Goldman’s new standards watchdog needs real teeth
There doesn’t seem to be much Goldman Sachs boss Lloyd Blankfein can do to silence his critics these days. The Wall Street firm’s decision to set up a business standards committee is a smart idea that could help shore up its reputation — and improve its relations with clients — but only if Blankfein gives the new watchdog real teeth.
The clearest way to do that is to ensure that the committee’s members have the power to say no to traders focused on making a fast buck that could damage the reputation of the franchise in the future. Blankfein reckons Goldman already does that, telling senators in April that the firm believes in rewarding “saying no as much as saying yes.”
To prove that, the committee will need to indulge in a modicum of transparency. That could mean appointing independent outsiders as members. At the very least it requires making public the standards by which the firm’s bankers and traders will be judged. That won’t be easy for Wall Street’s most cloistered parish. But without it, the committee will be little more than an empty PR exercise.
At stake is Goldman’s status as the trusted adviser that gets the first call from corporate chieftains, governments and investors the world over. Up to now, Blankfein says the business has held up well. But talk that AIG is dumping Goldman as its restructuring advisor is not a good sign — even if as a ward of the government it is easy to see why the insurer would be more sensitive to Goldman’s reputational issues than other firms.
The risk is that the longer Goldman remains under the microscope, the greater the chance that corporate clients will think like an AIG. A thoughtfully constructed committee tasked with “rigorous self-examination” of the firm’s business would be one way to ensure that Goldman’s legendary focus on what legendary senior partner Gus Levy called “long-term greedy” can continue to pay off.