Wednesday, October 26, 2011

Money And Power: How Goldman Sachs Came To Rule The World By William D. Cohan

Money and Power: How Goldman Sachs Came to Rule the World
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From the bestselling, prize-winning author of THE LAST TYCOONS and HOUSE OF CARDS, a revelatory history of Goldman Sachs, the most dominant, feared, and controversial investment bank in the world 
For much of its storied 142-year history, Goldman Sachs has projected an image of being better than its competitors--smarter, more collegial, more ethical, and far more profitable. The firm--buttressed by the most aggressive and sophisticated p.r. machine in the financial industry--often boasts of "The Goldman Way," a business model predicated on hiring the most talented people, indoctrinating them in a corporate culture where partners stifle their egos for the greater good, and honoring the "14 Principles," the first of which is "Our clients' interests always come first."
But there is another way of viewing Goldman--a secretive money-making machine that has straddled the line between conflict-of-interest and legitimate deal-making for decades; a firm that has exerted undue influence over government since the early part of the 20th century; a company composed of "cyborgs" who are kept in line by an internal "reputational risk department" staffed by former CIA operatives and private investigators; a workplace rife with brutal power struggles; a Wall Street titan whose clever bet against the mortgage market in 2007--a bet not revealed to its clients--may have made the financial ruin of the Great Recession worse.
As William D. Cohan shows in his riveting chronicle of Goldman's rise to the summit of world capitalism, the firm has shown a remarkable ability to weather financial crises, congressional, federal and SEC investigations, and numerous lawsuits, all with its reputation and its enormous profits intact. By reading thousands of pages of government documents, court cases, SEC filings, Freedom of Information Act papers and other sources, and conducting over 100 interviews, including interviews with clients, competitors, regulators, current and former Goldman employees (including the six living men who have run Goldman), Cohan has constructed a vivid narrative that looks behind the veil of secrecy to reveal how Goldman has become so profitable, and so powerful.
Part of the answer is the firm's assiduous cultivation of people in power--dating back to 1913, when Henry Goldman advised the government on how the new Federal Reserve, designed to oversee Wall Street, should be constituted. Sidney Weinberg, who ran the firm for four decades, advised presidents from Roosevelt to Kennedy and was nicknamed "The Politician" for his behind-the-scenes friendships with government officials.  Goldman executives ran fundraising efforts for Nixon, Reagan, Clinton and George W. Bush.  The firm showered lucrative consulting or speaking fees on figures like Henry Kissinger and Lawrence Summers. Famously, and fatefully, two Goldman leaders-- Robert Rubin and Henry Paulson--became Secretaries of the Treasury, where their actions both before and during the financial crisis of 2008 became the stuff of controversy and conspiracy theories.
Another major strand in the firm's DNA is its eagerness to deal on both sides of a transaction, eliding questions of conflict of interest by the mere assertion of their innate honesty and nobility, a refrain repeated many times in its history, most notoriously by current Goldman CEO Lloyd Blankfein's jesting assertion that he was doing "God's work."
As Michiko Kakutani's New York Times review of HOUSE OF CARDS said, "Cohan writes with an insider's knowledge of the workings of Wall Street, a reporter's investigative instincts and a natural storyteller's narrative command." In MONEY & POWER, Cohan has marshaled all these gifts in a powerful and definitive account of an institution whose public claims of virtue look very much like ruthlessness when exposed to the light of day.
Product Details

  • Amazon Sales Rank: #13898 in Books
  • Published on: 2011-04-12
  • Released on: 2011-04-12
  • Original language: English
  • Number of items: 1
  • Binding: Hardcover
  • 672 pages


  • ISBN13: 9780385523844
  • Condition: New
  • Notes: BRAND NEW FROM PUBLISHER! 100% Satisfaction Guarantee. Tracking provided on most orders. Buy with Confidence! Millions of books sold!
Editorial Reviews


"[A] definitve account of the most profitable and influential investment bank of the modern era....recounts these events capably.....[and explains] Goldman's cultivation of a reputation for brilliance unique even in the rarefied precincts of Wall readers the information they need to ponder whether investment banking has moved in a constructive direction."--The New York Times Book Review

"Destined to be a runaway bestseller...There's no shortage of Goldman clients, rivals, and former employees willing to explain how greed and recklessness led Goldman to become too big, too powerful, and even too conflicted to fail. As one Goldman alum puts it, 'I saw what they did to their customers...They'd steal from them, rape them, anything they could do.' It worked like a charm...[Cohan] has produced the frankest, most detailed, most human assessment of the bank to date. Cohan portrays a firm that has grown so large and hungry that it's no longer long-term greedy but short-term vicious. And that's the wonder -- and horror -- of Goldman Sachs."
-- Businessweek

"A well-researched history and analysis of the world's most powerful investment bank. Written with the co-operation of the top people at Goldman, Cohan's book is neither a hatchet-job nor a whitewash – and all the better for that."--The Financial Times

"[Money and Power] offers the best analysis yet of Goldman's increasingly tangled web of conflicts...The writing is crisp and the research meticulous, drawing on reams of documents made publicly available by congressional committees and the Financial Crisis Inquiry Commission."
-- The Economist

"[E]xhaustive, revelatory account of the rise and rise of Goldman Sachs....engrossing....penetrating....Cohan revels in a good bust-up and lingers over anecdotes involving intrigue....All the senior partners still living spoke to him, often very candidly, and only a few from the next ranks seem to have refuse....a vast trove of material"
--The Financial Times

"A former Lazard Freres & Co. banker and newspaper reporter, Cohan brings the bank's sometimes 'schizophrenic' behavior to vivid life...Drawing on more than 100 interviews with clients, competitors and Goldman leaders including Chief Executive Officer Lloyd C. Blankfein, Cohan evinces an eye for telling images and an ear for deadpan quotations."
-- Bloomberg

"In MONEY & POWER, journalist and former investment banker William D. Cohan launches a quixotic quest to show that Mr. Blankfein and his peers are money-sucking evil-doers that came to their riches mostly by nefarious means...(full disclosure: I was once a Goldman Sachs employee myself)....Mr. Cohan's complaints against Goldman seem to be that it is 'ruthless' in pursuit of profit; doesn't do enough to protect its instutitional clients from making bad decisions; works too closely with government; too often advises clients on both sides of a deal; and skirts close to the line of 'insider trading'."
-- Mary Kissel, The Wall Street Journal

"Like Michael Lewis's 'Liar's Poker' and Bryan Burrough and John Helyar's 'Barbarians at the Gate,' this volume turns complex Wall Street maneuverings into high drama that is gripping .... [His] account of its death spiral not only makes for riveting, edge-of-the-seat reading, but it also stands as a chilling cautionary tale about how greed and hubris and high-risk gambling wrecked one company."--Michiko Kakutani, The New York Times
"Fascinating."--The Wall Street Journal
"A riveting blow-by-blow account." --The Economist
"Masterfully reported....[Cohan] has turned into one of our most able financial journalists....he deploys not only his hands-on experience of this exotic corner of the financial industry but also a remarkable gift for plain-spoken explanation... It's impossible to do justice to his reportorial detail in a brief review..." --Los Angeles Times
"Cohan's portrayal of the firm's dominant partners—whose gargantuan appetites and mercurial habits provide the unifying force behind the book's operatic melodramas— makes this an epic . . . In fact, The Last Tycoons bears a striking resemblance to F. Scott Fitzgerald's The Last Tycoon."—New York Times Book Review

"Breezy and highly readable . . . For those of us who enjoy high-level gossip (most people) and an inside look at the machinations, triumphs, failures, and foibles of some of Wall Street's and America's most exalted personages, Cohan's book is entertaining and seductively engrossing."—Chicago Tribune

"Cohan not only knows where the bodies are buried but got a guided tour of the graveyard."—Financial Times

"Rips the roof off of one of Wall Street's most storied investment banks."—Vanity Fair
About the Author
William D. Cohan is the author of the New York Times bestsellers House of Cards and The Last Tycoons, which won the 2007 FT/Goldman Sachs Business Book of the Year Award.    He is a contributing editor at Vanity Fair, has a bi-weekly opinion column in The New York Times, and writes frequently for The Financial Times, Fortune, The Atlantic, and the Washington Post, among other publications. A former investment banker, Cohan is a graduate of Duke University, Columbia University School of Journalism and the Columbia University Graduate School of Business.

Excerpt. © Reprinted by permission. All rights reserved.
Wall Street has always been a dangerous place. Firms have been going in and out of business ever since speculators first gathered under a button­wood tree near the southern tip of Manhattan in the late eighteenth century. Despite the ongoing risks, during great swaths of its mostly charmed 142 years, Goldman Sachs has been both envied and feared for having the best talent, the best clients, and the best political connections, and for its ability to alchemize them into extreme profitability and market prowess.

Indeed, of the many ongoing mysteries about Goldman Sachs, one of the most overarching is just how it makes so much money, year in and year out, in good times and in bad, all the while revealing as little as pos­sible to the outside world about how it does it. Another— equally confounding— mystery is the firm's steadfast, zealous belief in its ability to manage its multitude of internal and external conflicts better than any other beings on the planet. The combination of these two genetic strains— the ability to make boatloads of money at will and to appear to manage conflicts that have humbled, then humiliated lesser firms— has made Goldman Sachs the envy of its financial- services brethren.
But it is also something else altogether: a symbol of immutable global power and unparalleled connections, which Goldman is shame­less in exploiting for its own benefit, with little concern for how its suc­cess affects the rest of us. The firm has been described as everything from "a cunning cat that always lands on its feet" to, now famously, "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money," by Rolling Stone writer Matt Taibbi. The firm's inexorable success leaves people wondering: Is Goldman Sachs better than everyone else, or have they found ways to win time and time again by cheating?

But in the early twenty- first century, thanks to the fallout from Goldman's very success, the firm is looking increasingly vulnerable. To be sure, the firm has survived plenty of previous crises, starting with the Depression, when much of the firm's capital was lost in a scam of its own creation, and again in the late 1940s, when Goldman was one of seven­teen Wall Street firms put on trial and accused of collusion by the federal government. In the past forty years, as a consequence of numerous scan­dals involving rogue traders, suicidal clients, and charges of insider trad­ing, the firm has come far closer— repeatedly— to financial collapse than its reputation would attest.

Each of these previous threats changed Goldman in some meaning­ful way and forced the firm to adapt to the new laws that either the mar­ket or regulators imposed. This time will be no different. What is different for Goldman now, though, is that for the first time since 1932— when Sidney Weinberg, then Goldman's senior partner, knew that he could quickly reach his friend, President- elect Franklin Delano Roosevelt— the firm no longer appears to have sympathetic  high- level relationships in Washington. Goldman's friends in high places, so crucial to the firm's extraordinary success, are abandoning it. Indeed, in today's charged political climate, which is polarized along socioeconomic lines, Goldman seems particularly isolated and demonized.

Certainly Lloyd Blankfein, Goldman's fifty-six- year- old chairman and CEO, has no friend in President Barack Obama, despite being invited to a recent state dinner for the president of China. According to Newsweek columnist Jonathan Alter's book The Promise, the "angriest" Obama got during his first year in office was when he heard Blankfein justify the firm's $16.2 billion of bonuses in 2009 by claiming "Goldman was never in danger of collapse" during the financial crisis that began in 2007. According to Alter, President Obama told a friend that Blankfein's statement was "flatly untrue" and added for good measure, "These guys want to be paid like rock stars when all they're doing is lip- synching cap­italism."

Complicating the firm's efforts to be better understood by the American public— a group Goldman has never cared to  serve— is a  long-standing reticence among many of the firm's current and former execu­tives, bankers, and traders to engage with the media in a constructive way. Even retired Goldman partners feel compelled to check with the firm's disciplined administrative bureaucracy, run by John F. W. Rogers— a former chief of staff to James Baker, both at the White House and at the State Department— before agreeing to be interviewed. Most have likely signed confidentiality or nondisparagement agreements as a condition of their departures from the firm. Should they make them­selves available, unlike bankers and traders at other firms— where  self-aggrandizement in the press at the expense of colleagues is typical— Goldman types stay firmly on the message that what matters most is the Goldman team, not any one individual on it.

"They're extremely disciplined," explained one private- equity exec­utive who both competes and invests with Goldman. "They understand probably better than anybody how to never take the game face off. You'll never get a Goldman banker after three beers saying, 'You know, listen, my colleagues are a bunch of fucking dickheads.' They just don't do that the way other guys will, whether it's because they tend to keep the uni­form on for a longer stretch of time so they're not prepared to damage their squad, or whether or not it's because they're afraid of crossing the powers that be, once they've taken the blood oath... they maintain that discipline in a kind of eerily successful way."
Anyone who might have forgotten how dangerous Wall Street can be was reminded of it again, in spades, beginning in early 2007, as the market for home mortgages in the United States began to crack, and then implode, leading to the demise or near demise a year or so later of several large Wall Street firms that had been around for generations— including Bear Stearns, Lehman Brothers, and Merrill Lynch— as well as other large financial institutions such as Citigroup, AIG, Washington Mutual, and Wachovia.

Although it underwrote billions of dollars of mortgage securities, Goldman Sachs avoided the worst of the crisis, thanks largely to a fully authorized, well- timed proprietary bet by a small group of Goldman traders— led by Dan Sparks, Josh Birnbaum, and Michael  Swenson— beginning in December 2006, that the housing bubble would collapse and that the securities tied to home mortgages would rapidly lose value. They were right.

In July 2007, David Viniar, Goldman's longtime chief financial offi­cer, referred to this proprietary bet as "the big short" in an e-mail he wrote to Blankfein and others. During 2007, as other firms lost billions of dollars writing down the value of mortgage- related securities on their bal­ance sheets, Goldman was able to offset its own mortgage- related losses with huge gains— of some $4  billion— from its bet the housing market would fall.
Goldman earned a net profit in 2007 of $11.4 billion— then a record for the firm— and its top five executives split $322 million, another record on Wall Street. Blankfein, who took over the leadership of the firm in June 2006 when his predecessor, Henry Paulson Jr., became treasury secretary, received total compensation for the year of $70.3 mil­lion.

The following year, while many of Goldman's competitors were fighting for their lives— a fight many of them would  lose— Goldman made a "substantial profit of $2.3 billion," Blankfein wrote in an April 27, 2009, letter. Given the carnage on Wall Street in 2008, Goldman's top five executives decided to eschew their bonuses. For his part, Blankfein made do with total compensation for the year of $1.1 million. (Not to worry, though; his 3.37 million Goldman shares are still worth around $570 million.)

Nothing in the financial world happens in a vacuum these days, given the exponential growth of trillions of dollars of securities tied to the value of other securities— known as "derivatives"—and the extraordinar­ily complex and internecine web of global trading relationships. Account­ing rules in the industry promote these interrelationships by requiring firms to check constantly with one another about the value of securities on their balance sheets to make sure that value is reflected as accurately as possible. Naturally, since judgment is involved, especially with ever more complex securities, disagreements among traders about values are common.

Goldman Sachs prides itself on being a "mark- to- market" firm, Wall Street argot for being ruthlessly precise about the value of the securities— known as "marks"—on its balance sheet. Goldman believes its precision promotes transparency, allowing the firm and its investors to make better decisions, including the decision to bet the mortgage market would collapse in 2007. "Because we are a mark- to- market firm," Blank­fein once wrote, "we believe the assets on our balance sheet are a true and realistic reflection of book value." If, fo...

Customer Reviews

Most helpful customer reviews

56 of 58 people found the following review helpful.
5Inside scoop on the "giant vampire squid"
By Srikumar S. Rao
In his now famous - infamous? - Rolling Stone article Matt Taibbi refers to Goldman Sachs as a "...great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells of money." Cohan,whose earlier books gave you the inside scoop on Lazard Freres and Bear Stearns now turns his searchlight on Goldman Sachs, arguably one of the most powerful financial institutions that ever existed.

It is not really a Goldman "bashing" book but there is plenty of hard reporting that lead one to wonder how Goldman can get away with proclaiming itself to be a temple of team play and a firm where customer interests always come first. Team playing culture? Cohan gives you details about the unusually sharp knives that came out frequently in succession struggles from earlier days - Gus Levy clashing with Sid Weinberg - to more recent events - Hank Paulson ousting Jon Corzine - and paint a picture quite at variance with Goldman PR.

Customer comes first? Cohan reveals that way back in the sixties Goldman was sued for "...fraud, deception, concealment, suppression and false pretense..." in connection with the Penn Central fiasco. Creditors claimed that Goldman "...made promises and representations as to the future (of the company) which were beyond reasonable expectations and unwarranted by existing circumstances." You make up your mind about whether this was a disgruntled customer trying to splash mud or a depiction of Goldman's approach. It certainly was a harbinger of later developments such as the firms disingenuous statement that it was not "betting against its customers" during the sub-prime crisis but merely and prudently managing its risk profile. If you believe that may I interest you in a solid gold brick I found on Fifth Avenue the other day? I will let you have it real cheap because I like you.

Whether you like it or not Goldman executives - past and present - play larger than life roles on a global stage. Cohan gives you engaging details about the real person behind the persona. Did you know that Robert Rubin dropped out of Harvard Law to bum around Europe and persuaded the dean of the school to hold his admission for a year by getting a psychiatrist to testify that he was making a "reasonable" decision?

Cohan does a splendid job of describing how Goldman grew from a small but influential investment bank - and a partnership where the partners were liable to the full extent of their personal net worth - to the titan that it is today with the ability to shake the central banks of major nations and tentacles into the inner political circles of many countries and where Croesus may envy the amount of moolah the senior guys rake in with limited liability.

It is possible, indeed likely, that Goldman is actually the "good guy" in the field in which it plays and that its competitors are far worse in morality and tactics. And that, my friend, is the really scary story.

48 of 54 people found the following review helpful.
5Wow, what a book - EXTRAORDINARY - No Holds Barred - 5 STARS !!!!
By Richard Stoyeck

Every now and then, someone comes along and writes a book, and in the process lays out a new framework of understanding with such exquisite detail that the average reader's generalized understanding of how the world works is blown away, and a new understanding becomes the norm. This is EXACTLY what author William Cohan has achieved with "Money and Power: How Goldman Sachs Came to Rule the World."

Such a book was Carroll Quigley's "Tragedy and Hope". Quigley understood how the world worked and the dark forces that can exert undue enormous power behind the scenes. President Clinton in his inauguration speech specifically mentioned the power that Carroll Quigley had over him when he was student at Georgetown and Quigley lectured about those who truly control the world. Clinton understood the power structure, and their assumed ruthlessness, and was forever changed by it. Now we have in Cohan's book the thorough exposure of the less seemly side of Goldman Sachs.

Today there are only two firms that have the cache value to make an MBA's dream of working for them. They are Goldman Sach's in the financial world and McKinsey & Company in management consulting. If you work for either entity, it is the equivalent of having a halo over your head. You are anointed. Goldman Sachs now stands alone as the ultimate financial wheeler dealer in our time. With 35,000 employees, they still manage to be able to cut and slash like an institution a tenth of their current size.

Being a former alumnus of both Lehman Brothers and Bear Stearns, and currently managing several billions of dollars of private money, I have always had the utmost respect for Goldman. I believed then as now that only Goldman could possibly have been better run than either Bear or Lehman. The rest of the players were a joke compared to these three firms.

Now it appears that Goldman was head and shoulders above the other two. I only say this on the basis of survival. No matter how smart you are, if you manage to have your business platform destroyed like Bear and Lehamn, even if it takes a tsunami type event, you simply did not manage well. Goldman demonstrated the ultimate in management style by surviving the financial crisis of 2008 completely intact. Some would argue including the author of this book that perhaps Goldman completely planned the coming debacle to knock out their two arch rivals Lehman and Bear Stearns and have the playing field basically to themselves. Keep in mind that the three of them dominated the fixed income arena for a century.

Back in the old days of the late 1800's and 1900's, German-Jewish firms were not allowed in investment banking, and therefore exploited those areas where they could shine, like fixed income trading. The so called "White Shoe" firms headed by JP Morgan at the top of the list, completely controlled the banking side of the business. Big corporate America would only deal with Christian dominated Wall Street, corporate America was held captive by the big firms. They had a lock on the business. You must read Stephen Birmingham's exquisite book "Our Crowd" for the details of this period. Slowly but surely, absolutely brilliant German-Jewish minds came into Wall Street including but not limited to August Belmont, Felix Warburg, Otto Kahn, Jacob Schiff, and many, many more. They built firms that intellectually were magnitudes smarter and better run than the White Shoe houses like Dillon Read, White Weld, Kidder Peabody, Brown Brothers Harriman and others. Of course JP Morgan stood alone.

Where the German-Jewish firms took off and completely dominated was fixed income, and to this day Bear, Lehman, and Goldman dominated this vast, quiet, non-publicized multi-trillion dollar market, and then with Bear, and Lehman gone there is one left - Goldman. Author William Cohan does an extraordinary and exemplary job of documenting the rise, and dominance of Goldman Sachs. I do not see how this book could have been done any better. I have thought about how to criticize it, where is it lacking, could it have been done tighter (less pages) or better edited. I keep coming up empty. This work is simply superb.

There are 610 pages of superbly written, entertaining narrative spread over 24 chapters. The book reads like lightening. There is not a dull page in the book. If you have read a corporate thriller like the "Smartest Guys in the Room," which is the story of Enron, you will know what I mean by thrilling. If you have any desire to know how Wall Street is really run, about how the world works, and what power is, than you must read this book. Here are just a few things that I found fascinating:

* For 142 years this firm has been the envy of corporate America - its ability to move swiftly from area to area and to cloak its moves has been unequalled. With each generation, Goldman gets stronger and stronger, and more entranched in the financial world.

* The way they manage conflicts, make money, and deal with global power is second to none.

* Goldman can come at you from the short side as well as the long side. They are masters of hedging, and then disguising it. Nobody knew they were hedged during the financial crisis which is why they came out of the crisis unscathed.

* In September of 2008 when Lehman was filing bankruptcy, Goldman had already refinanced the firm with $5 billion of Warren Buffett's money, and another $5 billion raise from the public. They did not need a dollar of government bailout money.

* In October of 2008, they were forced to take $10 billion of government money at the insistence of the Secretary of the Treasury. Less than a year later they would pay it back with interest and buy back the warrants that were issued. For the government it was a 23% profitable annual rate of return.

* You will recall that the government brought legal charges against Goldman for their marketing of the Abacus 2007-AC1 CDO underwriting. They would wind up paying a $550 million fine for this act of greed.

* They also demonstrated to the world during this period that the firm was beyond greedy. They put their own interests and the interests of another client ahead of the clients who were buying the underwriting. Their reputation would never be the same again, but no one served time, and they could easily write the check.


My favorite chapter is entitled POWER which is chapter 13. It is the story of Robert Rubin who would become Co-Chairman of the firm and then shortly thereafter retire from Wall Street to become assistant to President Clinton for economic affairs. Ultimately Rubin would become Secretary of the Treasury in his own right, and establish an illustrious career in government. Do not think about reading any other book on Wall Street until you have read the history of Goldman Sachs by reading Cohan's book. The depth, the insights, the exhaustive research that was done on this book is second to none. I promise you that you will love it, and thank you for reading this review.

Richard Stoyeck

9 of 10 people found the following review helpful.
5Miscarriage of Justice on Wall Street
By Ted Marks
Wall Street is the symbol of power and wealth in America where smart entrepreneurs make millions of dollars on risky bets in the equity and fixed income markets. Money and power are the driving forces on Wall Street, for good - or for evil. As we have seen in recent years, scoundrels can (and have) take control of our capital markets. In the hurly burly world of Wall Street, justice is a rare commodity.

A new book about Goldman Sachs, one of the leading investment houses on Wall Street, enlightens us on the workings of one of our most important financial institutions. The book is titled MONEY AND POWER: HOW GOLDMAN SACHS CAME TO RULE THE WORLD, and its author, William D. Cohan, provides us all the details -- good, bad and otherwise -- of how Wall Street works. Cohan's book tells a fascinating story of heroes and villains in the pantheon of the American capitalistic system.

One chapter in Cohan's book, in particular, brings a long overdue measure of justice to one of the victims of Wall Street. The victim was Goldman Sachs partner Robert Freeman, whose life was changed forever on Feb. 12, 1987 when an assistant U.S. Attorney abruptly arrested him on alleged charges of insider trading. Freeman was innocent of the charges, according to Cohan, but his experience highlights the risks posed by the old freewheeling trading activities on Wall Street - as well as improper performances by then U.S. Attorney General Rudolph Giuliani and reporter James Stewart, who was then working at the Wall Street Journal.

But there are many other highlights in this book that provide some sunlight on Wall Street. We learn about the major GS leadership (founder Marcus Goldman, Sam Sachs, Sidney Weinberg, and onward to his son John Weinberg, John Whitehead, Steve Friedman and Bob Rubin, Jon Corzine and Hank Paulson, as well as current CEO, Lloyd Blankfein).

Cohan brings us up to date on Goldman's triumphs and travails. Initially Goldman Sachs profited from the influence of its founding partners. But by the second half of the 20th century, things had to change. Whitehead, for example, drags the firm into the 20th century by stressing the creation of new business and customer service. Rubin and Friedman stressed the firm's trading operations when billions were made in profits on just smart trading in the equity, fixed income and commodity markets. They also brought in additional capital from outside investors who acquired ownership of 20 per cent of the firm. Public ownership was broadened in 1999 when Goldman issued an IPO -- which transformed the company further.

Goldman's historical warts included its dismal record in treating its female employees who suffered form all sorts of sexual harassment and abuse.

But perhaps the most damaging era in Goldman's history was its record in creating and dealing mortgage-backed securities (MBS) that led to the financial crisis of 2007-2009. This period is, necessarily, still incomplete because of ongoing litigation (Goldman has already paid $550 million in fines and faces the prospect of further charges by federal regulators). Goldman was not alone in this sordid story involving housing finance, but it made billions of dollars off of highly questionable synthetic and derivative securities that it had created for its own profit motives. Cohan does an excellent job in relating this sorry record of finance, but since the saga is not yet complete, Cohan's book is necessarily incomplete in this area of finance.

The Freeman saga is also not complete, but Cohan goes a long way towards bringing closure to that sorry episode - sorry from the standpoint of government regulation and the American financial press.

Freeman was the victim. The villains, according to Cohan, were a trio of vain, self-centered, ambitious men: U.S. Attorney Rudolph Giuliani, who was being driven by his political ambitions; journalist James Stewart, a reporter at the Wall Street Journal who served as Giuliani's public mouthpiece; and Martin Siegel who was, by his own admission, a crooked investment banker who already had a covert relationship with Stewart, feeding the reporter with tips on impending mergers and takeovers.

In the mid-1980's, Giuliani was increasingly cited as a potential candidate for Mayor of New York (he was to lose his first try in 1990 to David Dinkins), and to further his political ambitions, he cooked up a phony scheme under which he could be seen as taking down a partner in one of Wall Street's most prestigious firms. He launched his scheme on Feb. 12, 1987 when he sent one of his deputies to arrest Freeman right off the Goldman trading floor. There was no credible evidence, no indictment and no grand jury. Freeman's arrest (and that of two other traders at Kidder Peabody) was simply a concocted event, based on lies by the crooked Siegel (who had been receiving suitcases full of money from convicted inside trader Ivan Boesky).

"In truth ... Siegel's specific allegations against Freeman and his two former Kidder colleagues were pure fiction," writes Cohan. "But by the time anyone bothered to figure that out, Freeman's career was over...."

Giuliani justified his concocted event by feeding his version of events to Stewart, who duly published the insider details in the Wall Street Journal. Alas for Giuliani, the case began unraveling within days of Freeman's arrest."

Two months after Freeman's arrest, a grand jury did issue an indictment, but even that belated document did not last long. A few weeks later, Giuliani withdrew the original indictment, promising a new one. It never came. Two years later, Giuliani resigned his office to run for mayor of New York. During those two years, Giuliani justified his actions by continuing to leak information to Stewart - published information that later proved to be simply wrong. Ironically (and pathetically), Stewart (and his colleague, Daniel Hertzberg) won the Pulitzer Prize for their incorrect, unethical reports that were based on leaks from Giuliani and access to supposedly secret Grand Jury deliberations (in violation of the law).

Giuliani kept Freeman in limbo for two years, without bringing any formal charges. Freemen voluntarily underwent five lie detector tests (all of which he passed). But even without formal charges, Freeman was under pressure. Giuliani's successors started talking about using the RICO (Racketeer Influenced and Corrupt Organizations Act) law to convict Freeman. The RICO statute is a broad-based law that allows law enforcement wide latitude to convict racketeers, and seize their assets. The statute was used to convict the Princeton Newport firm, headed by Freeman's close friend, Jay Regan. That verdict (which was subsequently overturned) convinced Freeman that he didn't stand a chance if the prosecutors came after him under the RICO law; in that case, he would be in limbo for years - with the potential loss of his family fortune - leaving him in prison and his wife and children penniless. Two weeks after the Princeton Newport verdict (but before the verdicts were overturned), he reluctantly authorized his lawyers to negotiate a deal to end his ordeal, pleading guilty to a single count of mail fraud involving a highly questionable charge

Giuliani, at least, had the temerity to admit that the case against Freeman was wrong. In a walking tour in 1989, as he ran for mayor, Giuliani told reporters: "It was a mistake to move that case at the time that I did and - to the extent - I should apologize to them."

Stewart accepted his Pulitzer Prize without so much of a flinch of embarrassment over his unethical behavior. Even though he was a trained lawyer, according to Cohan, he had published secret grand jury testimony (in violation of the law) and used a convicted embezzler (Siegel) as a source of false information that he published in the Wall Street Journal. To its credit, the Wall Street Journal published several editorials that condemned Giuliani's behavior - and by inference, its own reporter, Stewart (Stewart was just recently hired by the New York Times to become the newspaper's financial columnist).

Belatedly, the news media came around to the realization that Giuliani and his cohorts had screwed Bob Freeman:

Said the Wall Street Journal the week after Freeman ended his ordeal with a plea bargain:

"Rudy Giuliani promised new indictments in `record time' and asserted that the original charges were just the `tip of an iceberg.' Last week, the iceberg turned out to be an ice cube, and even it melts under close scrutiny."

Said The Daily News:

"The government's behavior in that case reflects what many defense lawyers have called a display of sloppiness and arrogance that has needlessly ruined careers and reputations in the government's anti-fraud crusade."

Newsday called Freeman "the Willie Horton of Rudolph Giuliani's mayoral ambition." Wrote Robert Reno: "They could never find anything on the guy they handcuffed, but not to be left looking entirely like a bunch of loutish brownshirts, federal prosecutors scratched around for two years, combed the details of Freeman's existence, and found a wholly unrelated charge to which it was conveniently arranged for him to plead Robert Freeman's martyrdom all of us were brutalized by Handcuff Giuliani."

Cohan's book is the first to really detail the ordeal of Bob Freeman, and Cohan should be commended for doing so. As for Freeman himself, he served his four months in prison, and since then he has lived a private life for the last 20+ years, trying to cope with the exploitation he experienced at the hands of a politically-driven prosecutor. Cohan gives him a well-deserved chapter in his excellent book. Someone, someday, ought to devote an entire book to this miscarriage of justice.

Disclosure: the writer was a boyhood friend of Bob Freeman and remained in touch with him throughout his ordeal.


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