Tue Jan 11, 2011 6:46pm EST
* Changes seen as attempt to repair image and reputation
* Bank has been accused of putting its own interests first
* To disclose how much money it makes from prop trading
* Top executives, including CEO Blankfein, unscathed
* Goldman shares fractionally lower (Adds reference to forthcoming
U.S. Senate report on financial crisis in final paragraph)
By Dan Wilchins
NEW YORK, Jan 11 (Reuters) - Goldman Sachs Group Inc (GS.N)
pledged to be more open about how it makes money and to put the
interests of clients ahead of its own in an effort to rebut
criticism it acted more like a hedge fund than a bank during
the credit boom and misled investors.
Goldman revealed for the first time how much it made from
trading and investing on its own behalf, which many investors
have suspected is a key source of the bank's profits, during
the first three quarters of the year.
The bank also made structural changes to its divisions, but
there was no major management shake-up, leaving in place Chief
Executive Lloyd Blankfein.
Blankfein and his firm came under siege last April after
U.S. securities regulators sued Goldman and bond trader Fabrice
Tourre for selling repackaged mortgage bonds to investors
without disclosing key information about the securities.
Tourre referred to himself as "fabulous Fab" and to a
collateralized debt obligation product he helped create as "a
little like Frankenstein turning against his own inventor." To
many critics of Goldman, he embodied the firm's willingness to
put its own interests ahead of clients.
Soon after the SEC lawsuit, Goldman commissioned a report
to determine how it should change the way it does business.
The report, released on Tuesday, recommends creating at
least three internal committees and focuses mainly on
disclosure and oversight. It makes few recommendations for how
Goldman will change the way it does business day to day and
some observers questioned how much will change.
"I'm not terribly convinced it produces a new culture,"
said Cornelius Hurley, a professor and director of Boston
University's Morin Center for Banking and Financial Law. "It
seems to be part of their concerted public relations effort."
Still, Goldman did shed new light on the heretofore murky
realm of proprietary trading profits, revealing that its
investment and lending group --- which includes the bank's bets
with its own money --- accounted for nearly 30 percent of
pre-tax earnings in the first three quarters of 2010.
And Goldman's disclosure overhaul could boost pressure on
rivals to follow suit, especially after the sweeping Dodd Frank
financial reform bill shone a spotlight on the propensity of
big Wall Street firms to make risky bets with their own
capital.
Source: Reuters.Com
