New era begins at Goldman

relinquish Goldman’s brash trading culture, which had paved his rise to power — he once famously stormed out of a management meeting because the firm was unwilling to make as big a bet as he liked — but has more recently led to some embarrassing losses. At the height of the bitcoin frenzy last year, Blankfein said his firm wanted in even as other Wall Street leaders remained cautious about trading the cryptocurrency.

The promotion of Solomon indicates that Goldman is not only moving on from Blankfein but from his legacy as well. Blankfein took over Goldman in 2006, when the balance of power on Wall Street was shifting to traders.

That trading culture paid off in Blankfein’s first few years, and particularly during the financial crisis. But it also tarnished Goldman’s reputation and has been a dud recently. Regulations and shifts such as the rise of indexing have made David Solomon Wall Street’s trading desks less profitable. Blankfein continued to pine for the old days. He has repeatedly said he would ramp up the firm’s risk-taking again if regulators would allow it.

Solomon, like Paulson before him, has spent much of his career as an investment banker. He ran investment banking at Bear Stearns, leaving well before that firm collapsed. Schwartz, the other logical candidate for CEO, came from commodities trading, like Blankfein. (Incidentally, so did President Donald Trump’s recently departed economic adviser Gary Cohn. The selection of Solomon suggests that Cohn might not have been the lock for Blankfein’s successor that everyone thought he was.

Solomon’s elevation resolves some of Goldman’s identity crisis. And it got the thumbs up from investors, who have become increasingly wary of Goldman’s continued embrace of risk. Shares of Goldman jumped almost $4 on the news on Monday, to nearly $275, before retreating somewhat. But it will also leave Solomon with plenty of tough decisions to make.

Goldman, with more than 36,000 employees, has doubled in size since Paulson took over in 1999. It’s unclear whether a firm more focused on investment banking can support as large a cost structure. Less trading and less risk may lead to more predictable profits but also less opportunity for outsized gains and bonuses.