Business Insight Zone

Today’s Company of the Day is Goldman Sachs.

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It’s been a long, hot summer in the financial markets, and the sweating is hardly over for mortgage lenders, big banks, buyout firms, and the rest of Wall Street’s players. Among the big investment banks, Lehman Brothers and Morgan Stanley felt some heat when they reported lowered quarterly profits this week. Bear Stearns, meanwhile, is sweating bullets after it took a huge hit from bad investments in the subprime mortgage market. Yet there sits Goldman Sachs, immaculate in a tailored suit, cool as the other side of the pillow, basking in the glow of a quarter in which earnings rose 79% from the same period a year ago.

That profit would have been impressive regardless — it was the third-highest quarterly figure in the firm’s nearly 140 years of business — but it was even more stunning considering that it came in a quarter when the company wrote off more than $1.5 billion in bad subprime loans. The subprime hit was offset by healthy gains in Goldman’s asset management, equities, and investment banking units. The firm even found a way to turn a profit in the mortgage arena when it shorted mortgage-backed bonds, thereby betting (correctly) that they would continue to decline. Goldman also reaped a tidy gain of $900 million when it sold its interest in Horizon Wind Energy.

Though Goldman isn’t quite perfect, it has enjoyed a balmy run of success during the years since its 1999 IPO, racking up enormous profits and paying out princely bonuses to its partners and executives. (Among Goldman’s leadership alumni: New Jersey governor Jon Corzine, former Treasury Secretary Robert Rubin, current Treasury chief Henry Paulson, and NYSE Euronext CEO John Thain.) These days, the company’s diverse business lines, deep pockets, and overall acumen have allowed it to thrive even as many other blue-chip financial firms have struggled to hold an even keel.

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Goldman’s terrific results have inspired waves of commentary. I thought this item from the Wall Street Journal’s MarketBeat blog, which talks in more depth about Bear Stearns’s quarter, was particularly interesting:

Bear Stearns Necessities