Published: Thursday, 6 Aug 2009 | 10:48 AM ET

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Lloyd C. Blankfein has a story about the cataclysm that nearly brought down all of Wall Street. It goes something like this: One by one, lesser banks were swept away by the financial storm of 2008. And as the floodwaters rose, no one, not even Goldman Sachs, seemed safe.

The question, in Mr. Blankfein’s eyes, was how high the water would rise. But Washington stepped in with all those bailouts before the surge reached Goldman

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The story, which was recounted by several friends and colleagues, represents a sobering private admission from Mr. Blankfein, Goldman’s chief executive.

Publicly, it is a different story. Now that Goldman is minting money again, the bank insists that it was never in any real danger. Mr. Blankfein, in an e-mail message this week, disputed his private account, saying Goldman’s survival was never in doubt. Other Goldman executives reject the notion that the bank was rescued at all.

“We did not have a near-death experience,” said Gary D. Cohn, Goldman’s president. The government saved the financial industry as a whole, but it did not save Goldman Sachs, he said.

Rarely has the view from inside a company been so at odds with the view outside it. Could Goldman Sachs have lived if all those other giant banks had failed? Could it alone survive financial Armageddon?

Goldman executives are dismissive, even defiant, when critics argue that the bank is playing a heads-we-win, tails-you-lose game with American taxpayers. And yet the questions keep coming. Last month the story of Goldman’s postcrisis success — and conspiracy theories surrounding it — leapt from the business pages to the cover of Rolling Stone.

The idea that nothing has changed for Goldman Sachs strikes many outsiders as absurd. In this era of mega-bailouts, Goldman is widely perceived, on Wall Street and in Washington, as too big and important to fail. If its bets pay off, Goldman profits and its employees get rich. If its bets go bad, ultimately taxpayers will have to pick up the bill.

“Many observers on the market believe that Goldman and others of its size now have a free insurance policy,” said Elizabeth Warren, the chairwoman of the Congressional oversight panel for the $700 billion bailout fund. “Whether they do or not is less important than the fact that many in the market believe they do. That means at some level Goldman is playing with the American taxpayers’ future.”

Is Goldman gambling at America’s expense? Of course not, Mr. Cohn said. Should it change its business strategy in the wake of the gravest financial crisis since the Depression? No. Is Goldman taking big risks to make big profits? Courting more outrage over Wall Street pay with its plans to pay lavish bonuses? Throwing its weight around in Washington?

No, no, no.

Goldman executives dispute suggestions that high-stakes market gambles are behind its big profits — $3.4 billion in the second quarter. And they are dumbfounded when people like Ms. Warren suggest companies like Goldman, which paid back its bailout money last month, now operate with an implicit taxpayer guarantee.

After so many wrenching changes on Wall Street and in the economy, it might come as a surprise that the post-bailout Goldman is virtually indistinguishable from the pre-bailout one.

The bank has strengthened its capital base and reduced its use of leverage — the borrowed money that turbo-charges profits on the way up and can prove devastating on the way down. But Goldman sees little reason to change the way it does business. In fact, its executives are surprised that anyone would suggest it should.

Even Goldman’s conversion to a traditional banking company at the height of the crisis — a step many predicted would clip Goldman’s gilded wings — has been deftly sidestepped.

It is, in other words, business as usual at Goldman — and what a business it is. Quarter after quarter, Wall Street executives scour Goldman’s results hoping to figure out how the bank makes so much money. Mr. Cohn and other executives, in recent interviews, sketched the broad outlines of an answer. Mr. Blankfein declined to be interviewed for this article.

During the second quarter, Goldman bet, correctly, that the financial markets would calm down. It wagered that market volatility would decline and that certain securities tied to the troubled home mortgage market would revive. Its securities underwriting business bounced back too.

A vast majority of profits came from trading on behalf of clients like big mutual funds, pension funds and endowments, rather than from staking Goldman’s own money in the markets, Mr. Cohn said. Proprietary trading now accounts for about 10 percent of profits, down from 20 percent in 2005. Goldman dominated institutional trades linked to changes in a closely watched stock market index, the Russell 2000, and is benefiting because old competitors like Bear Stearns and Lehman Brothers are no longer around.

“We don’t have to outsmart the market today,” said Mr. Cohn. “We just have to do what our clients want us to do.”

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