A brief history of Goldman Sachs heads

By Felix Salmon
November 4, 2009
losing the governorship of New Jersey yesterday, it was yet another bad day for former heads of Goldman Sachs. It's worth running down the list, since the venerable pairing of John Weinberg and John Whitehead came to an end in 1990.

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With Jon Corzine losing the governorship of New Jersey yesterday, it was yet another bad day for former heads of Goldman Sachs. It’s worth running down the list, since the venerable pairing of John Weinberg and John Whitehead came to an end in 1990.

First up there was the pairing of Robert Rubin and Stephen Friedman. Both of them attempted to become venerable eminences grises, but neither succeeded, in the end. Friedman became chairman of the New York Fed, where he helped to which put together the deal under which AIG’s CDS counterparties, foremost among them Goldman Sachs, got paid out at 100 cents on the dollar, He was also involved in approving and which also approved Goldman’s request to become a bank holding company. He then inexplicably bought tens of thousands of shares Goldman shares in the open market — a clear conflict of interest given his position at the Fed — resulting in his resignation shortly afterwards.

Rubin, of course, looks even worse. As arguably the most Wall Street-friendly Treasury secretary ever, he helped to inflate the deregulatory financial-services bubble on the basis that big banks were extremely sophisticated and more than capable of looking after their own risk books. He then moved to the ultimate cushy job at Citigroup, where he got paid $10 million a year despite having no employees, no P&L, and no defined responsibilities. In hindsight, his main contribution to the bank was to be the biggest internal cheerleader for the fixed-income group, which he encouraged to take on ever-greater amounts of risk despite the fact that no one in senior management (including himself) really had a clue what they were doing. Result: disaster.

Rubin and Friedman were succeeded by Corzine, whose post-Goldman career has been spent almost entirely in politics. He was pretty ineffective in the Senate, before moving to the governorship of New Jersey. (In a classic case of the squid’s tentacles being everywhere, he there helped oversee the incoherent mess at Ground Zero, due to New Jersey’s 50% stake in the Port Authority of New York and New Jersey. The chairman of the Lower Manhattan Development Corporation, charged with rebuilding at the site, was former Goldman senior partner John Whitehead.) Never much of a natural politician, he basically bought both jobs, which at least meant that he wasn’t corrupt. But after he was almost killed in a 91 mile-an-hour car crash where he wasn’t wearing a seatbelt, he lost a large chunk of whatever leadership ability he had formerly held. His political demise yesterday, at the hands of an oafish opponent, comes as little surprise.

Corzine, in his turn, was replaced (indeed, ousted) by Hank Paulson. Paulson’s post-Goldman career, of course, was spent as the Treasury secretary who oversaw the biggest financial meltdown since the 1929 crash. Reading Andrew Ross Sorkin’s Too Big To Fail, which was clearly written with a lot of help from Paulson, he comes across as a man who was always at least one step behind the curve, someone who could never get ahead of the unfolding crisis, who was prone to inconsistent and ad hoc decisionmaking, and who went out of his way, even before getting a waiver allowing himself to talk to Goldman Sachs, to be as helpful to them as he possibly could.

Paulson seems to have spent a large amount of the crisis throwing up in his office bathroom, and even into Nancy Pelosi’s wastebin. Of course, he couldn’t simply go see a doctor, like the rest of us, because he’s a Christian Scientist. Similarly, he hobbled his ability to communicate by refusing to ever touch email: instead, any time he wanted to say anything to anybody he’d have to do so over the phone or in person. No wonder he was semi-permanently hoarse, and his phone records are insane.

Paulson’s biggest failure, of course, was that of Lehman Brothers: he set up an emergency weekend confab at the New York Fed in an attempt to save it, but refused steadfastly to ever consider any public help at all, and also failed to keep British regulators in the loop, despite the fact that their assent would be needed in the event that Barclays were to acquire Lehman. In fact, when the fateful phone call to the Brits was made, it was the hapless Christopher Cox who made it, rather than Paulson. In general, Paulson was more of a bully than a leader, and he managed to be equally unpopular both on Capitol Hill and at the White House.

Looking at the list, it seems to comprise men who are very long on hubris, and who have no doubt that if they can run Goldman Sachs, they can do anything else, with normal rules not really applying to them. All of them, post-Goldman, have been tarnished. If Lloyd Blankfein has any sense, he’ll retire quietly.

Update: Goldman calls to say that Friedman, as chairman of the New York Fed, was not personally involved in the decisions that the Fed made involving Goldman. I’ve updated the post accordingly.

36 comments

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Also ranking high on the ex-Goldman power listing are Bob Steele and John Thain. at best, Thain had reasonable success running NYSE for a few years before landing at mother merrill.

at least Paulson isn’t a creepy follower of L. Ron…

Posted by Griff | Report as abusive

Corzine will land on his feet. There’s plenty of room in the Obama Administration for Goldman Sachs Alumni right, Mr. President??

Posted by The Cronk | Report as abusive

Do not forget the bank of Canada governor he is also an ex Goldman Sachs.Go figure the Canadian dollar behavior over the last few weeks

Posted by Haverlad | Report as abusive

Welcome back Felix. Blogosphere ain’t the same without you.

Posted by kthomas | Report as abusive

I wish like anything that we had not bailed out ANY of these companies. When I think about the AIG bailout in particular, I just want to find a clean trash can — not used by Paulson. I wish \”W\” had never been born, or at least that his drunk driving conviction had become known during the 2000 primaries so he wouldn\’t have been nominated. How can we say \”no\” to the evil of socialized medicine when we have thrown trillions to the crooks on Wall Street? We have lost our way. We are finished. Time to learn Mandarin. Thanks, \”W\”.

Posted by David Gallo | Report as abusive

The blame put on G.W. Bush for this crisis is a travesty. Rubin put all the players and deregulation into action during the Clinton administration. William Jefferson Clinton, along with the Democrats in congress, put the noose around the heads of the American worker by signing NAFTA into law. The floodgates were open and now the loss of all those manufacturing jobs and the purchase of all the bonds by China have put the United States in one of the worst economic crisis this country has ever seen. It started to play out yesterday in the elections on the east coast. There is no quick solution but as an American my tenacity and resolute faith in the real America I will overcome and hopefully our government will also.

To clarify Mr Versaw

Yes you are correct. President Clintons signature is on some of the de-regulation bills that perpetuated this mess. The bills were brought to him by a Republican congress though. NAFTA has nothing to do with this. Corporate America had been moving jobs out of America long before NAFTA

Posted by RonCo | Report as abusive

I am a person living in Tanzania.

Posted by Billy Bali | Report as abusive

Can anyone say ‘system quarterback’? There is also the ‘Genius behind the geniuses’ theory I have concerning Fischer Black, who Rubin hired, and who post-LTCM, led GS to the top of the heap. This also works when looking at Black’s non-GS buddies, like Merton and Scholes.

I am a person.

Posted by Billy Bali | Report as abusive

Regardless which congress brought the bill to the president, he has the veto power. This would require a 2/3′s majority to override the veto. NAFTA opened the floodgates and allowed corporations to bring these products back in the US with no tariff or tax.

All these guys should be on the terroist list. They have done more damage by greed then Al qaeda or the taliban could do to the USA in a 1000 years. But lets give them $100,000,000 bonuses instead of a bullet in the forehead.

Posted by Steveo | Report as abusive

This would’ve been a good article without the author’s commentary… a little too much ad hoc ergo propter hoc. Calling Lehman Paulson’s problem, after the 10,000 books and articles by now detailing Fuld’s inability to deal with LEH’s solvency issues, is pretty weak. As far as politicans go, Corzine’s intelligence and integrity are well above average – however he worked for Goldman so we have to dislike him (rabble rabble!)… even if he dressed like a community college assistant professor. This is another anti-finance/anti-Goldman article with no perspective that gives liberals a bad name. Worth noting is Blankfein’s testimony in front of Congress this year disputing the intelligence of the “invisible hand,” saying that bank balance sheets are not necessarily best served at the hands of publicly-elected boards.

I really hate these guys for appropriating the phrase “the best and the brightest” and using it as a code word for Goldman employees and alums. NO! These people ARE the “great vampire squids wrapped around the face of humanity”. What has been their contribution? Dealing in fictional assets and pushing the American economy to the brink of collpse! So much for being self-congratulatory “the best and the brightest”.

Posted by anakin | Report as abusive

Hello person in Tanzania. How does the corruption in the USA compare with the corruption in Tanzania?

Posted by Antipodean | Report as abusive

Democracy is working by evicting Goldman alumni from political offices.

With regard to Financial Center Politicians, Mayor Michael Bloomberg compromising term limits principles in order to perpetuate US Political Power being concentrated in Manhattan and New Jersey Banking Centers, will put him in the hot seat.

Particularly as independent party status, One would believe that as the retaliatory political impulse that is prevailing begins to target the epicenter of the financial crisis in New York City’s poor investigatory record during Bloomberg’s term in office will make his coming term one for him to remember.

Bloomberg might find himself short on national support.

When we consider the one regulator that should have stopped the catastrophy before it happened, Mr. Bloomberg bears near total responsibility.

What goes around…

Felix, reading this post carefully, I determined that you have a talent perhaps unknown to you. You can take this piece of documentary about a bunch of clowns playing with other people’s money but burn the house down, and juice it up a bit. Thus becoming the script of the next Hollywood ‘Greed Is Good’ blockbuster movie.

Yes, if case you’re bored with Reuters blog, you will do well in Hollywood. Even star in the role of Tim Geithner. But don’t leave.

Posted by The Real Deal | Report as abusive

i think all the leaders of GS come to think that the GS performance is due to them, when it is more likely it is from the GS system/culture/people which does not exist elsewhere, so when GS leaders operate *outside* of GS the results are sub-optimal – btw, how can you overlook the wonderfully named Neel Kashkari who is ex-GS and was the inaugural TARP director? carry on

Posted by frankl | Report as abusive

So, Corzine not being re-elected proves that democracy is working? what a great measure …..

Posted by fahrender | Report as abusive

It is hugely advantageous for banks to be able to influence government policies.

Goldman Sachs (Government Sachs) is not stupid. They actively encourage their employees to get involved in government and for obvious reasons and evidently it is working. During the crisis, Geithner spent more time on the phone talking with Goldman Sachs head than anyone else. His closest advisors are on Goldman Sachs payroll.
This is information is fact, and has been disclosed to the public.

Obama Obanka can really talk the talk but when it comes to walking the walk, the only person he is walking with are the Big Banks. Recently, Paul Volcker voiced concerns about the banks and he was effectively silenced by the administration.

George Carlin sums it up best:
http://www.youtube.com/watch?v=acLW1vFO- 2Q&NR=1

Posted by RayT | Report as abusive

You wrote:

“He [Friedman] was also involved in approving Goldman’s request to become a bank holding company.”

Since the decision to approve GS application to become a bank holding company was approved by the Board of Governors of the Federal Reserve System (not the board of the Federal Reserve Bank of New York), please specify what role Friedman played in approving Goldman’s request.

Here’s the release from the Fed:

Release Date: September 21, 2008
For release at 9:30 p.m. EDT

The Federal Reserve Board on Sunday approved, pending a statutory five-day antitrust waiting period, the applications of Goldman Sachs and Morgan Stanley to become bank holding companies.

http://www.federalreserve.gov/newsevents  /press/bcreg/20080921a.htm

Posted by reader | Report as abusive

Ron Paul is the answer to this problem. New Jersey is the starting place. Show the government they can’t take over any more of this country and take back what they now control.

When government and business heavily interact with each other it’s called Fascism.

American voters should do a better job of identifying Fascism and then vote to stamp Fascism out.

The next Presidential election should be interesting.

By that time, the Democrats will have replaced the management teams with their own people in many of the major corporations in the US as a consequence of bailouts, pay czars and government takeovers in just about every major industry.

The Republicans will only be able to raise a fraction of the money the Democrats can raise – because anyone who makes decisions regarding political contributions will have been replaced by Democrats on that company’s management team.

Given that money lubricates the wheels of politics, will we become a one party country? If we allow one party to direct our major corporations, there will be little left of our democratic system.

Posted by Darrel | Report as abusive

People please, it’s finance. No one deserves a “bullet in the forehead” for profiting from a few credit default swaps, morphing their corporate shell now and then to take advantage of differences in regulatory regimes, etc. etc. Besides if you chop off the part of America that does nothing but buy cheap imported goods from China, GS could stand alone as a country that at least exports something useful even if it is just services.

And what is so bad about China buying US treasuries? That’s what happens when Americans don’t save enough money to buy their own government’s bonds – I guess because they are busy buying houses at hugely inflated prices and plastic crap imported from … China.

Posted by Reminder Bot | Report as abusive

I amazed how someone who never met Paulson in person and did not have any depth in financial services can write on a populistic blog such an article! The author has no clue how the markets work, read a book about it and how pretends to have an opinion about this.

Posted by EDIS | Report as abusive

“People please, it’s finance. No one deserves a “bullet in the forehead” for profiting from a few credit default swaps, morphing their corporate shell now and then to take advantage of differences in regulatory regimes, etc. etc.”

It’s not finance and they didn’t “profit.” It’s living it up on money stolen from taxpayers; it’s cheating; it’s making bets and keeping the money when you win and and forcing innocent people to pick up the tab when you lose. Al Capone was right; Wall Street is run by criminals. Maybe a bullet is too much to ask, but a few criminal prosecutions would be just fine.

Posted by Dena | Report as abusive

EDIS – The markets do not work. Just today alone scores of people are being arrested for insider trading etc. Are we to believe these people are the exception?

I agree with the one poster on his comments on Ron Paul. He is the one person who seems to have integrity, who is unwavering in his support of the constitution and opposition to the big corporations.

Posted by RayT | Report as abusive

If nothing else, the past year’s ruckus may prompt the average American to ask himself/herself the following: …just who are political leaders appointing to positions of power and decision making and what types of conflicts of interest exist? Maybe we will have a generation of Americans that find the term “investment banker” to be a disgusting and deplorable term… and that would be a bad thing? Not to mention the soiled reputation of Ivy leaguers. Even if I could afford it, I would not want my kid to mingle with such elitist, greedy criminals…

Posted by kc | Report as abusive

So Stephen Friedman resigned, after acting on insider information that he himself help created? That’s it?? That’s not ILLEGAL??? Not worth investigation by ????

I thought I’ve lost my capability of being outraged, but obviously I was wrong. No wonder the Tea Partiers are still going strong! The Obama team really really need to do something about this moral hazard thing. I can’t believe he’s gotten so out of touch with how people on the ground feel so quickly, not even a year yet.

Posted by jian | Report as abusive

This is another anti-finance/anti-Goldman article with no perspective

Posted by Michael | Report as abusive

I have been to Tanzania and can confirm that it is a transparent cronyless enterprise compared to Wall Street.

Some here would insist that capitalism is superior to socialism. Well, it appears that communism has proven itself superior to capitalism. After all, as the U.S. has experienced a steady decline over the past decades, China has seen unbelieveable progress, leaving the communists with the terrible dilemma of coffers too full to close.

But appearances can be deceiving. Goldman Sachs and others have positioned themselves to profit from the wholesale export of American factories, jobs and investment capital to the communist nation.

As much as some would like, America cannot survive when the majority of it’s workers are engaged in managing data regarding regarding imported goods or modifying blank pieces of paper by causing some ink to be applied to it. Hot air, bullshit and commercial paper DO NOT create tangible wealth.

Posted by whitewolf60 | Report as abusive

Strike one “regarding” : )

Posted by whitewolf60 | Report as abusive

Cronk well said,

Mr. President, let’s sign off all GS to the GOV. payroll…so they will officially represent the gov.

FED is DADDY and \”too big to fail\” are the monster kids that want to be helped out…

GSucks is the preferred child( and rep of the govt.), that\’s why they always win…under bush or Obama, they RULE…so is anybody aware of the THEATRical spectacle of the incumbents( all of them should be ousted with real independents, if they exist).

Go GS , you SUCK… but always win….

Goldman Sachs only outperforms because they have unfair advantages. They are the equivalent of the poker player who uses marked cards and then brags about his winnings.

Posted by The Truth | Report as abusive

When Clinton let Goldman Sachs into Government via Robert Rubin, isn’t that when kids started to have to take a million vaccinations? Aren’t they making Billions as a vaccine broker? Follow the money.

Posted by Lila Cardiff | Report as abusive