Partners of a certain vintage are leaving Goldman Sachs, and people aren't happy

Are you a partner managing director (PMD) at Goldman Sachs? Are you in with Lloyd Blankfein? No? You might want to watch your back.

Goldman insiders suggest the firm is in the throes of a battle for control over the succession to Lloyd Blankfein and the senior positions below him, and that this is influencing the current round of departures.

As we reported last week, Goldman's fixed income sales and trading cuts appear to be disproportionately affecting some of the bank's most senior and long-serving staff. Herman Klein Wassink, a managing director in structured credit sales since 1997 has gone. Guido Filippa, an MD of five and a half years in fixed income sales is understood to have gone too, along with Andrew Wyke, an MD and head of European rates sales since 2008. Peeyush Misra, a partner managing director and veteran mortgage derivatives trader, is said to have retired. The other exits may well have been voluntary too.

Something similar is happening on Wall Street. There, Goldman staff say it's the most senior people at the firm who are disappearing. Without offering names, one Goldmanite said it's the guys who "ran desks for ten years" who are off. The exits reportedly include a head of derivative sales, a head of cash sales trading, a head of CMBS, a head Latin American sales and a co-head of equities sales, with some people leaving voluntarily. The Wall Street Journal reported that J. Ronald Morgan, head of execution services at Goldman Sachs was retiring earlier this month. Bloomberg reports today that Carsten Schwarting, a fixed income trading partner, is retiring alongside Misra.

While some at Goldman attribute the disappearance of senior staff to the need to make way for younger, cheaper and sometimes more productive mid-rankers, others detect something more Machiavellian.

Goldman Sachs declined to comment on the exits, but one senior Goldman insider suggests they're part of the battle to succeed Lloyd Blankfein and to shape the firm after he's gone. Blankfein, who received chemotherapy for "highly curable" cancer earlier this year, has never given a date for his retirement, but the sands are allegedly shifting below him.

Gary Cohn, Goldman's COO, has long seemed assured of the CEO title when Blankfein steps aside. Insiders suggest Jim Esposito is emerging as a contender for the head of securities. An alleged favourite of Blankfein, Esposito was named chief strategy officer of Goldman's securities division in February, putting him at the forefront of attempts to reorganize the firms' trading operation. Last week, Tom Cornacchia Goldman's global co-head of sales, said the firm's fixed income division is already experiencing "friction" as it moves to more of an agency model and staff are encouraged to sell to clients over the length of a relationship rather than the length of a telephone call.

As this change takes place, Goldman insiders suggest the perception internally is that the most senior cohort of Goldman's fixed income currencies and commodities (FICC) staff is protected. "Those senior FICC lieutenants who created revenues for the firm between 2003 and 2007 are still here," says one Goldman banker, claiming that they are Blankfein's people, and are mostly on the management board.  It's a group that includes Esposito, CFO Harvey Schwartz, co-heads of the securities division Pablo Salame, Isabelle Ealet and Ashok Varadhan, along with London-based Michael Sherwood. All five men and one woman work in or have a background in fixed income trading and were promoted to MD at the start of the 2000s.

In normal circumstances, Goldman's heads of business might have retired. The firm's stock is well above its nadir of 2009 and by 2014 most pre-crisis option packages had vested above water.  Insiders argue they're hanging on because of Blankfein's succession. European banks like Credit Suisse and Barclays have been through multiple heads of fixed income sales and trading since the crisis. - Then again, their businesses have performed less well.

With the most expensive PMDs at Goldman seeming to be inviolable, insiders say it's the tier below that's disappearing as the firm tries to save money. Hence the departure of so many long-serving veterans and heads of desk. It doesn't help that 2016 is a partner year and that existing partners are often encouraged out to make way for new ones. With the successful 2003-2007 cohort of PMDs seemingly protected, it's the older partners and those recently promoted in 2008, 2010 and 2012 who are said to be watching their backs. The 2014 partners will be safe for one more cycle.