Roubini Misreads Goldman

Sir:

Nouriel Roubini offers no evidence to support his curious assertion that most of Goldman Sachs' (nyse: GS - news - people ) lines of business are losing money ("Next: The Mother Of All Bank Runs?" Oct. 2, 2008). As a result, we're left to assume that it's a gut reaction. Unfortunately, it appears that Mr. Roubini did not look at our recent earnings release, which shows that we reported a quarterly profit in a very difficult environment. In fact, we've reported a profit in each quarter since the credit crisis began more than a year ago.

Mr. Roubini does not distinguish between the differing performances at various firms. As a result, he fails to acknowledge that the difference in performance is clearly a function of different business models, risk management practices and decision making.

For example, Bear Stearns had a narrower business model, concentrated in fixed income, particularly in mortgage-related businesses. Lehman Brothers (nyse: LEH - news - people ) also had a business model more focused on fixed income and had a real estate portfolio that was very significant in relation to its capital.

Both had very different funding and liquidity profiles from Goldman Sachs and Morgan Stanley (nyse: MS - news - people ). He also doesn't explain why Merrill Lynch (nyse: MER - news - people ) decided to merge. His readers might have been interested to know that, in addition to significant concentrated exposure to the mortgage market, the firm had a large amount of debt to be refinanced this year.

Mr. Roubini asserts that Goldman Sachs needs to raise more capital. Has he looked at any of the relevant capital metrics that demonstrate that Goldman Sachs has one of the strongest balance sheets in the financial services industry? Has he compared the quality of our balance sheet to those of the banks with whom he thinks we should merge?

Insightful opinion plays an important role, particularly in disrupted markets, but Forbes readers deserve more than a "fire, aim, ready" approach.

Sincerely,

Lucas van Praag
Managing Director
Goldman Sachs & Co.
85 Broad St.
New York, N.Y. 10004