What’s happening at Goldman Sachs?

Goldman Sachs CEO David Solomon.Michael Kovac/Getty Images

• There has been persistent negativity at Goldman Sachs lately.

• The Latest: Another big departure, the possibility of a massive writedown, and a report calling into question the future of CEO David Solomon.

• What the hell is going on at 200 West Street?

Bad news keeps pouring in at Goldman Sachs.

Here are some of the headlines from the last 36 hours:

Ouch.

These headlines follow previous reports from The Wall Street Journal, which said Goldman Sachs is at war with itself, and reports from The New York Times on the luxury real-estate side hustle of CEO David Solomon.

Meanwhile, Insider’s own Dakin Campbell reports in detail on Solomon’s use of a private jet, leaving bank insiders fuming. Many, many high-profile partners have left (you can view our running list here), while the few remaining partners have discussed complaining about Solomon to the board.

There was a disturbance in a capital raising for a Silicon Valley bank, which was later seized by regulators. US authorities are now investigating Goldman’s work in the wake of the California bank failure. And there were layoffs in January.

Overall, not great news. So what is happening after all?

failed consumer strategy

Goldman Sachs has been forced to retreat hastily from its big bets on consumer banking, exemplified by the GreenSky sale process just two years after Goldman Sachs acquired it for $2.4 billion. Any cut on that sale would add to the billions already lost in consumer banking.

The failure of that strategy has had two effects. At first, insiders viewed losses and costs of consumer loan loss reserves as offsetting large gains in other divisions such as trading and investment banking. When Goldman Sachs cut the 2022 bonus pool for partners, leaving some top performers feeling shortchanged, fingers were pointed at the consumer business.

Second, it has taken a toll on Goldman’s brand reputation. A firm historically known as the elite of the elite, it has been criticized for pushing “capable dad”-like clients into the bank.

The Economist made a good point on this earlier this year when it ran a cover story titled “The Humbling of Goldman Sachs”. When Goldman insiders saw it, they were surprised.

DJ D-Soul’s other interests

Then there’s David Solomon. You can’t be the CEO of Goldman Sachs without sharp elbows, but Solomon has earned a reputation for being particularly quick-tempered.

This trait would be held against a mercenary CEO, a money-obsessed business that might seem bizarre to people outside the Wall Street bubble. But Goldman Sachs’ historical partnership model has given it a distinctive culture where these kinds of things matter.

Then there are Solomon’s outside interests. Their passion for DJing started as a weird hobby, but for some, it has become an annoying distraction.

And Solomon’s involvement in the luxury real-estate company Discovery Land Company led to some serious columns in The New York Times and later in the Air Mail, even though his investment was relatively small.

big names going

Goldman Sachs has made it clear that the average tenure of partners is increasing, and turnover is actually lower. And it’s true that there are many opportunities available to Goldman Partners.

But the potential of some of those departing is amazing: Dinah Powell McCormick; Greg Lemkau; Stephen Sher; Eric Lane; Katie Koch, Fred Baba. All of them were leading lights in the firm.

Dropping out doesn’t just represent lost talent. Lemkau, for example, has clamored for Solomon’s leadership since leaving the firm, but disgruntled campers on the way out could become powerful outside voices given Goldman’s alumni holdings. Those who are distressed but remain determined can also make life difficult for Solomon.

So what will happen next?

Goldman’s share price performance has been solid. Solomon’s supporters say he is running the company with shareholders in mind, not partners, and that strategy is working. The company continues to excel in its core strengths of investment banking and trading, while the wealth-management business continues to grow.

The Messenger reports this week that Solomon’s position as CEO is in doubt and he has lost the support of the power behind the throne and board secretary John Rogers has been strongly denied.

Tony Fratto’s global head of communications told the publication, “There is no truth in this. It is complete nonsense. Anyone who knows John Rogers will understand that this is a lie. It is a complete lie. Period.” “

Whatever may be the truth, it is clear that Goldman Sachs and David Solomon will remain in headlines for some time. And it is sure to have an impact.

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