Friday, May 28, 2010

Goldman Sachs And CEO Blankfein's Bleak Charm

It was only before the Securities Exchange Commission's civil suit over the Abacus 2007-AC1 deal that Goldman Sachs was CEO Blankfein's talisman. Today that juju seems far away from performing any more miracles to sustain Lloyd Blankfein's narcissism and charisma on the Wall Street. Born in Bronx and raised in Brooklyn's linden houses in a neighborhood with vast majority of occupants as working class, Lloyd Blankfein's salesman acumen and trading acuity shaped his destiny. From a commodity salesman in 1981, Blankfein rose to Goldman's hot seat in 2006. At a time when Goldman was acclimated to a banking style leadership at the top with Henry Paulson, co-COOs and Presidents John Thain and John Thornton, Blankfein was at odds to rein the company with a trading mindset. Blankfein's adeptness for profits through insistent style kept Goldman's bankers spellbound to his luminous spark even during the astounding credit crisis that quivered the global economy. Blankfein's leadership and modus operandi kept Goldman buoyant when sentiments on the main street were capsizing due to foreclosures. During this turbulent storm of emotions that had people's homes and hopes in its stride, Goldman was encapsulated by nobility in greed, a psychology of investment at the Wall Street that influences the financial and business environment at large.

With overconfidence as market maker and Abacus as smart money campaign, Goldman traded abnormal profit opportunities for plunge above and beyond fundamental risk. Creating and trading derivatives which were sub-par and certain to shake market sentiments through an incendiary bet, was like risk-return marriage that was sure to end in a divorce. For Goldman endorsing such malignant campaign to its customers certainly was a gambit on its 140 year old reputation. More than just a financial instrument, Abacus was a transactional loop for Goldman's investors that made them pay through their nose. A fallacy though but for CEO Blankfein, Goldman was doing 'God's work'. Today however the whole episode in substance appears to be not a question of numbers but an infringement of Goldman's customer sentiments and trust and violation of Wall Street's most valuable commodity called Information. A step further, this interlude post crisis seems to be a silent sin of abusing the legacy and hegemony of Wall Street as America’s economic and financial heart. 

On closer look, Goldman's status quo is a wake up call. For now, it is just litigation that neither has so far proven Goldman guilty nor seems like a situation of using Goldman as goad to financial reforms. However, somewhere midway the Goldman-SEC plea should be an elemental intention to restore the public confidence in operations at the Wall Street. The case should be a cardinal assessment of Goldman’s business practices and of similar other companies on the Wall Street that nurture hyper-competitive high fliers who desire to win at the cost of integrity and corporate morality.  CEO Blankfein's testimony before the congress in April had a different tune of Goldman's moral obligation to its customers. It somehow fails to conform to the company's corporate values and business principles that puts clients interest first, talks of reputations as asset and puts integrity and honesty at the heart of Goldman's business.

The questions that Goldman saga begets are strategic to common man's understanding of how the Wall Street operates in a scenario where each day, each bet is a scale of money vs. morality. Moreover, are corporate values today just an adornment for a company to attract Ivy League talent? Or is the CEO's role slowly drifting away from a corporate steward and leadership led by conscience to just a political and celebrity status? Goldman's catechism may take several months before we have exact answers. Meanwhile Goldman's board will have a tough run in its face lift against its customers for whom the company once represented long authentic innings in financial business. This would also impact the company’s current and near future ventures, one of them being the target date funds that would provide secured income in retirement years for middle class workers with 401(K) investments. Driving business in a sensitive target market, no doubt today will be challenging for Goldman, given the increasing skeptics of its reputation at the Main street.  These are few concerns for Goldman that serve as prelude to a financial reform at the Wall Street.

Also, at this point Goldman’s current corporate governance may sound like a safe bet for shareholder interests and value but may be predatory for a greater financial and societal good in the long run. Being the big daddy at the Wall Street, a better approach for Goldman may be to rethink its clout at the top. This is also in view of the watchdog set by the proposed reforms, which put consumer protection as a priority, shows implications of imposing the Volcker rule and tighter regulations on The OTC derivatives market which are the cash cows for big firms such as Goldman Sachs. While as it may take some time before the strife between the house-senate dynamics on financial reforms is actually framed into law, Goldman Sachs meanwhile should strategize for a shared responsibility at the top with clear distinction between leadership for business and guidance on regulatory affairs. It is imperative to understand that even if lawmakers are striving to groom Wall Street to a more ethical and economic friendly rearrangement, the big firms at the financial district need to resurrect and revamp their own governance for a better cohesion of what the government expects them to do and what the common man believes of them. More importantly, amid a hot debate on the viability of the financial reforms to bail out an ailing economy, we should not loose focus on Goldman and the aggregate of bungles that led to the current global economic milieu.
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