Goldman Sachs' Blankfein gets the blame

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Published August 24, 2009 at 6:15 AM

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Goldman Sachs Group Inc. (NYSE:GS) CEO Lloyd Blankfein is getting a lot of attention, both good and bad -- but mostly bad. And this publicity and the idea of "image" are the topics of the latest Time's article, The Rage over Goldman Sachs and Charlie Gasparino's column in The Daily Beast.

According to Gasparino, the negative media is making Blankfein anxious, almost "paranoid." According to Time, the negative attention seems to be undeserved.

Both seem to agree Goldman Sachs' media attention is mostly negative -- Blankfein is to "blame" for sculpting Goldman into one of the most successful banks on Wall Street, inspiring employees to work hard for bonuses, bringing in large shareholders like Warren Buffett (God forbid), making profits for the bank and ironically casting a shadow on Goldman's image.

Time's article lays Blankfein down as a victim of "gonzo" journalism that turned the firm into a "giant sucking vampire squid." At the same time, the article takes an ironic look at Blankfein's success and the firm's image:

If anyone shoulders the "blame" for Goldman's golden performance, it is Blankfein. Self-deprecating and seemingly unassuming, the former gold salesman has been ruthlessly ambitious for his firm and its continued success. "He takes it very personally when people act against the firm or show disloyalty," says a former Goldman executive.

While Goldman's conspiracy theories have been around for years, its Golden Bank appeared to have gotten tarred by the bailout of American International Group Inc. (NYSE:AIG). Of course, AIG's bailout was about systemic risk. So AIG played with risk and got burned, and Goldman played but profited. In a way, Time's story seems to imply that instead of risking its profits, Goldman risked its reputation.

The confounding thing, of course, is that after the bailout of AIG, Goldman got $12.9 billion from AIG in the form of collateral that Goldman already had in its possession and a cash settlement of ongoing margin disputes. "The fact of the matter is, we already had the collateral," Blankfein says. "If AIG had defaulted, guess what -- we would have kept the collateral from AIG and from the banks we'd bought protection from. The government's decision to bail out AIG was about the risks to the system. It wasn't about Goldman Sachs."

Of course, when AIG's bailout happened, attacks on Goldman accelerated, culminating with conspiracy theories that added to the damage of the firm's image. Plus, it didn't help that at the same time politicians were throwing around the "bankers are bad" in the name of finding a scapegoat for the decelerating economy.

Gasparino's column in The Daily Beast takes another approach. He claims the attacks on Goldman's image have worried Blankfein so much that apparently the firm is hiring a brand manager. It also seems to suggest that the government could boot Blankfein from his job for the firm's image and that he is being pressured by regulators to repair it.

The firm, like the rest of the former bastion of capitalism known as Wall Street, is protected by the federal government as a commercial bank. Goldman was bailed out with the rest of the financial system late last year, and while government bureaucrats don't run Goldman like they run Citigroup, they are watching the firm like never before. And one thing government bureaucrats don't like is bad publicity, even if it's in fringe media publications.

Mind you, Gasparino's column doesn't do anything for Blankfein's or Goldman's image either.

Why all of the hub-bub about the deteriorating image of Goldman? Goldman is the largest firm and most successful financial institution on the Street, so it's image should be good. But it's not. Is it as bad as Bank of America Corp. (NYSE:BAC) or Citigroup Inc.(NYSE:C)? Humorously enough, no one at Rolling Stone seems to be suggesting that those two institutions are wrecking the financial system and the economy. So through this whole PR image is Wall Street being redefined yet again?

If so, then how do you define success on Wall Street or an institution: by profit, bonus size or by image? Are profitable businesses and employee retention bad to have these days? This is the identity crisis that Goldman and its Wall Street peers seem to be battling over and over again. Blankfein has become so cautious of Goldman's rep he's asked employees to lay low and not spend extravagantly. The Times article uses Blankfein's former risky behaviors of --

Smoking two to three packs of cigarettes a day
Gaining too much weight
Dressing inappropriately or ostentatiously (such as in" fashionable houndstooth blazer with groovy wide lapels")
Turning to gambling in Las Vegas

-- as a metaphor that, as he pushed his employees to take on more risk and profit, he personally took part in less risky behavior. Still, successful or not, Blankfein's image seems to be tarnished by his success. However, shareholders are probably less concerned with Blankfein's smoking and gambling than Goldman making a profit. - Maria Woehr

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Comments

From: e,

you are totally wrong. it is what the former GS employees are doing, the positions they hold in government and politics, the perception of collusion and continued corruption, i could go on. it doesn't have anything to do with AIG or making money. all of these GS fools colluded to f%@k the ordinary people. that is the perception. and they continue to make each other rich with back door deals. right or wrong thats how its seen.

Posted on: August 24, 2009 7:47 AM

From: mike,

http://www.youtube.com/watch?v=e3zo7zjYk2E

I strongly believe we need a federal reserve audit. The recent stock market action suggests to me the federal reserve is intervening in a free and open market. I believe the biggest beneficiary of this TRILLION DOLLAR stock market move in a couple of weeks was Goldman Sachs. Goldman Sachs sells derivatives in our equity markets its apparent that Goldman Sachs Has Total Control Over our stock market using the unlimited capital available from the federal reserve. I believe Goldman Sachs doesn't have the best interest of our markets. They are misusing the federal reserve to manipulate the stock market and making huge 100 BILLION DOLLAR profits THIS IS ILLEGAL people expect our government to obey the laws just like citizen. Also this manipulation without regards for cost continues to put our government and the people more and more in debt

JUST THE FACT GOLDMAN SACHS HAS HAD SUCH IMPOSSIBLE SUCCESS AT TRADING IS ALL THE PROOF OUR GOVERNMENT NEEDS TO KNOW TO PROVE MANIPULATION!!!!!!

AUDIT THE FEDERAL RESERVE

http://www.auditthefed.com/

Posted on: August 24, 2009 10:04 AM

From: Joseph Stafura,

So we learn that this generation of rich guys succumb to moral hazards, this has been observed and recorded by Shakespeare and many others across history.

What we don't learn that money acts like a drug after a certain point, distorting perspectives and justifying unethical actions in the name of "doing good" by the shareholders.

Our banking system and health care systems have been corrupted by the winer takes all attitude of gamblers like Blankfein, Paulson and others. Except they know they aren't really gambling because they are too big to fail, so our chips can vanish while Lloyd heads to Vegas.

Posted on: August 24, 2009 11:36 AM

From: Matthew Wurtzel