Morning Coffee: What Pablo Salame’s little chat tells you about Goldman Sachs. Horrible precedent for junior bankers
Goldman Sachs bankers love a good slogan. Although CFO Marty Chavez says they're no good at naming things (hence "SecDB"), they're pretty good at devising and disseminating nifty three word phrases that stick. Past examples include: "long term greedy" (Gustave Levy, 1970s) and "doing God's work" (Lloyd Blankfein, 2009). Now we have, "Just add butter!"
The new phrase is only three months old, but Bloomberg says Goldman bankers have already assimilated it and emblazoned it across caps now scattered about the trading floors. Coined by Pablo Salame, one of Goldman's three co-heads of securities trading, the phrase refers to the experience of a hypothetical diner in a hypothetical restaurant who requests that butter is added to his steak. Penny-pinching chefs don't oblige and the diner is miffed. By implication, he leaves and never comes back. Applied to the trading business, the butter story suggests that Goldman needs to stop prioritizing costs and to make an effort where it matters. After (another) dire quarter to start this year, Salame reportedly told his staff he was tired of losing: "Just add butter!", he implored them.
Salame's catechism and the April town hall meeting that gave birth to it say more about Goldman than just that it's partial to slogans though. We now know that Goldman is rattled by its recent history of poor quarters in fixed income trading (Bloomberg says the town hall was held in an unusual roundtable style to discuss Goldman's issues). We know too that Salame is inclined to blame senior staff, whom he reportedly accused of spending too much time in offices rather than out on the trading floor. And we know that Goldman's traders and salespeople are still seen as too myopically focused on their own P&L rather than the clients' relationships with the firm as a whole.
The meeting also raised an interesting question about the future leadership of Goldman's Securities business. Why was Salame rallying the troops in April? Why not co-heads Isabel Ealet or Ashok Varadhan? Is it because Salame's credit business (which is now orienting towards corporate clients) is the problem here? Or is it because Ealet is in the doghouse after a poor start in commodities? Or that Varadhan is too new in the role? Or is Salame, a "cerebral Ecuadorian", actually the real power in the securities co-head structure?
Either way, Salame needs to hope his new slogan works. After persistent low volatility, Goldman's second quarter stands to be easily as bad as its first.
Separately, imagine if clients refused to pay for the services of junior bankers. It may sound unlikely, but it's becoming a thing in the Australian legal world, where the Australian Financial Review reports that some clients won't pay for work done by juniors and trainees. If this came to banking, it might help quash the juniorization trend at the bottom of the hierarchy. However, it would also surely be a bad thing for junior bankers' pay and encourage offshoring and nearshoring to cheap locations. If clients won't pay for juniors sitting in London and New York, how about experienced staff sitting in Mumbai?
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