are in a client situation, working on a deal, and they’re learning everything there is to know about that business, they take all that information, pass it up through their organization, and use that information to trade against the client, against other clients, et cetera, et cetera.” The speaker stops short of labeling this as insider trading, but only barely, saying, “I don’t understand how that’s legal.”

Mr. Cohan raises the same question as he writes that the firm’s onetime dedication to its clients has evolved into something more ruthlessly self-serving. “Its primary source of profit has shifted from banking to trading,” he writes, “and the firm is intentionally quite vague about how, and precisely where, those trades are made or, equally relevant, from whom the profits are coming.” When “Money and Power” can boil down its arguments that clearly, it has welcome moments of toughness and precision.

But the explication of intricate financial and legal issues is an art form not easily mastered. Mr. Cohan has done a better job of reporting and gathering information than he has of relaying it to the reader. Over the span of 600 pages, “Money and Power” includes an exhausting load of reasonable but clumsy observations like this, about the refinancing of mortgages by homeowners when interest rates fell in 1985 and 1986:

“This caused Goldman’s portfolio of mortgage-backed securities, which contained mortgages with higher interest rates, to be paid off early (through refinancings) and to lose value rather than increase in value as would be expected when interest rates fell, since the value of a bond with a higher interest rate increases when relative interest rates fall.”

There’s a better way to say this. And there is a better raison d’être for a new Goldman Sachs book than this one provides. Here are three central questions: “Why is Goldman Sachs so very powerful on so many dimensions? How did the firm achieve its present leadership and acknowledged excellence? Will Goldman Sachs continue to excel?”

Those were asked in 2008, by Mr. Ellis. Their meaning has changed startlingly over the last three years. Somewhere within “Money and Power” there should be new answers.

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