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.