Workers Find The Gold At Goldman Sachs

After Record Profit, Allotment For End-Of-Year Compensation Averages $622K Per Employee

(CBS/AP)  The big investment houses are set to deliver unprecedented 2006 results after Goldman Sachs Group Inc. reported Tuesday the biggest annual profit in Wall Street history.

The world's largest investment bank reported a staggering profit of $9.4 billion and revenue of $37.67 billion for its fiscal year thanks to record takeover activity and a robust stock market. Record high revenues came from every part of its business, including investment banking, fixed income, commodities, equity trading, and asset management.

Goldman said it was dedicating $16.5 billion for salaries, bonuses and benefit at the end of the year. This translates to an average of $622,000 for each employee, though the biggest payouts are given to top investment bankers who bring in the huge deals.

CBS News national correspondent Byron Pitts reports that experts say top executives at the company will earn as much as 20 to $50 million each.

Compensation expert Stephen Hall says that such big bonuses are driven simply by profits and competition, Pitts reports.

"There are a lot of other avenues of people who want to gobble up their talent," Hall said.

Goldman's record results left some on Wall Street wary about whether the good times may have peaked. Investors sent the company's high-flying stock down $1.56 to $200.97 on the New York Stock Exchange.

But Goldman Sachs shares are up about 58 percent in 2006, offering the strongest returns of any Wall Street investment house.

"The stars must all be aligned as they were in the just-ended period," said Richard X. Bove, an analyst with Punk Ziegler. "The equity markets must be strong. Private equity funds must be able to stimulate mergers. The worldwide economy must maintain its growth. Lacking these factors, the company could see a substantial decline in earnings in 2007."

There are already indications that the U.S. economy is moderating, and that securities firms will be hard-pressed to match this year's results. The big investment houses also face a drop in mortgage derivatives and debt financing used to finance takeovers.

Indeed, even the company's top executives would not go as far as to claim a repeat is in the works. Chief Financial Officer David Viniar said it is "very hard to predict what is going to happen in our business" but he again forecast growth.

Still, it might not be the kind of growth Goldman reported Tuesday. Or the kind likely to be seen when Lehman Brothers Holdings Inc. and Bear Stearns Cos. post results on Thursday, and Morgan Stanley Inc. next Tuesday.

Goldman reported profit attributable to common shareholders for the three months ended Nov. 24 of $3.1 billion, or $6.59 per share, compared with $1.63 billion, or $3.35 per share, in the year-ago period. Net revenue rose 47 percent to $9.41 billion from $6.4 billion.

Results easily surpassed Wall Street projections for earnings of $6.04 per share on $8.96 billion of revenues, according to analysts polled by Thomson Financial.

This kind of report would have been difficult for Chairman and Chief Executive Lloyd Blankfein to predict when he took over the leadership in June to replace Treasury Department-bound Henry Paulson. At that time, the stock market took a summer dive and big equity deals all but dried up.

But a turnaround that sent the stocks to new highs also sent many of Goldman's top businesses into record territory.

"This was a remarkable year for Goldman Sachs by any standard," said Viniar, who pointed out this year's earnings per share of $19.69 is almost equal to 2004 and 2005 combined. By comparison, the biggest U.S. profit for an American company was Exxon Mobil Corp.'s $36.13 billion, or $5.71 per share, in 2005.

"If the global economy continues to grow, then we'll grow," he told journalists. "We're seeing a good backlog of deals, a lot of dialogue with companies, and activity both on the strategic and financial-sponsored side."

Trading during the fourth quarter remained one of Goldman's biggest drivers, with revenue from stock transactions up 105 percent to $1.23 billion. Trading of bond, currency and commodities jumped 58 percent to $3.1 billion.

Principal investments, which include returns from Goldman's private equity investments, rose 64 percent to $1.4 billion. Investment banking surged 42 percent to $1.34 billion, while bond underwriting fees increased 96 percent from last year.

Revenue from its asset management and prime brokerage business rose 16 percent to $1.43 billion, but dipped 2 percent from the third quarter. Goldman reported that its Global Alpha hedge fund performed poorly in November, and is down 10 percent this year.

This all showed some "impressive earnings power," said UBS analyst Glenn Schorr. "Despite some noise, it's a strong close to a record year no matter how you slice it, and the outlook remains favorable."

[sharncedar]

"If you want to "have" then make sure your kids become "investment bankers". "

I'm sure the future successful nations will want nothing to do with American investment bankers when they see how badly their advice ruined American manufacturing; its happening already, the Chinese are laughing in the face of Henry Paulson, for example. So being an investment banker won't save you either, a bad local economy hurts all businesses, and these traitorous fools are sinking our whole nation.

[tibu987]

These people will say that they earned this money.
No, they did not earn it, they just had to be party to the system that allows this sort of thing at the expense of many other people.
But, that is little concern to them, they are just ecstatic to get it no matter the harm
It is the American way, but not that does not make it right.
That illiterate ballplayers make millions of dollars, movie stars get astronomical amounts of money, is indicative of a society gone mad and the loss of the country's true values.
As always, the little guy pays, you just don't feel their hands in your pocket.

[tibu987]

This obscene, nothing less.
Where do you think that amount of money comes from?
Yep, you and me, even if you are not in the market. Everybody in the U.S. pays.
This greed which is endemic in the U.S. breeds a different type of American, a person who will go to any extreme to get what he wants, no matter who is harmed.
This story tells much about the current generation and it is not good. Bush and his cohorts, our politicians, fit right into this scenario of greed.

[ceres5]

I know well how the money will be distributed. For each big shot executive, the cut will be $621,999.99 for each year of experience. For the rest, each will get $0.01 for each 30 years of experience. Don't be surprised if after the money has been paid, most of the executives will complain that they deserved more.

[perception5]

If you want to "have" then make sure your kids become "investment bankers". This is how a "capitalist" country/economy works. If you want something for nothing then move to socialist Europe......

[dirtyharry02]

Tell me why I got my degree in Environmental Chemistry, oh I forgot, so I can make $11.00/hr. for the state? Should've went business, or got an art degree and shoot straight into law school, ***, my college education sure paid off.

[mrvolleyba11]

Why aren't these "profits" going to the investors and the companies stockholders?

[gladetryst]

Free market operates where an entrepreneur gives a customer something the customer wants, customer exchanges something the entrepreneur wants. It only become ruthless and greedy when the government starts giving the entrepreneur something the customer doesn't want to give away. Thus we see, capitalism is not at fault, it is government interference.

[mjv2944]

The "haves and the have nots", you better be prepared to be a "not". These are ruthless people who worship at the altar of gold. They'd sell their souls for a buck.

[shedhouserob-2009]

No big deal
Corporate America can do as they please. Part of this profit is they took Montana's Power company away from them and then left them with pennies. Sucker Montana, Sucker America

[sharncedar]

this from msnbc: Leading the way for Goldman were its so- called Asian principal investments, or bets with its own money. The firm's investment in Beijing-based ICBC, China's biggest lender, contributed $949 million of the principal investments' $1.4 billion in revenue.

Investments in China is a mostly a currency play, if the currency rises than the value of the investment versus Us-dollar valued investments rises.

so the former CEO of Goldman is using our entire nation's power and influence to hype his company's investments in China, at the expense of American interests. This should be punished with the ultimate sanction, it is a crime of extreme proportions. we need to clean house in this country, and with a firm hand.

We will probably hear one day that David Viniar will be Jeffrey Skilling's bunkmate at the federal prison in Waseca, Minn.

[sharncedar]

"Middle class and poor folks are quick to cry foul but yet they are the same fools that fuel these outlandish salaries!"

Goldman through political contacts directly manipulates the trade policies and laws of the United States to make their illegal mergers possible and foreign investments profitable. How did we fuel that, we fight it with all our strength, they control the government, have you noticed or is your head so far where the sun don't shine.

[sharncedar]

hah hah hah. The Treasury Secretary, a former Goldman CEO, is in China right now betraying America to hype some Goldman and other investments. He wants to raise the yuan, China's currency, which will pay off big for currency traders and foreign investors in China while costing American consumers a lot more. Contrast that with putting import taxes on Chinese goods, which would equally discourage imports but send the money to America instead of to forex traders playing the China market.

That's how Goldman makes its money. Direct betrayal of the US to other countries.

Why do we tolerate it? Because the pain level isn't that great in America yet, we are getting there. The silly part is the idiots who support these crooks as they put us into infinite debt. It's you they are ripping off, who do you think is paying the $600,000, it is the American taxpayer and the American worker amd the shareholder.

[rcrach]

I knew I should have gone for the MBP degree in business parasites or as the alum like to call it Let them Eat Cake 101.

[cryonbrian]

If someone%u2019s boss wants to pay them a hefty sum of money, I say perfect! We see it all across the US. American%u2019s are so fascinated with celebrities that they are willing to pay huge sums of money to be like them. Americans pay premium prices for anything associated with public figures just to feel like that celebrity! In America people are paid millions to sing, dance, swing a golf club, racket, and bat, drive a race car, throw and catch balls. So what is the difference in paying a nine to fiver a huge sum of money?

Middle class and poor folks are quick to cry foul but yet they are the same fools that fuel these outlandish salaries! They are so quick to purchase items just to be part of the trendy crowd! Complaining and swiping their credit cards at the same time!

If you can make huge sums of money the legal way, I say go for it! You only get one life and money is the answer to everything under the sun! So bravo to Goldman Sachs and its employees!

Remember this, ask not what you can do for your company but ask what your company can do for you! Its all about the money!

[jonw1115]

It is too bad they don't distribute evenly. I am sure the admins and people who run the floor for these firms would love to have a piece of that!

[creeper00]

Seldom does a story leave me speechless. This one does.

Thank you, mjv2944. You said what I couldn't.

[mjv2944]

Yes sir, let's don't raise minimum wage, let's watch as middle class America disappears, let's not do anything about illegal immigrants and their ability to keep low wages, let's change bankruptcy laws to accommodate the Goldman Sachs of America, let's just keep beating down thw working man and with any luck we'll be able to steal what ever pension he may have. We are there folks, the needy and the greedy, just what the repubs have been working for for years. Keep the peasants beat down and in their place.