Monday, October 18, 2010
Today's topic: Goldman Sachs- 10 questions
1) What exactly does Goldman Sachs do?
a- investment banking & securities
b- investment & asset management
c- mergers & acquisitions advice
d- underwriting services & prime brokerage
e- proprietary trading & private equity deals
f- all of the above
Ans: F All of the Above- Yep... you guessed it right
2) Goldman Sachs was founded in 1869. How did it first make a name for itself?
a- gold speculation
b- currency swaps
c- pioneering the use of commercial paper
d- financial middleman between railroads and banks
Ans: C In the global money market, commercial paper is an unsecured promissory note with a fixed maturity of 1-270 days. It is a money-market security issued (sold) by banks and corporations to get $ to meet short term debt obligations (for example, payroll), and is only backed by an issuing bank or corporation's promise to pay the face amount on the maturity date specified on the note.
3) On December 4, 1928, it launched the Goldman Sachs Trading Corp. What was that?
a- a closed end fund with characteristics similar to a Ponzi scheme
b- a means to securitize Latin American national debt
c- division of Goldman Sachs involved specifically in Far East economic affairs
d- all of the above
Ans: A A closed end fund is a collective investment scheme with a limited number of shares. New shares are rarely issued after the fund is launched; shares are not normally redeemable for cash or securities until the fund liquidates. The fund failed as a result of the Stock Market Crash of 1929, hurting the firm's reputation for several years afterward.
4) Gus Levy took over as Senior Partner of Goldman Sachs in 1969 and coined a phrase which has become Goldman's philosophy- what is it?
a- Kill or Be Killed
b- Long Term Greedy
c- Customer is always right.. to his face
d- Profit before Family.. before Country.. before God
Ans: B 'Long Term Greedy' implied that as long as money is made over the long term, trading losses in the short term were not to be worried about.
5) Another financial crisis for the firm occurred in 1970, when the Penn Central Transportation Company went bankrupt with over $80 million in commercial paper outstanding, most of it issued by Goldman Sachs. What was the result of this?
a- Credit ratings created for every issuer of commercial paper
b- Goldman barred from commercial paper transaction by SEC for 5 years
c- Goldman still managed to turn a profit off the ordeal
d- Gus Levy left to become Fed Chair under Nixon in 1971
Ans: A A credit rating estimates the credit worthiness of an individual, corporation or even a country. It is an evaluation made by credit bureaus of a borrower’s overall credit history. A credit rating is also known as an evaluation of a potential borrower's ability to repay debt, prepared by a credit bureau at the request of the lender. The 1970 bankruptcy was large, and the resulting lawsuits threatened the partnership capital and life of the firm.
6) In 1995, Goldman Sachs bailed out a nation- which?
Ans: E Former Goldman head and Fed Secretary at the time, Robert Rubin drew criticism in Congress for using a Treasury Department account under his personal control to distribute $20 billion to bail out Mexican bonds, of which Goldman was a key holder. On November 22, 1994, the Mexican Bolsa stock market had admitted Goldman Sachs and one other firm to operate on that market. The 1994 economic crisis in Mexico threatened to wipe out the value of Mexico's bonds held by Goldman Sachs.
7) Despite the 2007 subprime mortgage crisis, Goldman Sachs was able to turn a profit- how?
a- by selling 95% of total shares 3 months before Lehman collapsed
b- by short-selling subprime mortgage-backed securities
c- by converting its cash overflow into swiss francs
d- by hedging that the market would not fall below 8000
Ans: B A mortgage backed security is an asset-backed security or debt obligation that represents a claim on the cash flows from mortgage loans through a process known as securitization. Goldman made a profit of $4 billion by "betting" on a collapse in the sub-prime market, and shorting mortgage-related securities.
8) In spite of a $4 billion profit, how much did Goldman receive from TARP in Oct. 2008?
a- $ 2 billion
b- $ 5 billion
c- $10 billion
d- $12 billion
Ans: C Goldman also received an additional $10 billion- Berkshire Hathaway agreed to purchase $5 billion in Goldman's preferred stock, and also received warrants (securities) to buy another $5 billion in Goldman's common stock, exercisable for a five-year term. That Christmas season it paid 1556 employees bonuses of at least $1 million each
9) In 2007, Goldman Sachs paid $6 billion in worldwide taxes. What did it pay in 2008?
a- $5.7 billion
b- $2.3 billion
c- $1.2 billion
d- $14 million
Ans: D This in spite of making $2.3 billion profit and paying $10.9 billion in employee pay and bonuses.
10) Lastly, famous Goldman alumni include which of the following:
a- Robert Rubin- Former US Treasury Sec. (Clinton), ex-Citigroup chair
b- Henry Paulson- Former US Treasury Sec. (Bush)
c- Erin Burnett- CNBC Host
d- Jon Corzine- Former Governor of the State of New Jersey
e- Guy Adami- CNBC's Fast Money
f- Jim Cramer- best selling author, CNBC's Mad Moneyhost; Scumbag
g- George Herbert Walker IV, member of Bush family
h- Robert Zoellick- US Trade Rep (2001–2005), Dep. Sec of State (2005–2006), current World Bank President
i- Mark Carney- Current Governor of the Bank of Canada
j- All of the Above
Paulson: <blush> Um, golly gee..thanks~
Bush: No I mean it- The American people owe you a debt
Paulson: Well gosh.. It was my pleasure to serve, Mr. President.
Ans: J Could it be any other answer?
~ Now wasn't that 'Fun'??
Posted by Susquehanna at Monday, October 18, 2010