Goldman’s Last Stand — The Wall That Held
Lloyd Blankfein and The Call That Changed The World
September 14, 2008–10:43 PM
Lloyd Blankfein cracked open a Diet Coke. Unlike most of his Wall Street peers, his weekends weren’t spent at Hampton soirees or collecting rare vintages like Jamie Dimon or Richard Fuld, although the latter was going to be very much on Blankfein’s mind.
Blankfein was all Bronx, no Bordeaux. He grew up in the Linden Houses, a public housing complex in East New York, Brooklyn. His father was a postal worker, and his mother was a receptionist. He was an unlikely master of the universe.
Having spent his career in fast-moving trading pits, not mahogany-lined boardrooms, his idea of a power meal was a Pastrami sandwich from Katz’s Deli, or whatever the cafeteria served inside 200 West Street on a late night. Yet on this Sunday night, the menu had nothing but antidepressants. He was skimming through briefing notes on credit market liquidity, Blankfein’s version of a good beach novel, when his phone buzzed.
“It’s Hank.”
That meant Hank Paulson, the U.S. Treasury Secretary, and Blankfein’s former boss. Paulson was an Olympic power player inside the arena called Goldman Sachs, beating out Jon Corzine to become CEO in 1999. Corzine left to become governor of New Jersey, not a state known for gentle politics. Blankfein had seen Paulson outmaneuver sharp-elbowed partners before. He was, as they say, well bred, well versed, and swollen headed.
But this wasn’t a friendly call. Paulson was his potential executioner.
“Lloyd, we’re not saving Lehman.”
A pause.
“You can’t be serious?” Blankfein asked, voice steady but clipped.
“It’s done.” Paulson didn’t sound unsure — he sounded resigned.
Blankfein exhaled. He had expected bad news, but not this. Paulson was letting the entire system burn before trying to save it.
Blankfein exhaled sharply. Lehman was hung out to dry. His legal mind began the process of numbering a spreadsheet with steps and stages to see where on the gameboard Goldman would land.
He had flown back from London that afternoon, and the next day wasn’t going to let up. Nor the next week or month.
“Paul, you gave Bear Stearns a lifeline. What the hell?”
Goldman had planned around that logic. But if Lehman wasn’t getting a helping hand, these bureaucrats had just thrown away the rule book. They worried about their polling numbers, Blankfein was more concerned about the country and the tailspin its economy was just about to take.
“It going to be Armageddon, Paul. You realize what this means?” Blankfein said, pacing his den. “If you saved Bear, but not Lehman, markets will interpret that to mean no one is safe.”
Without a government backstop, every lender would call their loans, pull in lines of credit, and freeze the financial system overnight. The domino effect would gut investor confidence, tank the stock and bond market, and put every other Wall Street bank — including Goldman Sachs — one foot over the line.
Paulson hesitated. “There’s no appetite for another bailout. The public won’t stand for it. And Congress won’t either.”
Blankfein gritted his teeth. This wasn’t just a crisis — it was a full-blown reckoning by a government that hated the financial system it had created. It was about to eat its children. There was no time to argue, and it was clear that no argument would change the minds of the powers that be.
But Blankfein knew that Lehman’s failure wouldn’t just take down one firm. It would pull everyone into the abyss. And the next logical target would be Goldman Sachs.
Why?
And what the government wants, seemed to be Paulson’s message, the government gets.
Because it was the strongest firm on Wall Street, and a bizarre mixture of bravado and ego inclined the government to want to see it fail. Or the other interpretation was simpler: Washington needed a villain. And Goldman Sachs was still standing.
The Trading Floor War
Blankfein didn’t waste a second. He knew that the difference between survival and collapse was speed — and he knew how to make sure Goldman moved first.
By the time he got to 200 West Street, it was well past midnight, but the trading floor was still humming.
Phones were ringing. Screens flickered with red. Traders were glued to their monitors, tracking the carnage. Some had been through crashes before, but this? This was different.
Blankfein scanned the room and raised his voice just enough to cut through the tension.
“Alright, listen up — Lehman is kaput. The Fed isn’t saving them. That means we are officially in the fight of our lives.”
The room fell silent. Everyone knew what that meant. It was a Tsunami headed for their home, and there would be no ducking the carnage.
“Markets are going to panic. Liquidity will dry up. Clients will start pulling money. That’s exactly what we can’t let happen to us.” He locked eyes with the senior partners in the room. “We stay in front of this. We control our own fate. We need to get closer to home.”
A trader near the front, usually stone-faced, spoke up. “What exactly does that mean?”
Blankfein didn’t flinch.
“It means we do what Goldman does best — we run to the problem. We don’t sit back and wait to see how bad it gets. We move first.”
He pointed at the senior partners.
“Every client call, every counterparty, every fund manager — we get ahead of them. If they’re nervous, we tell them why we’re fine. If they’re moving their money, we give them a reason not to. We are a confidence business — once we lose that, we lose everything.”
One of the managing directors leaned in. “And what if Paulson and Bernanke start forcing our hand? They could regulate us out of this business.”
Blankfein exhaled, then nodded.
“Then we adapt. If they’re writing the rules, we learn them before they do. If they change the game, we change with it. But we’re not going down.”
He let the words hang in the air.
Then, after a moment, he grinned.
“Now, we’ve got an unwinnable war, but we’re going to win.”
The floor erupted. Phones picked up, emails fired off, trading screens flickered as Goldman Sachs did what it had always done best — move first, move fast, and outthink everyone else.
Goldman Sachs would not become the next Lehman. It would become something else entirely.
The Partnership
“If your obituary is nine paragraphs long — no more than two should be about your career.”
Blankfein had laughed at the time his partner gave him the advice. Imagine your entire career, where you spend most of your life amounting to just two paragraphs in your nine-paragraph obituary? But standing in the middle of the worst financial crisis in modern history, he understood exactly what he meant. Goldman Sachs was a money-making machine, but its founder’s culture is what made it a survivor.
Blankfein had never forgotten. It wasn’t just a warning to keep his identity from being swallowed by the crisis of the moment — it was a reminder that what made Goldman different was the ability to think longer term than anyone else on Wall Street.
“When I first became a partner at Goldman Sachs, a senior partner had a chat with me and said two things: ‘You’re expected to keep all your shares in the firm’ and then, ‘When your epitaph is written, and it’s nine paragraphs long, no more than two should be about your career at Goldman Sachs.’”
That philosophy defined Goldman’s culture, and it was that very culture that would ensure its survival. Goldman wasn’t just a bank — it was a launchpad for leadership.
From Steven Mnuchin and Gary Cohn in the Trump administration to Blankfein’s own predecessor, Hank Paulson, Goldman’s reach into government was so deep that critics had nicknamed it Government Sachs.
Now, in 2008, that pipeline was a double-edged sword.
Goldman had influence — but it also had enemies.
If Paulson, Bernanke, or Yellen turned against them, no amount of tradition, culture, or history would save them.
But Blankfein understood something that others missed.
Goldman Sachs’ culture wasn’t a weakness — it was its greatest survival tool.
Navigating the Storm
When the 2008 financial crisis hit, Goldman Sachs was in better shape than many of its competitors, thanks in part to Blankfein’s decision to reduce exposure to subprime mortgages before the market imploded and the culture of partnership the founders had embraced.
“No one at Goldman Sachs gets paid out of his or her own P&L. It matters how your business is doing, but it matters more how the firm as a whole is doing,” Blankfein explained.
.But that didn’t shield the firm from the fallout. As panic gripped the markets, confidence in every major financial institution was evaporating.
The most critical moment came in September 2008, as Lehman Brothers collapsed and the entire system seemed ready to follow. Goldman Sachs, still an investment bank at the time, was vulnerable. Without immediate action, it could be next.
That weekend, as Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke scrambled to prevent a total economic meltdown, Goldman needed to act fast. The solution? A transformation. Blankfein led the firm’s swift move to become a bank holding company, giving Goldman access to Federal Reserve funding and ensuring its survival.
The decision was bold, strategic, and necessary. And it worked. Goldman Sachs weathered the crisis while others fell, emerging bruised but intact. But the battle was far from over.
The Government-Made Crisis
The 2008 financial crisis is often framed as a product of Wall Street greed and reckless deregulation. But this made-for-TV drama narrative ignored the role of government in creating the very conditions that made collapse inevitable.
While bankers certainly made their share of mistakes, key decisions by the Federal Reserve, Treasury Department, and government-sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac were the primary accelerants of the crash.
The real cause of the 2008 collapse wasn’t unregulated markets — it was a financial system warped by government intervention.
Janet Yellen’s Hubris
Janet Yellen, who would later lead the Federal Reserve, was among those bureaucrats who believed the Fed could fine-tune the economy. In 2013, she assured Congress that low interest rates were not about to create a dangerous bubble.
“We don’t see the kind of extreme leverage in banking that we saw in the run-up to the crisis,” she said.
She was wrong.
By 2017, she declared, “I don’t believe we will have another financial crisis in our lifetimes.”
It was an astonishing level of hubris from someone who had failed to see the last one coming. Her problem is that she saw into the numbers the Fed published but without any insight into the economy and human nature. That was Blankfein’s metier, however, and fortunately for Goldman Sachs, he was in charge of the firm’s economy.
The reason Goldman Sachs didn’t collapse was because it didn’t rely on Washington to save it. Right before its extraordinary transformation, Lehman was gone. Bear Stearns was a memory. AIG was gutted.
Blankfein adjusted his tie and picked up the phone. He was known to make more than 100 calls per day, ‘keeping his hand on the pulse of the firm’ as he said in our interview.
The war wasn’t over — but he was about to win the first battle.
Under Fire
With survival secured, Blankfein faced a new war — not against financial ruin, but against public outrage. Goldman had taken $10 billion in TARP funds, though it quickly repaid them. The firm had also made money during the crisis while others suffered, fueling accusations that it had profited from the collapse. The media painted Goldman Sachs as the ultimate villain of the financial crisis, and Blankfein became its reluctant figurehead.
In 2009, as he testified before Congress, he was grilled relentlessly. Lawmakers accused Goldman of betting against its own clients. The headlines were brutal. Blankfein, who had spent his career thriving in the chaos of trading floors, was now navigating a different kind of storm — one of public perception and political backlash.
But he never wavered. “I know I’m going to take hits,” he said at the time. “But my job isn’t to be popular. It’s to make sure this firm comes through stronger than before.”
That didn’t stop the headlines.
It was a Sunday. Blankfein was heading into 200 West Street when a London Times journalist shouted at him in the elevator.
“Are you off to work?”
Blankfein smirked. “You know, we’re just doing God’s work.”
It was a throwaway line. Brooklyn sarcasm.
But the media removed the sardonic grin and turned it into a Gordon Gekko mantra. Suddenly, “God’s Work” became Wall Street’s dog whistle for greed.
But few of his critics understood the stark reality: at the height of the financial crisis, with Goldman Sachs in the crosshairs of a collapsing market and an unpredictable government, Blankfein wasn’t playing the role of Wall Street kingpin. He was fighting for the financial system’s very existence.
Perhaps, after all, Lloyd Blankfein was really doing God’s work.
