Gary Cohn, the No. 2 executive at Goldman Sachs Group Inc., has just come from meetings with people overseeing hundreds upon hundreds of billions of dollars.
After arriving in Toronto this week for a Goldman-run conference, he had dinner with the chief executive officers of three of the country’s largest pension funds and the head of RioCan Real Estate Investment Trust. He had breakfast with the incoming head of Royal Bank of Canada. In between, he met with two other bank CEOs and conferred with the head of the Ontario Securities Commission. Canada is a key market for Goldman, and he and the firm’s Canadian head, Jack Curtin, wanted to see as many big clients and important contacts as possible.
Then Mr. Cohn took a break to sit down for a 45-minute interview to talk about the firm’s challenges.
This is the new face of Goldman Sachs. Where once the company was a quietly elite group that shunned the press and avoided a public profile to concentrate on profits, the investment bank is now actively revealing itself to the world in an attempt to counter some of the blows absorbed in and after the financial crisis.
“Somehow we became synonymous with Wall Street. Whether it was deserved or not, I’m not going to argue with you,” said Mr. Cohn, settled on a couch in Toronto’s Shangri-La Hotel. “I obviously don’t think we were, but it is what it is. I do believe we have made a lot of steps forward. We’ve been a lot more open, a lot more transparent.”
The crisis was not kind to Goldman. With its stock plunging, Goldman was forced to turn itself into a bank in 2008 – accepting more regulation in return for a perception of stability. It was forced to take government aid, and it turned to billionaire Warren Buffett for a cash infusion that helped to restore confidence.
Still, the firm weathered the financial tempest much better than many competitors. Goldman was in the first group of major financial institutions to pay back the money it got from the government’s Troubled Asset Relief Program. While other banks such as JPMorgan Chase & Co. and Bank of America have had huge litigation settlements over such issues as mortgages, Goldman’s have been relatively minor.
However, the company’s stock is only worth about 60 per cent of what it was at its peak before the 2008 financial crisis. And the company’s reputation has taken an even bigger beating than its stock.
Goldman didn’t do the one thing – handing out dodgy mortgages – that really got America in trouble, but it was involved in the daisy chain that turned those mortgages into investments that later went sour. The bottom came in 2009 when Rolling Stone polemicist Matt Taibbi famously dubbed the company a “vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”
Suddenly, what had been Goldman’s strengths were now seen as weaknesses. The company’s huge and heretofore steady profits and pay packages fed the public’s perception of greed. Goldman’s tendency to stay out of the press and concentrate on business was taken as a cloak of secrecy. The presence of Goldman alumni in key jobs ranging from U.S. Treasury Secretary (Hank Paulson) to Governor of the Bank of Canada (Mark Carney) was interpreted as evidence of a Goldman plot to control the levers of power.
As the crisis drew to a close, Goldman decided it had to approach business differently and dial back its aggressiveness, the edge that it once had.
“Not only should we look at can we do something, we look at should we do something,” Mr. Cohn said. Before 2008, “what we didn’t do as well is we didn’t go through ‘Just because we can do this transaction, should we do it?’ Now we spend an equal amount of time on ‘Should we?’ ”
Mr. Cohn said the company’s new discretion has “put us into some very tough situations lately. We’ve withdrawn from some businesses and withdrawn from some opportunities out there in the world because we decided we shouldn’t do that type of business because the brand and the reputation was too valuable.”