I never thought I’d write this but … I miss the old Goldman Sachs.
I miss Lucas van Praag. He was Goldman spokesperson during 2008’s financial crisis and he gained a reputation for his sharp words. He regularly evisceratedReporters are stupid and do not understand finance. He once called a Wall Street Journal report “effluent.” And when Rolling Stone published its infamous profile of the bank that dubbed Goldman a “vampire squid,” van Praag called the story a “hysterical compilation of conspiracy theories … Notable ones missing are Goldman Sachs as the third shooter [in John F. Kennedy’s assassination]”and faking a first lunar landing.”
That was the voice of Goldman Sachs 2009 — the adamantine firm that managed to make its way through the crisis relatively unscathed. Goldman Sachs in 2023 will never be the same. What was in 2009 a force of disciplined finance’s biggest killers, has been weakened and humbled.
This stagnation has both a strategic and a cultural cause. Following the financial crisis and public outcry, all finance became more transparent. But ultimately the bank’s stumbles come down to the leadership of David Solomon — the 61-year-old CEO who thinks it’s cool to Hang out with The Chainsmokers. Solomon, who took over the bank in 2018, set out to transform it into something more normal and less highbrow. He invited the public to 154-year old bank’s first Investor Day in 2020 and announced plans to create the “digital bank of the future.” The patricians on Wall Street would reach out to the masses.
Solomon’s effort to create a brand new image for Goldman was a failure It did not go as planned. Solomon’s consumer bets have become a mess and Goldman Sachs has lost its edge in investment banking, the core business for which it is famous. The sinister, crisis-era image of Goldman Sachs manipulating the world from rows of flashing computer screens and skyscraping boardrooms has been replaced by a new, much worse picture — a rudderless bank in disarray.
These are hard times. Solomon has laid people off as dealmaking is drying up and his pet projects are losing money. About half of the compensation for partners and about 3,200 employees has been cut.. Goldman banker tells me that “Deal flow” is closely related to the board’s confidence, which at this moment, is at a record low. “The knives are on the table.”
In the olden days, van Praag told the Sunday Times of London “vampiresquids are small and harmless for humans.” The jokes that van Praag made back in the day were dry and funny, but today, Goldman Sachs doesn’t get the same reaction. Truth is the essence of comedy, and it hurts now.
When the winning stops
Lucas van Praag’s Goldman was hated by the society but feared on Wall Street. Say what you want about LVP’s elitism, his innate condescension, his scorn for the media, and his detachment from the notion that a powerful institution like Goldman Sachs might need to have a dialogue with civil society — he was, at least, a creature of excellence. He was the spokesperson of a place where winning meant never saying “I’m Sorry.” Goldman is no longer that place.
Goldman Sachs was the only major Wall Street bank to report a profit in July. miss earnings estimates. In fact, it was one of the few companies that missed earnings estimates at all — nearly 80% of S&P 500 companies beat their estimates this quarter, FactSet reported. Goldman’s headline numbers are ugly. Profits dropped 58% in comparison to the same period a year ago and were down 62% on the previous quarter. Under the hood, things were no better. Goldman took a $485 million write-down for its real-estate holdings and a $504 million loss related to its purchase of GreenSky — a fintech company it acquired to move into the consumer-loan business. The return on shareholders’ equity dropped to 4% from 11.6% in the previous quarter.
The knives have been taken out.
The bank is also starting to lose its once-unquestioned footing at the top of Wall Street’s League Tables — basically the scoreboards for the business of banking. Goldman has lost its top spot in the last quarter. 1 spot in mergers-and-acquisitions dealmaking to JP Morgan for the first time in five years, according to tables put out by Bloomberg and Refinitiv. In fact, JP Morgan is wiping the floor with Goldman — it has the top spot for 2023 in 11 of the 13 tracked sectors. Goldman has just one. LVP’s cufflinks are certainly chuffed by this.
Solomon apologized for the underperformance in February. It was as direct an apology as you could get on Wall Street. Solomon said, “There were clear successes but there were also clear stumbles.” “We have learned a lot.”
The bank is still a learning institution. Goldman Sachs’ more recent Goldman Sachs Terrible results in July were “impacted by selected items related to the execution of strategic goals as outlined at Investor Day — in particular, the narrowing of consumer ambitions and the transition of the Asset & Wealth Management business to a less capital-intensive model.” Goldman Sachs is losing money, because Solomon’s plan has become a burden around its neck.
Heart and DJ Sol
Solomon’s reasoning is not difficult to understand, given the turmoil that followed the Financial Crisis. It had already been trying to project an image of a friendlier, kinder business.
Van Praag — who was once dubbed “Goldman Sachs’ Rococo PR prince” by The Observer — left the firm in 2012. Jake Siewert replaced him, an ex-Treasury official from the Obama administration who gave the bank a softer tone in a more tolerant time. Goldman needed to find new sources of cash and new ways to drive its business. But even as the bank dipped its toe in consumer banking and asset management, Lloyd Blankfein — who remained CEO until 2018 — maintained Goldman’s focus on the kind of Moneymaking is ruthlessThe following are some examples of how to get started: International scandal we’ve — lamentably — come to expect from investment banks.
Goldman Sachs’ attempt to become more transparent and adapt to new banking rules did not bring it down. Solomon’s attempts to integrate Goldman Sachs into Main Street, by aggressively pushing it into the consumer banking space, brought Goldman Sachs crashing down. His vision for Goldman’s future required it to be both ordinary and elite at the same time — liked (at least enough for regular people to bank there) and feared (enough to crush Wall Street as usual). Goldman has never had that range.
Michael Kovac/Getty Images
To enter into the consumer business, Solomon invested heavily in growing Marcus — a book of high-yield savings accounts and personal loans started under Blankfein. He also — Contrary to advice of some in Goldman’s consumer business — bought the fintech GreenSky for $2.24 billion in 2021. By 2022, the bank realized that the GreenSky deal was a costly boondoggle with a paltry return of 10% or less over the next decade.
Solomon, I assume, was also trying to be cool. Solomon used to DJ under the name DJ Sol. During the pandemic he played a raucous Hamptons mix and toured to silent discos and festivals. Solomon’s office is a hive of activity. reportedly prefers bankers who have a social life — who go to charity events and post pictures with celebrities on Instagram. DJ Sol’s Page Six appearances are about the same as those of a minor Real Housewife New York City. He has DefendedThis time-consuming and attention-seeking activity by claiming that he is “having a good time” and it makes him feel “good.” Solomon, who is also a DJ at the company, raised eyebrows when he purchased a pair of private jets for the firm in 2019. Prior to this, bankers would fly in rented jets. That was considered “cool” by them.
Goldman’s senior employees have taken issue with these changes. According to The WSJSolomon’s extracurricular activities have been criticised by his older partners. This includes the former CEO Lloyd Blankfein. Solomon’s use of the private planes — which seem to spend a lot of time going to and from the Bahamas, Insider Dakin Campbell’s investigation found — has also rankled some leaders. Not by chance, senior bankers have been leaving the bank in large numbers. With an alarming number of 90 partnersSince Solomon has taken over, the departures have decreased.
Solomon’s thirst a management problem It’s a real problem. Goldman used be a collection of workaholics, hard-charging nerds, who never slept. Work-life balance at Goldman was for weaklings. Silicon Valley was the McDonald’s PlayPlace for those who wanted to feel good while having fun. Solomon is one of those men who enjoys their free time. Solomon performs at Lollapalooza. Solomon attends the same parties that Kim Kardashian does. Solomon jets to his beach house. Free time used to be something Goldman people enjoyed in secret — a guilty pleasure, like Oprah enjoying bread.
Cloudy Future
Solomon’s failed attempt to switch to consumer products has resulted in a massive loss for the bank. Goldman’s place and identity on Wall Street are unclear without winning. It’s not big enough to be JP Morgan or Bank of America. And becoming Morgan Stanley is a step backwards.
Solomon’s replacement is also not clear. Former Goldman bankers I spoke with suggested that Gary Cohn, the former COO of the bank, could take over the seat if he had not degraded himself by working for Trump’s administration. But he did.
In the world of finance, the image of Goldman as a giant vampire squid ingesting any capital in its path is far more preferable to the image Goldman has now — that of an Ivy League-bound mathlete who’s decided to run for both homecoming king and class president to impress a crush who doesn’t even know their name. Lucas van Praag should email me to tell me what a stupid article this is. I would like to see that old Goldman Sachs fury is still around, even if its not on Wall Street.
Linette Lopez is a senior correspondent at Insider.
