Weekend Economists Go for the Gold December 9-11, 2011 [View All]

[Demeter]

So what is the topic to distract us from the sordid reality of global economic and political conditions, you ask. Is it the Olympics? Is it Motown Oldies?

No, today, December 9th is a very special day for us to consider...it is the 190th anniversary of the birth of the man who founded....The Vampire Squid! http://1.bp.blogspot.com/_gPSEF5xjrMA/S1i1m5LD6ZI/AAAAAAAAD8o/71HwGUuAyMI/s400/Marcus+Goldman.JPG.jpeg

"Marcus Goldman, who worked as a peddler with a horse-drawn cart upon arriving in America, and went on to found Goldman Sachs, was born in Germany on this date in 1821. He created an eponymous financial firm in 1869 and took in his son-law, Samuel Sachs, in 1882. Goldman Sachs pioneered the use of commercial paper (IOUs) for business capital and also helped to establish the initial public offering market. The company, now headed by Lloyd Blankfein, paid nearly 1,000 of its executives more than $1 million each after receiving bail-out funds from the Troubled Assets Relief Program (TARP) in 2008. Goldman Sachs ranks #1 among financial firms in annual net income, earning close to $10 billion per year. Among the assets it owns seems to be the U.S. government.

“They bundled toxic mortgages into complex financial instruments, got the credit ratings agencies to label them as AAA securities, and sold them to investors, magnifying and spreading risk throughout the financial system, and all too often betting against the instruments they sold and profiting at the expense of their clients.” —Senator Carl Levin http://jewishcurrents.org/december-9-from-peddler-to-investment-pirate-8221

Marcus Goldman, Entrepreneur

Marcus Goldman was a German immigrant from the Bavarian town of Fürth. He left Germany in 1848 for the United States.

Goldman founded his investment business in 1869, a time when loans and credits were rare and expensive. He bought debt obligation certificates from his clients and sold them to banks in New York, making him a pioneer in the commercial paper business. In 1869 Goldman opened an office located in Pine Street in New York's banking and financial districts. When his son-in-law, Samuel Sachs, joined the business, the company was renamed “Goldman Sachs,” which would become one of the most well-known investment banks in the United States and around the world. The business was listed at the stock exchange in 1896. One of the oldest clients are the companies “Sears” and “Roebuck and Co.”

The first international office was opened in London in 1970, followed by Tokio and Zurich in 1974. Since 1999 the company’s stocks with the ticker abbreviation "GS" are traded at the New York Stock Exchange. http://germanoriginality.com/heritage/people/entrepreneurs.php?id=102




Goldman founded the firm in a one-room office on Pine Street. Goldman bought promissory notes from tobacco and diamond dealers that had been issued by their customers and then sold the notes to banks for a small profit, according to Time magazine. Son-in-law Samuel Sachs joined in 1882 and the firm became Goldman Sachs in 1885...SEE BUSINESS SLIDE SHOW AT LINK

http://images.businessweek.com/slideshows/20110706/goldman-sachs-the-good-the-bad-and-the-ugly/slides/25

Yes, it all started in Germany. Doesn't everything?

Goldman came from an Ashkenazi Jewish family, the son of Ella and Wolf Goldmann, a former schoolteacher and cattle dealer. He immigrated to the United States from Frankfurt am Main, Germany, in 1848 during the first great wave of Jewish immigration to America, resulting from the Revolutions of 1848 in the German states.

Upon arriving in America, he worked as a peddler with a horse-drawn cart and later as a shopkeeper in Philadelphia. There, Goldman met and married eighteen year old Bertha Goldman (no relation), who had also emigrated from Germany in 1848.

In 1869, with his wife and five children, Goldman relocated to New York City and hung out a shingle on Pine Street in lower Manhattan, with the legend Marcus Goldman & Co., setting himself up as a broker of IOUs.

From his earliest days of his business, Goldman was able to singlehandedly transact as much as $5 million worth of commercial paper a year. Successful though he was, Goldman's business was insignificant compared to that of the other Jewish-German bankers of the day. Concerns like J. & W. Seligman & Co., with working capital of $6 million in 1869, were already modern-day investment bankers immersed in underwriting and trading railroad bonds.

Goldman's youngest daughter, Louisa, married Samuel Sachs, the son of close friends and fellow Lower Franconia, Bavaria immigrants. Louisa's older sister and Sam's older brother had already married.

In 1882, Marcus Goldman invited his son-in-law Samuel to join him in the business and changed the firm's name to M. Goldman and Sachs. Business boomed—by 1880 the new firm was turning over $30 million worth of paper a year—and the firm's capital was now $100,000, all of it the senior partner's.

For almost fifty years after its inception, all of Goldman Sachs's partners were members of intermarried families. In 1885, Goldman took his own son Henry and his son-in-law Ludwig Dreyfuss into the business as junior partners and the firm adopted its present name, Goldman Sachs & Co. In 1894, Henry Sachs entered the firm, and in 1896, the firm joined the New York Stock Exchange.

When Marcus Goldman retired, he left the firm in the hands of his son Henry Goldman and his son-in-law Samuel Sachs. In 1904, two of Sam Sachs's sons, Arthur and Paul, joined the firm straight out of Harvard University.

In the summer of 1904, Marcus Goldman died. From humble beginnings, the institution he left behind would soon become a full-service investment bank. With the advent of underwriting, coupled with the extensive lending, foreign exchange, and trading operations, the structure of Goldman Sachs was in place. Although much smaller and less sophisticated, it was already recognizable as the firm it would become.

http://en.wikipedia.org/wiki/Marcus_Goldman