NEW YORK AND WASHINGTON — Burnishing its reputation as Wall Street's premier banking firm, Goldman Sachs Group reported a record quarterly profit that topped expectations and underscored the speed with which the firm has rebounded from last year's financial crisis.
Smart stock trades and reduced competition from rivals contributed to the $3.4 billion in earnings. Critics, however, said a nation still mired in recession could take little comfort in Goldman's rapid turnaround.
"We've got millions of people with no jobs," Rep. Elijah E. Cummings (D-Md.) said Tuesday. "It just doesn't make you feel too good, and it doesn't make my constituents feel too good."
Others said Goldman owed a debt to the taxpayer-funded bailout, which provided the firm with $10 billion in loans last year. But Wall Street analysts said Goldman's strong showing could be traced largely to the rebound in global stock and bond markets, which boosted trading activity by clients and increased the value of securities on Goldman's own books. Goldman had the added advantage of reduced competition. Bear Stearns Cos. and Lehman Bros. Holdings Inc. collapsed during the financial maelstrom, while Morgan Stanley and others cut their exposure to risky assets.
"This was a sweet spot for them because a lot of their competitors literally vanished or their appetite for risk-taking was taken away," said Glen Capelo, a bond trader and co-head of rates at Broadpoint Gleacher, a New York investment bank.
Goldman also suffered fewer losses on mortgage-based investments than its Wall Street rivals and thus was in a stronger position when financial conditions improved.
"The volatility in the market plays wonderfully for a savvy firm like Goldman Sachs," said Guillermo Kopp, executive director of TowerGroup, a financial industry research and consulting firm.
Goldman's second-quarter profit was up 65% from a year earlier, and it was significantly higher than the more than $2 billion that analysts had projected.
"While markets remain fragile and we recognize the challenges the broader economy faces, our second-quarter results reflected the combination of improving financial market conditions and a deep and diverse client franchise," said Lloyd C. Blankfein, Goldman's chief executive.
On Wall Street, big profits also mean big paydays. The money set aside for salaries and bonuses so far this year would provide average annual compensation of more than $770,000 for each of Goldman's nearly 30,000 employees.
