SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Stocks bounced back today, thanks to a batch of solid earnings reports from corporate America. But one of Wall Street's biggest names wasn't among them -- Goldman Sachs. The investment bank's first quarter profits were down 21 percent. Goldman earned $1.56 a share. That was a big drop from the $5.59 that it earned a year ago. Still, the results were much stronger than analysts expected. Suzanne Pratt takes a look at some of the speed bumps on the road ahead for Goldman.
SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: This is a familiar image when you hear the words Goldman Sachs. That's CEO Lloyd Blankfein on the far left, testifying before Congress early last year about who gets blamed for the financial crisis. Fast forward to today, when Goldman reported its latest quarterly results. The numbers were OK, not stellar, yet the giant investment bank continues to prove it's weathered the financial crisis and recession pretty well. Nevertheless, Goldman is now facing new headwinds, including a tarnished reputation. But Suzanne McGee, author of "Chasing Goldman Sachs," says the bank should be most concerned about its rival, JPMorgan Chase.
SUZANNE MCGEE, AUTHOR, CHASING GOLDMAN SACHS: It's been profiting quietly from all the hullabaloo surrounding Goldman Sachs. And if I were sitting there in Goldman Sachs' executive offices, I be looking over my shoulder fairly constantly and worrying more about what they are doing perhaps than what the public thought of me.
PRATT: And then there's the question of Blankfein and his big, but somewhat scuffed, shoes. Blankfein apparently has no plans to step down just yet, but already on Wall Street, the succession speculation has begun. While there's little agreement on a frontrunner, there is on one point -- the new chief will not be an outsider.
MCGEE: It historically has not done that. It would be almost a violation of their culture at a time when they're trying to go back to their roots, culturally speaking.
PRATT: And, of course, Goldman's stock price is another challenge. So far this year, the shares are down 10 percent, more than its brethren and lagging the overall market. Morningstar analyst Michael Wong does not believe the public's anger toward Goldman is the problem.
MICHAEL WONG, CAPITAL MARKETS ANALYST, MORNINGSTAR: We believe that the company's stock is mainly being affected by the cost of financial reform -- the capital requirements and also some other threats to its business model, such as the Volcker rule.
PRATT: And then, there's still questions about future financial reforms. No one really knows how those changes might affect Goldman's business model or earnings power in years to come. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.
Japan's Damage Estimates
SUSIE GHARIB: In Japan, workers started today draining highly radioactive water from the basement of that badly damaged nuclear plant. It's the latest step to stabilize the Fukushima Daiichi plant and prevent more toxic spills into the ocean. Meanwhile, initial damage estimates from Japan's massive earthquake and tsunami are coming in from the insurance industry. Total insured losses range from $12 billion to $34 billion. Now to get more perspective on that, earlier today, Tom Hudson talked with Shivan Subramanian, the CEO of FM Global. It's a commercial property insurance firm. Tom began by asking what the firm's damage estimate is.
SHIVAN SUBRAMANIAM, CEO, FM GLOBAL: Yes, right now, even though we have about $7.3 billion of capital in one of the largest property insurers in the world, I would estimate there are Japanese losses that are going to come under $150 million.
TOM HUDSON, NIGHTLY BUSINESS REPORT CORRESPONDENT: So a bit on the lower side from some of your competitors. What's the biggest source of losses for FMF Global in Japan?
SUBRAMANIAM: In Japan, most of them are earthquake-related, where there is damage to buildings or damage to equipment within the properties. And second, behind that is some water damage because of the tsunami.
HUDSON: Are you able to model any longer lasting damage from the radiation problems, from the damaged nuclear plant?
SUBRAMANIAM: No. It is very hard to do that. And right now, as you know, it's the area that is cordoned off is at least 50 miles in diameter and it is going to take us a while to look at it. The one thing I would say is given from what we know from what's going on, is that, you know, this is a country that is very well-prepared and has done a lot of good things in terms of disaster preparedness and so if there is any country that is going to recover well from this, it is probably Japan.
HUDSON: But address, from the industry's perspective, from insurance, Shivran, how the unknown impact of the continuation of the nuclear situation may impact business not only in Japan but worldwide.
SUBRAMANIAM: Yes. And there are several issues that are not just the nuclear contamination, but it's also the fact that that has led to a substantial reduction in power supply which means that a country that is so finally tuned with this manufacturing processes needs to have power on 24 hours a day, seven days a week, which is how they run their businesses. And they now have rolling black outs. So you combine that within the potential of damage from nuclear contamination, this could become a long- term situation.
HUDSON: Talking about business interruption insurance, is there much of that in Japan and is that impacted by these rolling brownouts that could become more of a fact of life in the next several weeks and months?
SUBRAMANIAM: Absolutely. The one thing that we will not know for at least another I would say 90 to 180 days if not more, is what exactly is the impact of business interruption. Because you can have business interruption many, many different ways. One example that most people don't realize is you can have a supplier, supplying a supplier, who's supplying a supplier and there is a small manufacturer in the Midwest which has a single location in the Midwest United States, who has that chain of suppliers. So it may take them several months before they start to recognize or really feel the impact from that business interruption. This is something that's going to take a while to know what the extent of the damage is going to be.
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