Is Goldman Sachs a hedge fund?

The debate about whether Goldman Sachs (GS) is one giant hedge fund has been around a long time. The argument is casually, sometimes angrily dismissed by the company. But the argument has stuck around as the company has come to rely more on trading for profits. This idea is explored in a recent PBS News spot (the first of a two part series) on the bank that highlights CEO Lloyd Blankfein's defense of the company as an investment bank helping client companies raise money and the like.

But the piece also notes, trotting out a former Goldman Sachs managing director, that such activity accounts for only a small amount, about "10 percent or so," of revenue. Thus, "if he's doing God's work he's only doing it at 10 percent capacity," she says.

Then the piece trots out David Stockman, of Reagan-era fame, who essentially agrees that the firm is essentially a hedge fund. All this is standard. Where the piece really gets aggressive is when it essentially accuses the firm of front-running clients. Stockman says that's "the long and ancient secret" of Wall Street, all firms do this. It moved on to the ABACUS issue, which we've discussed in the past. Blankfein put the best face it, noting that what the firm really does "is risk management" and "these are sophisticated investors who wants this risk." We could go on all day arguing about this. TARP has certainly complicated the equation.

For more:
- here's the video
- here are some excerpts

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