Gary Cohn's move from Goldman to Trump is a trading decision

10 December 2016

2 minute read

Gary Cohn's move from Goldman to Trump is a trading decision

After 26 years, aged 56, Gary Cohn may be leaving Goldman Sachs. The man who could have replaced Lloyd Blankfein as Goldman CEO has reportedly been offered a position as director of Donald Trump's National Economic Council and assistant to the president for economic policy.

It's not yet clear whether Cohn will accept the offer, but if he does it won't be a surprise. Cohn has reportedly indicated that he'd quit Goldman for Trump if only Trump offers him a job. As jobs go, head of the National Economic Council doesn't sound bad, although it's not on a par with the Treasury Secretary role Trump reportedly considered offering Jamie Dimon (but actually handed to another ex-Goldman banker, Steve Mnuchin).

This prestige of the new role may not matter though. Cohn's exit from Goldman is more likely inspired by financial considerations than career goals.

Cohn owns around $212m of Goldman stock. Thanks to Trump, Goldman shares are now the highest they've ever been. If Cohn quits Goldman for a government role now, he'll be able to cash-out at the top. This is because individuals who leave the private sector for executive roles in the federal government must sell their financial assets immediate to avoid conflict of interest regulations.

By comparison, if Cohn were to retire from Goldman Sachs in normal circumstances, or to join a competitor, he'd be bound by Goldman's deferral period of five years plus. - And by 2021, the 'Trump rally' may have passed.

In joining Trump, Cohn is therefore exiting his position in Goldman Sachs in the most profitable way possible. It's made even better by the fact that, under so-called "divestiture rules" Cohn can save $11.7m in capital gains tax if he joins the federal government in a senior role and promptly reinvests his monies in U.S. treasuries or diversified funds. Hank Paulson, the former CEO of Goldman Sachs, benefited from something similar in 2006.

In other words, Cohn won't be necessarily be entering the new administration out of a sense of public service. This is not a career move: it's a trade.

Contact: sbutcher@efinancialcareers.com

Photo credit: Gary D. Cohn - World Economic Forum Annual Meeting Davos 2009 by World Economic Forum is licensed under CC BY 2.0.

AUTHORSarah Butcher

Global Editor

2 comments

Sa
Sarah Butcher
11 December 2016
Erm...
1. In 2007, Goldman's share price peaked at $231. Now, it's $242.
2. Last week, Art Cashin calculated that 441 of the 1363 points the Dow has rallied since Trump's election were down to GS stock alone. To the extent that there's been a Trump effect, Goldman is benefiting.
3. The article clearly states that by joining Trump now, Cohn isn't the first person to benefit from the divestiture rules.
4. This isn't an article looking at why Trump appointed Cohn. It's an article looking at why Cohn chose Trump.
Reply
An
Another Fake News Article
11 December 2016
The author would like you to believe Trump is the reason Goldman Sachs stock is close to an all time high (it was higher in 2007 especially accounting for inflation). In reality the stock market is proving to have a better return on investment than bonds or other riskier assets, and many are incorrectly terming this the "Trump effect." In reality, a shift in confidence is occurring. Confidence is government controllng the economy is waning, and confidence in the private market is increasing (e.g. bond returns versus stocks).
The divestiture rules have been around since the Bush era and it's not like the current administration lacks examples of former executives benefitting from this policy.
The article reads more like "sour grapes" and doesn't offer the reader little to no insight on the appointment of Gary Cohn. Why waste the reader's time to mention qualifications, background or philanthopry?
Last, if the author supports careers in the financial industry, this article fails miserably to hit the target let alone support a vital industry. Thank you.
Reply