Goldman Sachs' $428 million loss: What does it mean?

Amid market turmoil, the investment banking giant posts a rare loss for the third quarter — inspiring both ominous predictions and shrugs

The Goldman Sachs booth at the NYSE
(Image credit: Chris Hondros/Getty Images)

On Tuesday, Goldman Sachs reported a $428 million loss for its third quarter, down from a $1.7 billion profit in the same three-month period a year ago. It marked only the second time the investment bank has reported a quarterly loss since it went public in 1999. Goldman did have "pockets of strength" last quarter, but those were more than offset by nearly $3 billion lost in the tumultuous stock and bond markets. The result? "The banking industry’s perpetual winner was this quarter's loser," says the Associated Press. What does it mean for Wall Street?

This signals a seismic shift: "Goldman Sachs, once Wall Street's highest flier, has been grounded, and it does not bode well for the rest of the financial industry or the New York City economy that depends on it," says Susanne Craig in The New York Times. And with new regulations that force banks to "discontinue high-profit businesses like proprietary trading, reduce borrowings, and hold more capital," plenty of other Wall Street firms "may no longer be able to produce the supercharged earnings that were common before the financial crisis."

"Goldman loss offers a bad omen for Wall Street"

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.


Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

Other banks won't suffer Goldman's fate: "It's too early to tell if the loss at Goldman Sachs Group Inc. is a temporary blip driven by a wild period in the markets or a sign of cracks in the bank's long-held business strategies," says the Associated Press. But one thing's for sure: Bank of America and Citigroup each reported billions in earnings. And Morgan Stanley is also expected to be in the black — "reinforcing this season's reversal of fortunes." Perhaps Goldman's reliance on investment banking services makes it more susceptible to market volatility than its rivals, which have substantive borrowing-and-lending businesses.

"Goldman Sachs loses $428 million in third quarter"

Perversely, Goldman employees will still get giant bonuses: Despite "an awful three months," Goldman "continued to shovel billions into the bonus pool it will share with its employees at year's end," says Gary Rivlin at The Daily Beast. The company has set aside $10 billion for bonuses, which averages out to $333,000 per employee. "Is it any wonder the Occupy Wall Street crowd might think there's something rotten about the system?"

"Goldman execs stay fat and happy"

And investors aren't flinching: On Wednesday, Goldman Sachs shares were up 5.5 percent "as investors looked past a third-quarter loss and focused on gains in trading revenue and prospects for a rebound in underwriting and takeovers," says Christine Harper at Bloomberg Businessweek. Apparently, investors and analysts aren't panicking quite yet.

"Goldman Shares rise as investors look past quarterly loss"

Continue reading for free

We hope you're enjoying The Week's refreshingly open-minded journalism.

Subscribed to The Week? Register your account with the same email as your subscription.