In a new book, former Goldman Sachs CEO Lloyd Blankfein describes the heady days of big profits

Things were going very well for Goldman Sachs, for the J Aron division, and for me at the firm. At the end of 1990, John Weinberg retired, and Bob Rubin and Steve Friedman became co-senior partners and co-chairs of the management committee. That was all as anticipated. Less expected was when Rubin left two years later to become chair of President Clinton’s newly created National Economic Council. Part of the idea of having co-heads was to create a balance between trading and investment banking. When Rubin left after such a short time in the job, there was no longer someone at the top of the firm with deep experience in trading. Steve Friedman chose not to elevate a co-head, leaving an imbalance that would have consequences.

Under Mark Winkelman’s guidance, J Aron had moved from arbitrage and risk avoidance to being a risk- based trading firm that was applying technology and quantitative analysis to foreign exchange, energy, metals, and fixed income. Aron was simultaneously becoming more of a client-focused business and more like a hedge fund.

The two went hand in hand. Being at the centre of so much trading flow – and having top analysts like Morrison and Davies – gave us the confidence and credibility to expand our own proprietary trading. Proprietary trading benefited our client relationships because we were engaged in trading similar to theirs, and our market knowledge was much more extensive and on point. Proprietary trading didn’t just make our advice more influential. It changed our relationship to clients, making us less a pure service provider and more of a peer. Taking large positions with Goldman’s own principal gave our “macro” opinions about where rates, prices, and policies were headed more weight with clients and with markets. It was a kind of virtuous circle, where our views helped to influence markets in the direction of those views. At least sometimes, for a while, and up to a point – markets go where they want to go, not where you believe they should go.

Within the firm, J Aron was driving unprecedented gains. It continued to contribute a third or more of even larger profits in 1991, 1992, and 1993. This was atypical of the industry. At most investment banks, currency and commodities trading contributed a smaller share of profits, closer to 20 per cent.

The other driver of trading profits at Goldman in those years was the fixed- income division, jointly led by Mark Winkelman and Jon Corzine, a team of rivals. Fixed income on its own contributed $1 billion to Goldman’s profits in 1993 – more than the entire firm had ever earned just a few years earlier. That year, Goldman’s pretax profits were an astonishing $2.3 billion. No Wall Street investment bank had ever had a year when it made that much money. The profits of those years funded rapid global expansion. Between 1990 and 1995, Goldman opened offices in Frankfurt, Mexico City, Vancouver, Seoul, Osaka, Taipei, Shanghai, and Beijing. The Cold War was over, and the era of globalisation was underway, moving with astonishing speed. The size of Goldman’s staff was multiplying along with the shiny new offices in exotic- sounding places.

It felt good to be a partner. I was able to focus on growing our businesses. I was travelling internationally, recruiting talent, working with clients, and expanding our revenue. I was already in charge of foreign exchange trading in the US and Asia and now began adding responsibility for bonds denominated in non-dollar currencies. When Dennis Suskind retired in 1990, Jimmy Riley replaced him as head of the worldwide metals business, reporting to me.

I brought a lot of intensity to my role. In those years, there were shortages of platinum- group metals that were needed to make catalytic converters, which the EPA required new cars to have in order to meet emissions standards under the Clean Air Act. Those elements – platinum, palladium, and rhodium – are mined in only a few remote locations, primarily in South Africa and the Russian Arctic. On the basis of weight, they were the most expensive metals in the world, the latter many times more valuable than gold (rhodium went to $7,000 an ounce in 1990, up from $1,200 the year before). Thanks to our long- term contracts, Aron was a critical supply conduit for auto manufacturers. General Motors named us Supplier of the Year four times in the 1990s for sourcing and hedging commodities. One year, they invited Jimmy and me to Detroit for a celebratory weekend that included driving all kinds of GM vehicles around a test track. Jimmy chose the Corvette. I went for the dump truck.

That was a rare domestic trip. More often, I was on planes to more distant places, including Malaysia, Hong Kong, Korea, and Brazil. Because we had young kids at home, I seldom tacked any leisure time onto my tightly packed meeting schedules. To this day, it’s hard to remember whether I’ve been to certain countries or not, because all I would have seen there is hotels, offices, and taxis, which looked more or less the same everywhere I went.

Jimmy may have enjoyed some of these trips less than I did. I was obsessed with preparation and would badger him with questions and worries before every client meeting. He used to tell people that when he left on a work trip with me, he made sure he had a whole bottle of Tylenol.

I was in our backyard in the Hamptons with weekend guests when Laura called to me from inside the house.

“Lloyd, Robert Maxwell is on the phone for you.”

I felt pretty pleased with myself. In 1991, Maxwell was one of the giants of global business and a press lord in the United Kingdom. He owned the popular tabloid the Daily Mirror and a variety of other businesses, including the publishing house Macmillan, various cable TV interests, and the Berlitz language schools. His personal story was the stuff of legend. Born into a poor Jewish family in Czechoslovakia, he escaped the Nazis as a young man and became a war hero fighting with the British. His reputation was far from spotless; British financial regulators had censured him decades earlier for “reckless and unjustified optimism.” But that was in the distant past, and Maxwell was doing a lot of business through Goldman Sachs. He was even Goldman’s landlord in London, where a senior partner in charge of the corporate trading desk, Eric Sheinberg, helped Maxwell syndicate loans and execute block trades. The firm also extended credit to Maxwell, based on his extensive assets.

And here the great man was calling me at home on the weekend to solicit my views about markets and currency trades.

Excerpted with permission from Streetwise: Getting To and Through Goldman Sachs, Lloyd Blankfein, Orion Ignite.