Vancouver Sun

NEW ERA AT GOLDMAN

Solomon breaks old mould

- SRIDHAR NATARAJAN Bloomberg With files from The Associated Press

NEW YORK It’s official at long last: David Solomon will inherit the crown from Lloyd Blankfein at Goldman Sachs Group Inc.

The news, announced Tuesday — after more than a year of jockeying, choreograp­hy and speculatio­n — fully and finally sets in motion one of the most significan­t succession plays on Wall Street. On Oct. 1, just 76 days from now, Solomon will start running Goldman Sachs, which sits at the centre of more concentric circles of money and power than perhaps any other firm in the industry.

Between now and then, Solomon has a freer hand in carrying out critical leadership changes that have been expected after Blankfein’s 12-year-run as the CEO. Even before Tuesday’s announceme­nt, a shakeup in the trading division in May had insiders pointing to a more assertive role being played by Solomon.

This is only the second handover in Goldman’s two-decade run as a public company — insiders and outsiders alike are calculatin­g the winners and losers. Blankfein, for his part, isn’t going out near the bottom: He has helped bring its vaunted trading division back to even footing after stumbles last year and leaves behind a firm that has made inroads into new and varied corners of finance.

Yet, for a man who has joked he would die at his desk, the transition has arrived sooner than even he might have expected.

“Today, I don’t want to retire from Goldman Sachs, but by my own perhaps convoluted logic, it feels like the right time,” Blankfein said in a note to staff. “It’s always been hard for me to imagine leaving. When times are tougher, you can’t leave. And, when times are better, you don’t want to leave.”

Blankfein, 63, has previously admitted that he’d have to give up the top spot before he was ready to move on, and has said that Solomon would benefit from more time in the president job.

“Once the process starts, you become a lame duck,” said Charles Peabody, a veteran banking analyst. “It’s hard to stay on and feel like you are a productive part of it after that.”

When Solomon, 56, does take the reins, he will be the oldest new leader at the firm in almost 50 years. Solomon is the fourth chief operating officer under Blankfein’s reign, with the previous three who had exited the firm having seen their path to the top curtailed.

Blankfein will relinquish his role as chairman at the end of the year, which will also be taken on by Solomon. Solomon’s stature as the heir apparent was cemented in March, when the firm announced that he would become sole president while Harvey Schwartz — his chief rival for the job — would leave the company.

The handover is taking place as the firm diversifie­s away from its trading operations, a traditiona­l profit centre, and pushing deeper into newer areas like consumer lending. The bank’s shares rallied after Donald Trump’s election on the hope of more trading activity and looser rules. That optimism has faded, with the firm’s shares dropping nine per cent this year, the most among major U.S. banks.

The change in Goldman Sachs’s business was evident in the firm’s second-quarter results, also announced Tuesday morning. While trading revenue bounced back from a year earlier, that business accounted for about 38 per cent of overall revenue, down from almost 70 per cent in 2007.

Solomon joined Goldman Sachs as a partner shortly after the firm went public in 1999, and has since climbed the ranks through its investment-banking division. He ran that unit for a decade and led a push into debt underwriti­ng, a business that had record revenue last year and contribute­d almost 10 per cent of the firm’s total.

Solomon grew up in Hartsdale, N.Y., and studied at Hamilton College. After a stint at Drexel Burnham Lambert Inc., which overlapped with Mike Milken’s time there, he rose to prominence at Bear Stearns Cos. where he helped run the junk-bond desk before being lured to Goldman Sachs.

Solomon is sometimes better known by his nightlife gig as a DJ at major clubs around the world as DJ D-Sol. In a sharp contrast to the typical Wall Street chief executive, he has a variety of outside interests, including collecting rare wine and practicing yoga, according to the New York Times. With Solomon, along with the firm’s relatively new finance chief, Martin “Marty” Chavez, a 54-year old gay Hispanic man with arm tattoos, Goldman Sachs seems to be portraying a much more open, lower key image compared to the power suits and stuffier white shoe nature that built the company through the 20th Century.

Goldman Sachs adopted the status of a trading powerhouse in the early years of Blankfein’s tenure, earning the envy of competitor­s. But that changed in the aftermath of the global financial crisis, as Goldman Sachs quickly became the poster child for Wall Street’s misdeeds in the eyes of the public.

That took a toll on Blankfein as he was hauled in front of congressio­nal committees and was tasked with explaining Goldman Sachs’s actions during the crisis. Lawmakers lambasted the firm for taking steps to limit its losses on the housing rout, while continuing to sell mortgage-linked products. As the public continued to heap scorn on the firm, Goldman’s favourabil­ity ratings plummeted even among the financial elite. Blankfein, as the face of the firm, bore the brunt of the attacks.

“Lloyd successful­ly led Goldman Sachs through a once-in-a-75year financial storm and its bitter aftermath,” said Hank Paulson, who was Blankfein’s predecesso­r before becoming U.S. Treasury Secretary. “He has grown in stature to become an industry leader. His keen intellect and sense of humour have made him an effective spokesman for his industry and his firm.”

Since the crisis, the firm has had to lean more on its investment banking group — where Solomon hails from — and less on the trading franchise. The trading division’s outsized money-making ability has been curtailed in the aftermath of the crisis under the weight of new regulation­s.

One of Solomon’s key decisions will be picking replacemen­ts for his current role. Candidates include John Waldron, co-head of investment banking, and Stephen Scherr, who leads the company’s consumer and commercial banking division.

And analysts and investors will keep a close eye on the resources he devotes to help the bank accomplish its target of identifyin­g US$5 billion in new revenue opportunit­ies by 2020.

Solomon and Schwartz had been competing for a shot at the top job since being promoted to co-presidents in late 2016. That happened after Gary Cohn, Blankfein’s longtime No. 2, left to join U.S. President Donald Trump’s administra­tion.

Blankfein’s retirement will leave Jamie Dimon, chairman and CEO of JPMorgan Chase, as the last head of a Wall Street firm who was around during the financial crisis. Kenneth Chenault, who led American Express through the crisis, retired earlier this year

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 ?? ANDREW HARRER/BLOOMBERG FILES ?? David Solomon, also known as DJ D-Sol at major clubs around the world, will take the reins of Goldman Sachs on Oct. 1. The handover is seen as Goldman Sachs portraying a much more open, lower key image compared to the power suits and stuffier white...
ANDREW HARRER/BLOOMBERG FILES David Solomon, also known as DJ D-Sol at major clubs around the world, will take the reins of Goldman Sachs on Oct. 1. The handover is seen as Goldman Sachs portraying a much more open, lower key image compared to the power suits and stuffier white...

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