- The Washington Times - Thursday, February 19, 2009


For years, you were golden if you hired from Goldman Sachs. Alumni of the Wall Street firm have advised presidents from both parties, taken high-profile Cabinet posts, run big businesses and been involved in multimillion-dollar philanthropies.

But recent missteps have challenged the notion that Goldman only breeds winners.

Henry M. Paulson Jr., who was criticized for mishandling the first incarnation of the bank bailout, is a Goldman alumnus. So is John Thain, who rushed billions of dollars in bonuses to Merrill Lynch employees before the investment bank had to be sold.

Also a Goldman vet: Robert E. Rubin, the Clinton Treasury secretary who resigned from his senior advisory role at Citigroup last month after being criticized for missing the warning signs of the financial crisis.

Those names have lent a rare tarnish to a firm sometimes called the New York Yankees of Wall Street.

“When you become a partner at Goldman, you are supposed to be the master of the universe,” said Ed Yardeni, who runs his own investment consulting firm and is a well-known Wall Street economist - and himself was turned down years ago for a Goldman job.

“That meant you could run the greatest investment bank on earth, but it turns out that skill set doesn’t always translate to the White House, Treasury or other Wall Street firms.”

Goldman draws its talent from the top students from the best universities and business schools. Those given a chance to embark on Goldman’s recruiting gantlet encounter job interviews in which they are asked not just complex questions about finance but simply why they deserve to be at Goldman.

And just like the Yankees, Goldman employees are well-paid. Its 30,000 employees last year made more than $355,000 each on average, including salaries, bonuses and benefits. The average at rival Morgan Stanley was about $250,000.

Those given the coveted title of managing director - who are considered partners - can pull in seven figures. But flashing wealth runs against the Goldman culture, and employees, dubbed “billionaire Boy Scouts,” are expected to give to charity or perform public service.

Goldman survived the financial meltdown last fall, but not without help. It took $10 billion from the government’s Troubled Asset Relief Program, or TARP. It also received a $5 billion investment from Warren Buffett’s Berkshire Hathaway that came with a strong endorsement from Mr. Buffett.

It was Mr. Thain, a former Goldman president and chief operating officer, who engineered a deal to sell Merrill Lynch to Bank of America. At the time, he looked like one of the smartest guys around.

But Mr. Thain became a poster child for Wall Street greed when news surfaced that he had rushed out billions of dollars in bonuses to Merrill employees just before the Bank of America deal closed.

Then came embarrassing reports that he had spent more than $1 million to redecorate his office at Merrill. Mr. Thain later repaid the money. A spokesman declined comment.

Mr. Rubin spent most of his early career at Goldman. He joined the firm in 1966 as an associate in trading and arbitrage, became partner in 1971 and was co-senior partner - CEO, in Goldman-speak - from 1990 to 1992. In 1993, Mr. Rubin left to work in the Clinton White House, and became Treasury secretary in 1995. He followed a path into the public sector paved by many past Goldman leaders.

When Mr. Rubin joined Citigroup in 1999 as a senior adviser, it was considered a coup for the bank.

While he never had an operational role at Citi, the company still took on massive risks that resulted in losses of $18.7 billion in 2008. In early January, Mr. Rubin resigned and said he wouldn’t stand for re-election to the board.

“My great regret is that I and so many of us who have been involved in this industry for so long did not recognize the serious possibility of the extreme circumstances that the financial system faces today,” Mr. Rubin said in a letter to Citi’s CEO announcing his departure.

Mr. Paulson, too, was drawn to a role in government after leaving Goldman’s helm in 2006, after more than 30 years at the firm. He became Treasury secretary in the Bush administration.

His arrival in the public sector came during a booming economy, but what soon emerged was a devastating recession matched with a financial crisis of historic proportion.

Mr. Paulson never seemed to get his hands around it, even with the help of some former Goldman executives he brought to the Treasury Department. Among them was Neel Kashkari, who was appointed to oversee TARP and formerly worked as an executive in Goldman’s San Francisco office.

None of this seriously threatens Goldman’s status on Wall Street, of course. It’s still the place to be - perhaps now more than ever, given the carnage in investment banking.

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