Though it wasn't a terrible quarter for Goldman Sachs
Goldman earned $1.81 per share in the third quarter, 70% lower than last year. That's actually a respectable showing -- Goldman didn't lose money! Book value grew 2% during the quarter, the company remains well-capitalized, and if anything, the turmoil in the market might create opportunities for Goldman to swoop in and profit from others' pain. No complaints, right?
That's where the good news ends
Unfortunately, after Bear Stearns' bailout in March and Lehman Brothers' bankruptcy over the weekend, many are starting to wonder whether the stand-alone investment banking model will be able to continue much longer, even for a formidable powerhouse like Goldman.
The current model for stand-alone investment banks like Goldman and Morgan Stanley
The alternative to this is to build your books through a stable base of customer deposits, in the way banks like Bank of America
Of course, these guys march to their own drums
For the time being, Goldman is clearly stating that it has no intention of merging with a deposit-heavy bank. Is that a good idea? It's not the safest bet -- especially if the global financial system continues to unravel -- but my gut tells me that Goldman will change its tune in the next year. If it were to merge with a bank like Wells Fargo
More on this weekend's historic developments: