Goldman Sachs is a storied house of financial wizardry–the king of Wall Street. Sure, it needed a $20 billion bailout from the federal government back in 2008, but that was an anomalous blip on a record mostly showing one extraordinary financial success after another. (And, besides, everybody was doing bailouts back then–bailouts were to financial firms as steroids were to baseball players in the 90s.) Credit default swaps aside, Goldman has a reputation for being able to see the future–and successive record profits seem to cement its reputation as a soothsayer. But not everything works out.
Back in 2000, powerful people sitting high above New York City in bespoke suits pondered this deal and hit GO. Trading firm Speer, Leeds & Kellogg was for sale and Goldman Sachs saw an opportunity it couldn’t resist. SLK, as it was known, was a leader in “market making” and Goldman wanted in. All those in favor? Good then: Goldman Sachs paid $6.5 billion for SLK–$4.4 billion of it in Goldman stock. At the time a press release claimed the company was at the “forefront of advanced technology.” By 2003 the investment already had its doubters. Goldman Sachs is today trying to sell the SLK unit. Analysts expect it to fetch less than $30 million. That’s a heavy loss. But somehow it seems not to matter. You make enough bets, you can lose some big ones. ”There is no such thing as a real bargain,” Goldman’s chairman, Henry M. Paulson, said just three years after the deal.