Free What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences by Steven G. Mandis Page B

division (C). In 1997, it is merged with the fixed income division.
    1982: Goldman makes its first international acquisition, London-based First Dallas, Ltd., later renamed Goldman, Sachs, Ltd (C). Stocks in the late 1970s and early 1980s are in a bear market. The Dow Jones Industrial Average bottoms at 777 on August 12, 1982. But a steady decline in interest rates—with yields on thirteen-week treasuries having eased to 8.6 percent from nearly 13 percent in the previous month and a half—finally gets stock moving. On August 17, the Dow leaps a then-record 38.81, or 4.9 percent, to 831.24, and the equity market begins a long bull run, with some bumps. Massive wealth creation over the course of the next twenty-five years, the likes of which the United States and the world had never seen, would follow.
    1983: The firm’s capital has grown to $750 million, some $500 million from the active partners themselves. In 1983, John L. Thornton co-founds Goldman’s European M & A business in London (O).
    1984: Continental Illinois National Bank and Trust becomes the largest-ever bank failure in US history. Continental was at one time the seventh-largest bank in the United States as measured by deposits, with approximately $40 billion in assets. Because of the size of Continental Illinois, regulators are not willing to let it fail (R). The term “too big to fail” becomes popularized.
    1985: Bear Stearns goes public (C). Whitehead leaves Goldman after thirty-eight years and later becomes deputy secretary of state to George Schultz, serving until 1989 (O). Steve Friedman, a former M&A banker, and Bob Rubin, a former equities proprietary trader, co-head Goldman’s fixed income division (O).
    1986: Goldman’s capital has grown to $1 billion, almost entirely through retained earnings. Morgan Stanley, Goldman’s primary competitor, goes public (C). Goldman’s growing trading business is capital intensive (C). The management committee conducts a study, led by Steve Friedman and Bob Rubin, and recommends taking Goldman public (O, C). John L. Weinberg and Jimmy Weinberg do not support the idea, and it is not brought to a vote (O). To raise capital, Goldman accepts a $500 million private equity investment from Sumitomo Bank, as a silent partner, in exchange for 12.5 percent of Goldman’s annual profits and appreciation in equity value (O, C). One of Goldman’s largest partner classes is voted in (twice as large as any previous class), including three partners from other firms who have never worked at Goldman, as well as Goldman’s first female partner and first African American partner (O, C). Goldman takes Microsoft public and joins the London and Tokyo stock exchanges (C).
    1987: In October, the Dow Jones Industrial Average drops 508 points, a stunning 22.6 percent, on “Black Monday,” raising fears that the US economy is headed for a severe recession. The Federal Reserve acts quickly to cut interest rates and pump cash into the banking system, helping end the threat. The October market crash, in part, causes Goldman to reduce overhead; several hundred employees are laid off by the end of the decade (O). It is the first time in recent memory that Goldman lays people off. Robert Freeman, Goldman’s head of arbitrage, receives a prison sentence for insider trading. As a result of the crash, Value at Risk models receive more emphasis (R, T, O). Wall Street begins to increasingly focus on hiring academically trained and quantitatively oriented traders and risk managers and increase spending on financial innovation (T, O).
    1988: Leon Cooperman, head of equity research, assumes responsibilities for building the investment management business, and a new division is launched: Goldman Sachs asset management (GSAM) (O, C). Hundreds of savings and loans (S & Ls) are shut down, at a total cost of more than the reserves in the federal insurance fund. US taxpayers make up the difference.
    1989: As an alternative to going public to raise