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JOIIN B. I'TITT,ERIIION 77 HILI^SIDE RD RYE, hrY 10540 9L4-S2r-2519

March 18,2009

Mr. Lloyd Blankfein Chairman and CEO 85 Broad Street New York" NY 10004

Dear Mr. Blankfein,

o'Do I write to commend your February 8 article not destroy the essential catalyst of risk", a welcome glimpse of responsibility and accountability from Wall Steet leadership. Integrity is the ability to acknowledge responsibility. Your article suggests an understanding of this truttr, but falls short of the mark. Let me explain.

Privately, no doubt you share my view that, but for the unprecedented government interventions, the financial system, including Goldman Sachs itself, would likely have collapsed. We are in extraordinary times, which call for unprecedented statesmanship from our financial leaders. As a trader by training, you grasp our predicament better than many leaders on . But as a trader, you've not had the responsibility of global financial statesman. Until now.

Goldman Sachs' Business Principles statei "areputation, if diminisied, is the most difficult asset to restore." Events have already set forces in motion that will make the task of rebuilding reputations long and arduous, undoubtedly defining the rest of your Goldman career. Risks are high for unpredictable consequences. Admiral Blair, Director of US National Intelligence, recently said that instability caused by the economic collapse now represents a greater threat to our nation than terrorism.

We must say, unfair as it may be to the many honest, hard working professionals in the industry, that there is blood on our collective hands, well beyond Madoff s. The growing and widespread suffering of literally billions of people is a direct result of the finance industry's collective irresponsibility. Yes, some were far worse than others, but no leading firm is in a position to throw stones. As the head of Goldman Sachs, this is the horrific responsibility which integrrty demands you must shoulder. No one asks for such a burden, but it was always part of the tade.

With all the complexity of modern finance, the public does not understand the nuance of this collapse any more than it understood the evil of 9-11. The public is similarly fearful and angry. Imagine that. We knowthat fear is the root of violence. Therefore, it is imperative to understand the market failures that you talk about in a wider context as we consider appropriate responses. No doubt Wall Street must be held to account. Such justice is the very bedrock of civil society. Justice must supersede any near term impact on o'the essential catalyst of risk" if trust is to be restored.

I broadly agree with the seven lessons learned and eight principles outlined in your Financial Times article. However, most of these were learned with the collapse of Long Term Capital Management and have been well documented in now three iterations of industry self-regulatory guidelines, beginning with the Counterparty Risk Management Policy Group I ("CRMPG I") report published tenyears ago. It was followed by the 2005 CRMPG II report titled "Toward Greater Financial Stabilify", and updated again in August of 2008 in a report titled "Containing Systemic Risk: The Road to Reform". As you know, Gerry Corrigan of Goldman Sachs, formerly the head of theNY Fed, chairs the CRMPG. The result of these self-regulatory initiatives was failure.

These comprehensive reports clearly demonstrate concerns at the highest levels about the industry perpetuated systemic risks that necessitated the bailout of AIG and others. We can't blame risk models as has recently become fashionable. These reports urged the importance of stress testing, and highlighted the age-old imperative of sound judgment.

Despite the clear and present dangers, many management teams failed to heed their own recommendations. Many boards were either asleep, unqualified for their duties, or mislead by managemento in some cases intentionally. Regulators, swept up in popular ideology, were not strategically focused and far too timid. Rather than reducing systemic risk in the wake of Long Term Capital, risks escalated with the advent of credit derivatives, their unfathomable scale, unique non-linear risk, and inadequate controls. Meanwhile, systematic'orating agency arbitrage" accelerated as if it were a game.

Adding fuel to the fire, capital requirements were loosened at the urging of firms like Goldman Sachs, most recklessly with the relaxation of the SEC's leverage limit in 2004. Like many, I first heard about this decision only a few months ago. This critical technical change was then systematically and irresponsibly exploited under the nose of regulators and the financial press with absurd degrees of leverage and liquidity mismatches. The banks chose to "continue to dance" out of some combination of competitive pressure and ooeveryone irresponsible greed, the else was doing it" excuse we reject from our children.

It is completely unfair for John Thain's name to appear next to Bernie Madoff s; their eruors were different in kind. But the public is angry and looking for heads. Justice is often improperly served in unstable and fearful environments, but served it will be as we have re-learned in the aftermath of 9-11. How better to underscore the imperative for genuine financial statesmanship at this moment in history?

Respectfully, I would challenge you to a higher standard of integrity and financial statesmanship than is evident in your Financial Times article. Justice demands consequences. It is the necessary precondition for the critical restoration of trust. Passing up a bonus in 2008 was the right call. Your exemplary leadership on this issue deserves recognition, but that gesture alone comes up short. It is now clear that the profits earned in aggregate by the industry going back several years were illegitimate for the most part because catastrophic systemic risks were externalized to taxpayers like me. Furthermore, Goldman Sachs and many others undoubtedly would not have survived AIG and the chaos its collapse would have triggered, had your former boss not acted when he did during that fateful weekend you shared with him at the Fed. I'm sure Paulson's motivation was systemic risk and rightly so. But certainly you and your parhrers must acknowledge the unjust windfall of not having to watch your Goldman stock, collectively $7 billion by my estimation, follow down the Lehman drain hole. And Larry Summers is'ooutraged" at $165mm in AIG bonuses?

True integrity demands accepting responsibility and saying this truth. True integrity would involve at the very least, Goldman partner forfeiture of all defened stock bonus accounts earned over the past three years. Is that stock any more legitimate than Mrs. Madoff s Park Avenue apartrnent? The kind of illegitimacy is differenl just as first- degree murder is different than involuntary manslaughter. But illegitimate it is, just as the victim of manslaughter caused by an irresponsible drunk driver is no less dead than the victim of pre-meditated murder.

Reaping the benefit of the government bailout on stock earned out of illegitimate profits is doubly unjust. Financial statesmanship would begin by leading a broad based industry initiative to define and contribute this "illegitimate stock" into a Restitution and Reform Fund with two objectives. First, it would offer some restitution to innocent victims at home and abroad, where we've outsourced much of the unemployment this'orecession" will generate. Second, it would frrnd thoughtful cross-disciplinary research and debate on fundamental reform that will frame a "post modern capitalism" that is socially just and ecologically sustainable. I offer to lead this initiative, and coordinate it with the profound work on this subject well underway. Perhaps such leadership would pre-empt less thoughtful responses from Congress.

The real lesson of this crisis is well understood in ecology and complexity science: how quickly we loose control when complex systems collapse. Financial statesmanship will heed this warning as we define the rules and ethics of a "post modern capitalism" that respects the global economy's rightful place as a subsystem of the biosphere, and finance's rightful pu{pose as servant to, not master of, a just economy.

I hope you and your peers can rise to this historic challenge. The issues at hand are far more profound than the risk of regulatory overshoot your article is concerned with. Taking up this challenge will demand a foundation of genuine integrity, not half gestures. It is a worthy purpose. It is a path to personal firlfillment and legacy money can't buy. Produced with a Trial Version of PDF Annotator - www.PDFAnnotator.com

The Goldman Sachs Group, lnc. | 85 Broad Street I New York, New York 10004 Tel: 21 2-902-0593 | Fax: 21 2-902-0633 | e-mai I : I loyd. bl an kf ei n@gs. com

Lloyd C. Blankfein Chairman & Chief Executive Officer GslFt{e;l-t*nr 5;:r'Jis

April27,2009

John B. Fullerton 77 Hillside Road Rye, NY 10580

Dear Mr. Fullerton:

Thank you for your recent letter. I appreciate you taking the time to share your thoughts and ideas as a response to my op-ed.

We certainlyrecognize that financial institutions have lost a lot of credibility. While we are proud of how Goldman Sachs has managed our risk and generated solid performance amidst very difficult conditions, no one has to remind us that our industry collectively failed to live up to the obligations the public expected.

I trust you have seen my recent speech before the Council of tnstitutional Investors. I hope you regard it as a step forward in our collective responsibility to improve accountability, transparency and the systemic management of risk.

I wish to clarify two specif,rc points in your letter. In terms of Goldman Sachs benefitting from decisions to save AIG and let Lehman Brothers fail, the fact is that our firm had more net economic exposure to Lehman at the time of its bankruptcy than it did to AIG. Second, Goldman Sachs produced a substantial profit of $2.3 billicn last year. During o'.r first quarter, lve generated strong performance. And, because we are a mark-to-market firm, we believe the assets on our balance sheet are a true and realistic reflection of book value.

People are angry and understandably ask why their tax dollars have to support large financial institutions. That's why we believe strongly that those institutions that are able to repay the public's investment without adversely affecting their financial profile or curtailing their role and responsibilities in the capital markets are obligated to do so. Produced with a Trial Version of PDF Annotator - www.PDFAnnotator.com

JOITN B. I'TILLEIR|IO}{ 77ITTI,T^SIDI} ROAD RYE, NElIv YORI( 1O58O

May 30,2009

Mr. LloydBlankfein Chairman and Chief Executive Officer Goldman Sachs Oroup 85 Broad Street New York, NY 10004

Dear Mr. Blankfein,

Thank you for your letter of April 2/h, responding to my call for a higher level of financial statesmanship and integrity from our'finance industry leaders.

I have read yow speech before the Council of Institutional Investors as you suggested and agree with many of your thoughffirl and statesmanlikg observations. However, I would also point out that many of my predictions of msre radical and unpredictable populist responses have transpired since I first wrote you in March'

Regarding AIG, it is simply not credible to me to zuggest thBt Goldman would have ro*inrA [ad AIG been allowed to fail. Other thoughtful observers including Larry Fink have said the samo thing. To be clear, my point was not to suggest that Paulson's decision to bail out AIG was part of some conspiraoy to save Goldman as some believe. I stated that I betieve his motivation was rightly systemic risk, despite the honible optics of the episode at the Fed that fateful weekend.

Without the Government guaranteeing Wall Street debt and access to liquidity through a mlltifude of unprecedented lending facilities measuring in the hundreds of billions of dollars, Goldman(and others) would have failed inthe ensuing chaos ofanAIG defauk. Of course we'll never know for sure, and you cannot publicly agree. But privately we both know, and we're not alone, That the financial meltdown has now tiggered a long and painful fallout in the real economy and stressed our already unsustainable fiscal condition is not debatable.

This is the coatext that the public's response to Goldman and other firms' desire to resume "business as usualo' must be considered. And this is the context in which our financial leaders' statesmanship and integrity must be judged. It is the very existence of your firm, its catastrophic impact on tbe global economy and the fiscal stability of the of America, its outsized influence over our political system, and your partners' $9.5 bitlion of what now csn be seen as illegitimate Goldman net worth that are the real questions we should be debating not whether the government has a right to conhol 2009 bonuses of the TARP recipients. Goldman Sachs, JPMorgan, and the other private consortium members made sure that the. Long Term Capital prhers walksd away from their fiaspo penniless a decade ago when the consortium took unprecedented risk to intervene. Our government should have cut an even tougher deal on TARP recipients, and should not let up now. Sffiing the focus to 2009 bonus payment constraints is insulting to alltaxpayers, and an outrageto the millions who have lost their jobs or houses. It suggests to me thc industry does not get it, A sense of entitlement apparently has no bounds. It must be corrected by gociety if industry leadership cannot accomplish the job. And society is the judge and jury, not the industry.

I have enclosed the speech I would like to have heard you give to the Council of Institutional Investors. I hope you find it thought provoking,

The world needs a healthy and viable financial system that servesthe real economy more than ever. From the depths of a severe and prohacted recession, we must now embark on a profound transition to an economy that respects the law of enbopy and can operate withifl the finite boundaries of the biosphere while China and India emerge. This is the most profound paradigm shift yori or I have ever contemplated, our Coperurican mompnt. It is ftuly the'oGreat lrly'ork" of our age as Thomas Berry called it.

This transition is what our bankers and central bankers should have their attention and critical skills focused on. Instead, we waste ouf time and limited resources managing the misguided sense of entitlement of a banking system addicted to short term speculative returns that serve no public purpose.

Finance has conflised means and ends. The rules and behavior need to change profoundly, not at the margin. The financial statesmanship I am calling for would participate thoughtfully and honestly in the process. Financial statesmanship would consider the broader interests of society, which of course are aligned with the long-term interests of the industry as well, Now is a time when finance has a monumental public purpose to serve. This is our calling, Our response will be our legacy.

Sincerely, Produced with a Trial Version of PDF Annotator - www.PDFAnnotator.com

JOIIN B. FI]LLERII]ON 77 HILLSIDE ROAD RYE, NMIM YORI{ 1O58O

December 37,20A9

Mr. Lloyd Blankfein Chairman and Chief Executive Officer Goldman Sachs Group 85 Broad Street New York, NY 10004

Dear Mr. Blankfein,

Much has transpired since my May 30 letter to you" which included the proposed "Goldman Historic Speech" on the break-up of Goldman Sachs. I cannot say I expected you to follow my advice in its entirety;perhaps no man would have had the courage. Herein I offer you some year-end reflections, and my predictions for 2010.

Certainly your failure to fully grasp the fallout of Goldman's behavior and responsibility to society needs no elaboration. The lost opporhrnity for leadership and financial statesmanship is now part of your legacy. Since no one filled this leadership vacuum, the industry is hopelessly despised and dangerously adrift.

Observing your recent initiatives, two of your actions are consistent with my prior suggestions: the apology, and the $500mm contribution to the to be invested in the small business sector. While I genuinely acknowledge these gestures, they come up short. An apology rings hollow without deeds appropriate to the circumstances. Goldman's deeds fail this test.

Think about it. The responsible persons in this case are Goldman Sachs' senior management and senior risk takers. The scale of the transgression necessitated a government response measured in the trillions of dollars with real and ongoing damage to billions of people for generations to come. Yet your response is to allocate o'profitso' approximately 47% of 2009 to compensation, yielding record bonuses, and l%6 to the small business initiative? Looked at another way, we taxpayers, the same ones who bailed you ou! are contributing 40% of the $500 millioru while Goldman shareholders absorb the balance. I ask you" is that taking responsibility?

This response is unsatisfactory and fundamentally different than my prior suggestion that Goldman senior management contribute a portion of their forever illegitimate personal stock to a restitution fund. Instead, your personally owned shares in Goldman Sachs appreciated $140 million in 2009, and your options appreciated undoubtedly a multiple of that. Surely you must aclcnowledge that this gaiq much less the avoidance of a total loss, is attributable directly to the toxpayer bailout af the industry. As you well know, your counterpart Mr. Fuld's timing was not so lucky. And your response is a token contribution funded by taxpayers and shareholders? And this before even considering your 2009 bonus of tens of millions of dollars? Yet you wonder why your frm is vilified?

Worse yet, as the Police and Fire Retirement Fund lawsuit against you and Goldman ooproflts" Sachs suggests, most of Goldman's this year should not be paid as bonuses at all. You call for transparency. I'd like to know what percentage of 2009 profits result from the steep write-downs you took in December of 2008. As you know, that month was conveniently hidden because of the change in your fiscal year end when the Fed o'bank" allowed you to become a thereby providing a lifeline to the discount window that kept you in business. And what percentage is a result of the overall recovery of asset values caused by the taxpayer bailout? And what percentage comes directly and indirectly from ongoing govemment guarantees on $21 Billion of your debt and the zerc percent short-term interest rates orchestrated by the Fed to subsidize capital formation in the banking system? Who in particular at Goldman deserves a bonus on those earnings? And why does your Board condone this, or anything like a 50% payout on profits largely earned through risk capital, when that historic norm was established in the days when earnings were driven by riskless and more labor intensive advisory and brokerage fees?

Turning to 2010, I am afraid it only gets worse foryou and your firm. Regrettably, my confidence in my government fixing "too big to fail" is low. But, by missing the opportunity to lead the critical tansition of Goldman Sachs in line with the ideas I *Goldman previously shared, your frm is now vulnerable to what may emerge as the Civil War" which will break up the firm on far less attractive terms.

The tension between banking and trading is well known on Wall Street. I can only imagine how intense these struggles will become as your clients begin to pull business from the firm, and your "counterparties" improve their battle plans. Some clients will drop you out of their own volition. Others will be forced by their customers to disassociate with you. Civil war could break out after Goldman loses the Facebook IPO for one reason alone: the Goldman Sachs brand. Or, consider the pressure from GSAM to be spun off in the wake of pension client defections so as to avoid the taint that comes with few if any privileges and many conflicts of interest. Yes, it will be a difficult year.

The public may not get the details, but they know injustice. You no doubt feel that Goldman is merely playing by the rules, and people are just envious. That would be a wrong analysis. I leave you with a quote from a man who, like me, was seeking justice at a pivotal time in the history of our country and was not afraid to speak up.

"It is not what a lawyer tells me I may do, but what humanity, reason and justice tell me I ought to do." - Edmund Burke, statesman, philosopher

Sincerelv. ,/ _19,//