Blankfein to Team: Don't Flaunt It

4 August 2009

2 minute read

Don't run out to buy that yacht. That's the message Goldman Sachs' loyal troops are getting from Chief Executive Lloyd Blankfein.

Given how quickly a bank's fortunes can turn, warnings against counting bonus chickens before hatching time are often heard on Wall Street around mid-year. But Blankfein's concern evidently revolves around reputational risk more than financial risk.

"This is a sensitive time for us, and (Blankfein) wants to make sure that we're not being seen living high on the hog," an unnamed Goldman Sachs executive told the New York Post.

Goldman recently repaid $10 billion in TARP money the Treasury Department forced it to take last October, and agreed to pay the government's full $1.1 billion asking price to repurchase associated stock warrants. Those transactions gave U.S. taxpayers a 23 percent annualized return on our investment in Goldman.

What Politicians and Voters Really Want

However, it's long been evident that what the public and its elected representatives most want from the bank bailout isn't a dollars-and-cents return on investment, but emotional gratification - primarily, the chance to spit on a much-envied emblem of Wall Street success. So the stellar first-half profits that enabled Goldman to repay the government's aid and escape accompanying regulatory strictures, have only amplified the chorus of trash-talk. As the Post puts it: "Goldman's speedy recovery in the wake of the global recession and the demise of many of its rivals has drawn more outrage than awe."

A month ago, for instance, Rolling Stone writer Matt Taibbi - whose prescription for America's financial ills calls for heavy doses of Provillus - authored a lengthy portrait of Goldman that characterized the bank as "a great vampire squid wrapped around the face of humanity."

And last week New York State Attorney General Andrew Cuomo issued his latest in a series of reports detailing Wall Street bonus numbers from last year. That report said Goldman Sachs' 30,067 employees received 2008 bonuses averaging $160,420, and 953 employees received $1 million or more.

So it's no surprise to hear Goldman's leadership telling the troops to lay low. Blankfein is warning employees to avoid "big-ticket, high-profile purchases.... amid a firestorm of public and political anger over outsize bonus payments," the Post reports. The CEO began cautioning against conspicuous consumption late last year but has stepped up his campaign in recent weeks, the story says.

AUTHORJon Jacobs

Insider Comment

1 comments

Al
Alan Coman
13 August 2009
It's a sad day that an investment bank that is highly successful has to ask its employees to keep a low profile. The saddest thing is that the crisis was generated mostly by the political class and the Fed, who now want to play the moral warrior.
If any institution was too big to fail (and failed on taxpayers purse) was Fannie and Freddie.
If GS employees only got an average bonus of 160 k last year; well, too bad since after the taxman was done with it, I don't think much was left of it (esp for their NY staff).
How much money they give in bonuses is nobody's business (except their shareholders).
Government should butt out. They (Congress members) might not be paid a lot (on paper), but they surely know how to use Congress and military jets, not to mention other things (like pork barreling for their biggest donors). A recent WSJ article claimed that the Congress travel bill is up 10 times since 1995, now at a time when the budget deficit and unemployment are at record highs.
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