Goldman's Golden Ones

The talk on Wall Street of late has been about layoffs, with nearly every major investment bank announcing job cuts. Bank of America said on Wednesday that it would cut 3,000 investment bankers, and Wachovia said late last week that it was eliminating 200 investment banking jobs.

And then there's Goldman Sachs.

Goldman has announced that it, too, is making some major changes to its work force: promoting 299 executives to managing director this year, an all-time high for the firm. When the latest promotions take effect, Goldman will have 1,384 managing directors.

The jump to M.D carries with it a significant salary bump, and a bonus that is usually a percentage of the revenue generated by the executive's group.

The promotion puts the executives in line for a chance to grab the real gold ring at Goldman: partner managing director. A holdover from when Goldman was a limited partnership, partner managing directors received an average of $8.6 million each last year.

How can Goldman afford to be sending people up the totem pole while everyone else on the Street is trying to cut costs?

Because it obviously can. In a third quarter that forced virtually major bank to take huge write-downs on their credit investments and on loans to finance deals, Goldman Sachs reported a 79 percent gain in earnings.

"Significant losses on non-prime loans and securities were more than offset by gains on short mortgage positions," Goldman Sachs said in its earnings statement.

Many on the Street grudgingly credit a skilled, agile upper management for Goldman's superior hedging in advance of the credit crunch. Pair that with the fact that Goldman made those impressive gains in the quarter while trading a tremendous amount of its own capital, and it is clear that the firm has many extremely capable traders, bankers, and executives.

But attracting and retaining that talent is expensive. Amid the storm clouds on Wall Street, there is at least one firm taking long positions on its assets.

Liz Gunnison