General American Mutual Holding Company: Fill & Download for Free

They are "an investment bank"An investment bank is a kind of bank, except that rather than holding deposits for customers, they hold owned investments or "cash" and borrow from others (either the Fed, other governments, or through writing bonds) which they then lend (or lend based on the equity secured by those investments ar borrowings) to large corporations, hedge funds, trusts, etc to allow them to operate. This creates a pool of money which allows the various people lending to GS (including the shareholders, who "own" what GS "owns") to spread their risk and enjoy a return based upon the collective ability of GS employees to choose investments which earn a larger amount of money than they pay in interest on their borrowings.Investment banks are kind of a bank to other banks, as well. Goldman makes the lion's share of their profits and revenue from "institutional services", which means that they provide services to large banks and mututal funds and the like. This is best understood like a checking account or mortgage account or brokerage account, except instead of an individual's account, it's a (e.g.) mutual fund's account, and instead of $1 to $100k (or whatever the typical FDIC bank account limit is these days), it's numbers in the millions or billions.As a public company, they are obligated to disclose the full details of their business operations in their annual report:From Goldman Sachs Annual Report, 2012The Goldman Sachs Group, Inc. (Group Inc.) is a leadingglobal investment banking, securities and investmentmanagement firm that provides a wide range of financialservices to a substantial and diversified client base thatincludes corporations, financial institutions, governmentsand high-net-worth individuals. Founded in 1869, the firmis headquartered in New York and maintains offices in allmajor financial centers around the world.We report our activities in four business segments:Investment Banking, Institutional Client Services,Investing & Lending and Investment Management...The firm generated net revenues of $34.16 billion for 2012.These results reflected significantly higher net revenues inInvesting & Lending, as well as higher net revenues inInstitutional Client Services, Investment Banking andInvestment Management compared with 2011.They own (page 41):Commercial paper, certificates of deposit, time deposits and other money market instruments $ 6,057MU.S. government and federal agency obligations 93,241MNon-U.S. government and agency obligations 62,250MLoans and securities backed by commercial real estate 9,805MLoans and securities backed by residential real estate 8,216MBank loans and bridge loans 22,407MCorporate debt securities 20,981MState and municipal obligations 2,477MOther debt obligations 2,251MEquities and convertible debentures 96,454MCommodities 11,696MTotal cash instruments 335,835MDerivatives 71,176MFinancial instruments owned, at fair value 407,011MThey collectively paid $3,732M in taxes on $11,207M in profit (page 44)Their 32,000 employees together are paid $12,944M in salary and benefits. (page 48)Segment Operating Results (Page 51)Investment Banking Net revenues $ 4,926MOperating expenses $ 3,330MPre-tax earnings $ 1,596MInstitutional Client Services Net revenues $ 18,124MOperating expenses $ 12,480MPre-tax earnings $ 5,644MInvesting & Lending Net revenues $ 5,891MOperating expenses $ 2,666MPre-tax earnings $ 3,225MInvestment Management Net revenues $ 5,222MOperating expenses $ 4,294MPre-tax earnings $ 928MInvestment Banking (page 52)Our Investment Banking segment is comprised of:Financial Advisory. Includes strategic advisory assignments with respect to mergers and acquisitions, divestitures, corporate defense activities, risk management, restructurings and spin-offs, and derivative transactions directly related to these client advisory assignments.Underwriting. Includes public offerings and private placements, including domestic and cross-border transactions, of a wide range of securities, loans and other financial instruments, and derivative transactions directly related to these client underwriting activities.Institutional Client Services (page 53)Our Institutional Client Services segment is comprised of:Fixed Income, Currency and Commodities Client Execution. Includes client execution activities related to making markets in interest rate products, credit products, mortgages, currencies and commodities.Equities. Includes client execution activities related to making markets in equity products, as well as commissions and fees from executing and clearing institutional client transactions on major stock, options and futures exchanges worldwide. Equities also includes our securities services business, which provides financing, securities lending and other prime brokerage services to institutional clients, including hedge funds, mutual funds, pension funds and foundations, and generates revenues primarily in the form of interest rate spreads or fees, and revenues related to our reinsurance activities.Investing & Lending (page 55)Investing & Lending includes our investing activities and the origination of loans to provide financing to clients.These investments and loans are typically longer-term in nature. We make investments, directly and indirectly through funds that we manage, in debt securities and loans, public and private equity securities, real estate, consolidated investment entities and power generation facilities.Investment Management (page 56)Investment Management provides investment management services and offers investment products (primarily through separately managed accounts and commingled vehicles, such as mutual funds and private investment funds) across all major asset classes to a diverse set of institutional and individual clients. Investment Management also offers wealth advisory services, including portfolio management and financial counseling, and brokerage and other transaction services to high-net-worth individuals and families.Off-Balance-Sheet Arrangements and Contractual Obligations (page 74)We have various types of off-balance-sheet arrangements that we enter into in the ordinary course of business. Our involvement in these arrangements can take many different forms, including:purchasing or retaining residual and other interests in special purpose entities such as mortgage-backed and other asset-backed securitization vehicles;holding senior and subordinated debt, interests in limited and general partnerships, and preferred and common stock in other nonconsolidated vehicles;entering into interest rate, foreign currency, equity, commodity and credit derivatives, including total return swaps;entering into operating leases; andproviding guarantees, indemnifications, loan commitments, letters of credit and representations and warranties.We enter into these arrangements for a variety of business purposes, including securitizations. The securitization vehicles that purchase mortgages, corporate bonds, and other types of financial assets are critical to the functioning of several significant investor markets, including the mortgage-backed and other asset-backed securities markets, since they offer investors access to specific cash flows and risks created through the securitization process. We also enter into these arrangements to underwrite client securitization transactions; provide secondary market liquidity; make investments in performing and nonperforming debt, equity, real estate and other assets; provide investors with credit-linked and asset-repackaged notes; and receive or provide letters of credit to satisfy margin requirements and to facilitate the clearance and settlement process.Cash: We generated $9.14 billion in net cash from operating and investing activities. (page 87)Value-at-Risk (page 89,92)VaR is the potential loss in value of inventory positions due to adverse market movements over a defined time horizon with a specified confidence level.Investments in the PIIGS (page 99)Regulation and Capital Adequacy (page 184)The Federal Reserve Board is the primary regulator of Group Inc., a bank holding company under the Bank Holding Company Act of 1956 (BHC Act) and a financial holding company under amendments to the BHC Act effected by the U.S. Gramm-Leach-Bliley Act of 1999. As a bank holding company, the firm is subject to consolidated regulatory capital requirements that are computed in accordance with the Federal Reserve Board’s risk-based capital requirements (which are based on the ‘Basel 1’ Capital Accord of the Basel Committee). These capital requirements are expressed as capital ratios that compare measures of capital to risk-weighted assets (RWAs). The firm’s U.S. bank depository institution subsidiaries, including GS Bank USA, are subject to similar capital requirements.Legal Proceedings are available at Page 200-212, listing all the ways GS is significantly involved in lawsuits (typically, against it)Managing Directors are available at Page 229-239, about 2300 people. These people are like "mini-CEOs", and are sometimes CEOs themselves, that help run the myriad sub-companies held and operated by GS.The Goldman Sachs Group, Inc.200 West StreetNew York, New York 102821-212-902-1000Goldman SachsThe Great American Bubble Machine | Politics News | Rolling Stone: describes it as a "great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money." This is an apt description for anyone or any institution that provides banking services- they lend you a little now so you can pay them more later. You are never going to get more than you pay for at a bank: and yet almost everyone with any amount of money needs the services of a bank at some point. ("Great American Bubble Machine" is referenced in Why I Am Leaving Goldman Sachs. describing the difference between good blood vampires and evil blood vampires)Neither a borrower nor a lender be;For loan oft loses both itself and friend,And borrowing dulls the edge of husbandry.- Hamlet, Act 1, SCENE III. A room in Polonius' house.

Thanks for the A2A Aren. Holding company structure, in my mind, can mean one of two things. First, when a bank chooses to silo its various subsidiaries (one corporation for the leasing business, one corporation for the cards business, one for the parent company), and secondly, when a bank is differentiated from all other types as a holding company bank (as compared to being a thrift bank, a commercial bank, or an investment bank).Regarding the first, silos are by no means limited to the banking sector. I can name one particular Asian real estate conglomerate that likes to make a new corporation every time it opens a mall. That way, in case something horrible happens (a terrorist attack, a massive lawsuit), only one revenue stream is exposed. I have yet to research the real estate industry in depth, but I assume at least a few other firms do this too. Alphabet, Inc. (GOOG US) is an example of a "reverse silo". Management wanted to distinguish the firm's growth businesses from the main OS/search engine one, for the sake of synergy and culture.For the second, after the Great Recession and primarily enabled by the Gramm-Leach-Bliley Act which reversed Glass-Steagall regulations, American banks underwent a general consolidation. There are thousands of banks in the world, but there is a certain kind of investment bank, called bulge bracket, which not only invests and deals in securities of other companies, but essentially function as the Berkshire Hathaway's of global finance. A bulge bracket IB usually covers the gamut of everything financial - from asset management to wealth management, to the original IB business to a complementary commercial/retail bank, and even asset trading.Why do these exist, you may ask? Generally, they're for economies of scale, continued growth, and well, empire building. IBs generally become holding companies because it is in their very nature to manage and direct high volumes of capital. Out of the Top 5 formerly independent American IBs, two have been subsumed into already existing bank holding companies (Bear Stearns and Merrill Lynch), while one died (Lehman Brothers).As of this writing, I consider the following to be American bulge bracket: JPMorgan Chase & Co. (bought Bear Stearns IB and Washington Mutual loans during crisis), Bank of America Merrill Lynch (bought Merrill Lynch IB), Citigroup (merger of Citibank commercial/retail bank and Travelers Group), Goldman Sachs (has everything except retail banking) and Morgan Stanley (recently announced entry into retail banking).As to be expected, foreign banks also tried to match their American counterparts. In Switzerland, we have UBS and Credit Suisse. For the rest of Europe, we have Barclays and Deutsche Bank. Note two things though. There are sub-bulge bracket banks, that have less prestige - like HSBC (currently undergoing cost cutting) and Wells Fargo - but are still global giants. We should also consider foreign banks that are probably on the rise. I don't know much about Chinese banks, but the top ones (Bank of China Ltd. etc.) should ascend to bulge bracket, if they haven't already have.

Remember the childhood game of Pass The Parcel (or Pass The Pillow)?(Image source: wikihow)The 2008 financial crisis was just a pass the parcel game, the only difference being that the parcel was a financial time bomb that would take everyone down once it exploded. And that is exactly what happened.So, who were the participants in this game?The general public (the innocent entity in the game, oblivious to the perils involved)The banks (your local, boring commercial banks)The investment banks - Merrill Lynch, Lehman Brothers and othersThe investment companies (another largely innocent entity in the game)The insurance companies - American International Group (AIG) and othersWhat role does each of this entity normally play in an economy?The general public deposit their savings in the banks and borrow from the banks. They also invest money in the products sold by the investment companies (Mutual Funds, Hedge Funds, Pension Plans, etc) and buy insurance from insurance companies.The banks accept deposits and give away loans (home loans, car loans, personal loans, corporate loans, etc).The investment companies pool money from investors (the public and the corporate houses) through their products (Mutual Funds, Hedge Funds, Pension Plans, etc), invest that money in the financial market (shares, bonds, etc) and share the yield with their investors.The investment bankers link the investment companies to the banks and other corporate houses.Insurance companies insures anyone who wants to insure something, in return for a premium.When acting individually and under strict regulations, these entities are pretty harmless, or in fact, quite useful for the growth of the economy. But in the early 2000s they began this dirty game of theirs that ultimately threw the entire global economy into disarray.What was the “game”? How did it all begin?House Loans.The game was all about housing loans. Under normal circumstances, a family that desires to buy a new house approaches a commercial bank for a loan. The bank verifies the application, sees if the family has the capacity to repay and a clear past record, and sanctions the loan (a.k.a mortgage) The family repays the loan over a period of time and if it fails to repay, the bank acquires the mortgaged house and the family is kicked out. The bank sells/auctions the house and recovers its dues.So far so good.But in the early 2000s, the investment banks and the investment companies were sitting on a huge pile of idle cash. The economy was dull and they had few opportunities to make big money. But the mainstream commercial banks were doing pretty fine, ‘coz the housing market is never really down (houses are always needed man!). The investment bankers thought why not join the banks in the real estate world and make use of their idle money to make…errr...more money!The investment banks asked the commercial banks to sell them their mortgage loans.Now why would banks “sell their loans” to someone?Suppose, a mortgage loan is worth $500,000 with 10% simple interest to be paid over 10 years. Thus, at the end of 10 years, the bank gets $550,00 from the borrower. The investment banker instead offers that the bank transfer (or “sell”) this mortgage loan to the investment bank for, say, $530,000.Why would the bank sell the mortgage at $530,000 to the investment bank when it is supposed to get $550,000 from the borrower himself?There is something called the time value of money. ‘$530,000 right now’ is a lot better than ‘$550,000 after 10 years’. It is, therefore, in the interest of the bank to accept the investment banker’s offer, which it eventually does.So the mortgage gets transferred to the investment bank. It's now the investment bank that recieves regular payments (loan repayment) from the home owners (i.e borrowers), or acquires the house in case of a default.Now we come to the next player - the investment companies, that were sitting on a pile of idle cash too and were looking for investment avenues as well. As mentioned earlier, the job of the investment bankers is to link the investment companies to investment opportunities. The investment bankers called up the investment companies -Invsmt Banker: “Hey bro, we have some new investment opportunities, wanna try them?”Invsmt Co.: “Sure, why not? What are they?”Invsmt Banker: “They are called…ummmmm… Collateralized Debt Obligations”Invsmt Co.: “Colled…..what? Never heard of them”Invsmt Banker: “Collateralized Debt Obligation.. They are cool man, just try them”Invsmt Co.: “Are the returns good enough and the investment safe?”Invsmt Banker: “Of course bro, they have got AAA ratings”Investment Co.: “Great! Send them over then”*end of conversation*And with this, the investment bankers passed on their mortgage loans to the investment companies in the guise of the fancy sounding thing called Collateralized Debt Obligation (CDOs).The dirty game begins here.To keep making more and more money, the investment banks need more and more mortgage loans and for that, the commercial banks need to give away more and more home loans. But there is an obvious limit to the number of well-to-do citizens in an economy who can be extended a loan. You cannot lend to anyone and everyone, lest they default. But the commercial banks thought, “Hey, why do we care? Once we sanction a loan we pass it on to the investment banks. It becomes their headache thereafter”. Even the investment banks would think on similar lines (“We anyway gonna pass the mortgage to the investment companies as CDOs, so why bother?”).With this, started the phenomenon of SUB-PRIME LENDING i.e giving away loans to “sub prime” customers (customers who didn't really have the ability and/or the will to repay the loan).And if that was not enough, even the insurance companies (our 5th player) jumped into the muck.They introduced a new insurance product with, again, a fancy name - Credit Default Swap (CDS). But these were less of an insurance product and more of a betting instrument. Just like you put a bet on a horse in a derby race or on a team in a football match, CDS were tools to allow you to bet on home owners (borrowers). You think Mr. Donald has no capacity to repay the loan upon which he bought that new house recently? You just bet on this via CDS. If Mr. Donald ultimately fails to repay his loan, you win the bet?Appalling, isn't it? But there's more to come….Soon, the investment bankers themselves became the biggest betters! They started betting against home owners; those home owners whose mortgage they were themselves holding!! Which means, they knew that the mortgages that they are holding are risky and low-worth. But why would they care? They were ultimately passing those mortgages on to the investment companies as Collateralized Debt Obligations!The bomb was up and ticking.(Pardon the crude look of the doodle. I did not have access to fancier tools)By 2008, home owners started defaulting enmasse. The betters were winning and the betting company (actually the insurance company) losing. The American International Group (AIG), the biggest insurance company involved in this, was on the verge of collapse in August 2008. It had to be rescued by the US government. [U.S. to Take Over AIG in $85 Billion Bailout]. The general public that had bought other insurance products from AIG suffered too.With home owners defaulting in bulk, the mortgages held by investment banks and CDOs held by investment companies became worthless. On September 15, 2008, investment bank Lehman Brothers crashes and so does the stock market [Crash! Shares tumble as Lehman Brothers collapses and fears grow]. And the Domino effect took down with it the entire global economy.........(Image source: wikispace)