FEATURES >> Highest Paid Bank CEOs | Top 10 Financial Failures of 2011
TOPICS >> MF Global | Occupy Wall Street | Dodd-Frank | Top Banks: GS C BAC JPM WFC MS

At Goldman Sachs, bankers vs. traders lines hardening?

April 20, 2010 — 10:48am ET | By Jim Kim

Tools

Tags
Goldman Sachs
Lehman Brothers
Lloyd Blankfein
Investment Bank

The rise of Lloyd Blankfein (Lloyd Blankfein news) at Goldman Sachs (NYSE: GS) represented the triumph of the traders, who had finally vanquished the bankers for control of the firms. Blankfein was a trader, down to his marrow, and in his train other traders rose. It reminds me a bit of the rise of trader Lewis Glucksman at Lehman Brothers (Lehman Brothers news) in the 1980s, where he waged war against banker Pete Peterson for control of the firm. Glucksman won, but the wounded firm couldn't survive; it was sold to American Express.

Given Blankfein's acension and the rise of traders within the firm, the idea of Goldman Sachs as a giant hedge fund (hedge fund news) isn't as far fetched as it used to be. Trading profits dominate earnings. You have to wonder what the bankers think about all this. Traditionally, the bankers sough to cultivate long-term ties to corporate executives, pitching themselves as the white hat-types. Rarely would the firm advise on a hostile deal; they were known as defenders. Service and relationships were always the priority.

This is not to say that relationships do not matter on the trading side. Indeed, John Paulson (John Paulson news), before he got famous, certainly seems to have been treated well, at the expense of the European institutions that bought the CDO (CDO news) in question. Clearly, they were savvy buyers, but in some ways this is just another case of an investment bank hawking a security only to have it blow up on the buyer. Frankly, this happens all the time on Wall Street, even when Goldman Sachs is doing the selling.

To be fair, a recent study by a Harvard undergrad found that Goldman Sachs' CDO actually fared better than most. Still, the view from the bankers' side is that culture of Goldman Sachs has changed, and it's no longer distinguishable from every other bank. Would the company be better off with some of the old banker ethos injected back into the executive mentality?

For more:
- here's a New York Times article about Blankfein