With the credit crunch ravaging the financial markets, and consumers apparently losing faith in the banking system, we were all assuming that that the masters of the universe might have to go easy on the foie gras, Chateau Petrus and brand new Ferraris this year.
This impression has only been strengthened this week, as various Wall Street investment banks have shuffled forward shamefacedly to admit that they’ve lost their shirts on sub-prime mortgages. Yesterday Bear Stearns, the bank that started all this mess when two of its hedge funds imploded, confessed that its profits were down a massive 62% last quarter. Morgan Stanley and Lehman have also taken a hit (albeit not quite to the same extent).
But if there is a crisis going on in the financial markets, clearly nobody remembered to tell Goldman Sachs. The US money-making machine revealed on Thursday that its third quarter numbers were so good that it is actually going to pay its people even more than it did last year.
Goldman shelled out $5.9 billion in compensation and benefits during the quarter, a 68% increase on 2006, while increasing employment levels by 7%. This was largely thanks to a big rise in revenues across the board, with investment banking, fixed income, equities, asset management and securities all managing to generate record numbers. Like most of its rivals, it suffered big lending losses – but while others took a big hit to the bottom line, Goldman increased profits by 79%. How do they do it?
The remarkable numbers are good news for Team Goldman, who can now expect another bumper cheque at bonus time (made all the sweeter by the relative poverty of their rivals elsewhere).
And it’s also good news for London’s restaurateurs, who will soon have the dubious pleasure of watching gangs of rowdy bankers work their way through the wine cellar.