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Banking and recession: The Goldman paradox

Public opprobrium for Goldman Sachs needs to be weighed against the magnificent returns it is making for shareholders.

For as long as we are in a financial crisis, anti-bank sentiment looks unlikely to wane. In the Great Depression, it was JPMorgan that felt the wrath of the public. In the Great Recession it is Goldman Sachs.

Animosity towards the firm has reached phenomenal proportions. The public seems to want to trace any negative event back to the firm. IndyMac’s private equity buyers got a sweetheart deal? Clearly it has something to do with Goldman Sachs, intimates a video that caused such a stir on YouTube in February that the Federal Deposit Insurance Corporation had to issue a rebuttal (US Banking: Private equity smells too strong for FDIC, Euromoney, March 2010). The fact that the only link seems to be that one of the buyers was once a Goldman Sachs employee matters little. The association itself is enough to further fuel the public’s ire and result in an audience of millions.

Yet despite the firm’s unpopularity among the public, Goldman’s shareholders must be delighted. A study by Boston Consulting Group shows that the firm has produced the greatest shareholder value of all the large-cap investment-banking franchises worldwide in 2009. Its total shareholder return for the year was 58.2%,

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