Goldman Sachs Proves Big Banking More Than Just a "Numbers Game"

In what is now an investing cliché, Warren Buffett once remarked: “Be fearful when others are greedy, and greedy when others are fearful.” Goldman Sachs seems to be heeding the Oracle’s advice.

Monday, the bank raised a fund with about $5.5 billion in capital commitments to buy private-equity assets on the secondary market from endowments and pensions that have been stung by losses, according to Bloomberg.

That news comes days after the Wall Street Journal reported that Goldman is considering making a multibillion-dollar offering of its shares to investors as part of an effort to repay a $10 billion government loan back early.

Such news has prompted analysts at Citigroup to hand Goldman their first “buy” rating on a bank since the collapse of Lehman Brothers a year ago.

Indeed, it’s when the going gets tough that the pros make everyone else look like amateurs. Rival Morgan Stanley is expected to take a hit of $1.2 billion to $1.7 billion when it reports its first quarter results later this month, reflecting the accounting treatment on some bonds it issued before the financial crisis erupted. Meanwhile, Citigroup and Bank of America are antagonizing congressional leaders by raising interest rates on consumer lending in order to beef up their flimsy balance sheets.

And in the insurance sector, a series of haphazard management decisions has led Genworth Financial nearer to bankruptcy after it failed to qualify for government TARP funds.

The “culture” factor

So what differentiates Goldman Sachs from its rivals? Many say the bank’s “culture” is stronger than its competitors, enabling it to take risks at a time when others won’t — or can’t. “Goldman has a culture that’s massively strong, and they’re focused,” says one London investment banker at a rival firm who asked not to be named.

Culture is not a word you hear bandied about very much these days on Wall Street; it’s more of a bull-market phrase used when everyone’s getting rich together and shoveling back thousand-dollar Gordon Ramsay meals with their golden paychecks. That’s ironic, because a strong corporate culture is one of the most valuable assets any firm can own when things go awry.

Despite recent defections , Goldman Sachs is proving over and over that it is sticking together as a team. Indeed, unlike former Merrill Lynch (whose chief executive departed last year in disgrace) or at Citigroup, the firm has had no significant management overhauls lately. In a landscape where attention in the financial services sector has been overly-focused on complex mathematical models, Goldman’s late success is illustrative that other, more human variables can be just as powerful a force in performance.

Ultimately, Goldman Sachs is proving that culture — not superior quantitative models — makes for sound investor and client confidence.