The significance of Goldman and Sumitomo's role reversal

Sumitomo''s relationship with Goldman is not a new one, although in our view it does reflect a telling reversal of the relative power of Japanese and US financial institutions.

One of the most ironic things about Goldman's acquisition of a $1.2 billion stake in Sumitomo Mitsui Bank Corp is the fact that it used to be the case that Sumitomo Bank was the shareholder in Goldman.

Back in 1986 - when Goldman was not the global powerhouse it is today - Sumitomo Bank became a limited partner of the firm. It invested $500 million and purchased 12.5% of Goldman's stock.

Sumitomo finally sold its stake when Goldman went public in 1999. Credit must go to Sumitomo for a decent investment - possibly the only decent one the Japanese made in the US in the 1980s.

The 1980s, it...

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