The March issue of Bloomberg Markets magazine carries a cover story on Goldman Sachs' (GS) investment management division, which the magazine says went through eight different heads in eight years. Netscape founder Jim Clark took his money elsewhere, the article reports:
He had met with Paulson & Co. founder John Paulson in August, 2006 and been impressed by the hedge fund manager's plans to bet against the subprime-mortgage market. His Goldman brokers talked him out of investing with Paulson, describing him as a bit player, Clark says.
Paulson generated a 590 percent return in his flagship credit fund in 2007.
"When it came out that Paulson had the biggest payday in history, I got angry," Clark says. The fact that Goldman Sachs had such a close relationship with Paulson incensed Clark further.
"They just butter their own bread and charge huge fees, these jerks," Clark says.
Goldman spokeswoman Andrea Raphael says the firm has no comment on Clark's complaint.
One might argue that Mr. Clark should be mad at himself for listening to the advice of the Goldman brokers, rather than being mad at the Goldman brokers, who of course are going to be making the self-interested case that he should keep as much money as he can with them (where they get a cut of it) rather than with John Paulson (where they don't.) At least, rather than calling for some government action against Goldman, Mr. Clark moved his money to Morgan Stanley. The article doesn't say so, but it's a good example of how market competition can be a powerful regulator, perhaps more so than government. There's no guarantee that Mr. Clark will get any better advice from Morgan Stanley than he got from Goldman Sachs, but perhaps this time Mr. Clark will take it with the skepticism — not cynicism, but skepticism — that it merits. It'd be interesting to find out the names of these particular Goldman people who lost Mr. Clark's business for the firm and to find out whether they still work at Goldman. It'd be also interesting to revisit the question 10 years from now and to see whether Mr. Clark would have done better over that time period by investing with John Paulson or by instead following whatever approach Goldman was recommending.