Share this article

print logo

Goldman vows transparency with clients

Goldman Sachs Group is promising to be more transparent about how it does business after widespread criticism that it put its own interests ahead of its clients.

In a report released Tuesday, the New York investment bank said that it would begin disclosing more information about how it makes money and ensure that its business practices put the interests of its clients first.

It's a bid to placate wary clients and quell public anger against the firm, which is known for paying large bonuses. Goldman agreed to reform its business practices as part of a $550 million settlement with the federal Securities and Exchange Commission in July.

In a video released along with the report, Chairman and CEO Lloyd C. Blankfein said Goldman has been subject to "considerable scrutiny" in the aftermath of the financial crisis. He said the review was an "opportunity to engage in thorough self-assessment and consider how we can and should improve."

However, experts say that some of the steps the bank is planning don't go deep enough.

"Conflicts are unavoidable when your business model relies on your getting wealthy at someone else's expense," said Lynn A. Stout, a professor of corporate and securities law at UCLA. Investment banks such as Goldman "have focused on trying to make trading profits for themselves rather than helping corporations raise capital for new investments."

Goldman said the 63-page report is the result of an eight-month internal review that began after Goldman was accused of misleading clients about complex mortgage investments.

The SEC sued Goldman last April, saying that it sold an investment put together by hedge fund manager John A. Paulson that was designed to fail. Goldman and Paulson made money from the investment, while investors lost more than $1 billion.

Goldman's clients were furious. BayernLB bank of Germany cut its business ties to the firm after the SEC lawsuit, and last week ACA Financial Guaranty Corp. sued Goldman over the same investment.

Goldman commissioned an independent survey of its clients as part of its review.

"Clients raised concerns about whether the firm has remained true to its traditional values," the report said. Clients also said that "in some circumstances, the firm weighs its interests and short-term incentives too heavily."

Goldman will start disclosing more information about its revenues beginning with its fourth-quarter results, which come out next Wednesday.

There are no comments - be the first to comment