Goldman needs to lose Gekko image

August 4, 2009


— Jonathan Ford is a Reuters columnist. The views expressed are his own —

So, Goldman Sachs has a “Gordon Gekko feel to it” according to an executive at Brand Asset Consulting. In a survey of leading U.S. brands, the market research firm has reached the conclusion that the investment bank’s stature has been diminished in the eyes of the public by recent events.

Somehow, this fails to do justice to the emotions the name Goldman stirs in the breast of the average American.

Goldman’s stature isn’t diminished; the firm is becoming actively hated, and this emotion is going mainstream. When Rolling Stone recently published a cover story describing Goldman as a “vampire squid wrapped around the face of humanity”, its author, Matt Taibbi, was simply saying what a lot of people think — if more eloquently and memorably.

Normally, the good opinion of the wider world, or of its rivals, wouldn’t matter too much to the steely-eyed Wall Street firm. So long as Goldman continues to be supremely well-represented in the corridors of power, retains the respect (if not affection) of its clients, and is able to hire the brightest bankers, then what Joe Public thinks is surely largely irrelevant.

Goldman itself certainly seems to believe this. Despite public revulsion at the excesses of Wall Street, it has returned as quickly as possible to normal service sucking up cheap government and Fed funding, making pots of money trading for its own account and paying fat bonuses to staff. Meanwhile, it has liberated itself from the political fetters of the TARP.

But it’s conceivable that the great squid has miscalculated.

The risk it is running is not that clients will desert the firm. It is more that the hostility of the general public may make it vulnerable to a populist backlash. Quite what form this may take is unknown. But history provides an uncomfortable parallel from the thirties — the last time the public thirsted for revenge on Wall Street. In 1933, an equally well-connected and powerful firm, the house of Morgan, was broken up after a celebrated series of Congressional hearings that take their name from the committee’s counsel, Ferdinand Pecora.

Called upon to investigate the causes of the 1929 crash, Pecora mounted a populist attack on Morgan. Some of what he uncovered was scurrilous, such as the existence of a “preferred list” by which the firm rewarded influential friends (such as ex-president Calvin Coolidge) with shares in stock offerings at deeply discounted rates. But much was innocuous. True, Morgan partners paid no taxes in 1931 and 1932. But what was lost in the hubbub was that they did so because of heavy stock market losses.

So unpopular was Morgan with the public, however, that the bandwagon swiftly became unstoppable. The government had not planned to rope private banks like Morgan into new banking legislation designed to stop deposit taking “national” banks from underwriting securities. But when the national banks offered to accept the so-called Glass-Steagall restrictions without demur so long as Morgan was included, its goose was cooked.

As Ron Chernow observed in his book “The House of Morgan” the firm was vulnerable because it did not take the hostility it faced seriously until it was too late. Morgan believed public opinion to be largely irrelevant to men of business. Yet when opinion turned, not even its powerful friends could defend it from one determined district attorney.

This may be the mistake that Goldmantoo is making. The qualities that have allowed it to become so dominant in its industry could work against it in the public arena.  After all, would Lloyd Blankfein do any better on the stand than Jack Morgan?

There is no modern-day equivalent to Glass-Steagall on the horizon, and it is unclear what legislation could clip Goldman’s wings without damaging the rest of the investment banking industry. But Goldman has become identified in the public mind with a shadowy and greedy business that helped to trigger a vast crisis. That makes it vulnerable in a way it has not been in the past.

In the film Wall Street, the odious Gekko advises a novice trader to get a dog if he wants a friend. To date that has seemed to typify Goldman’s attitude. The bank could do with a few more friends — preferably of the human kind.


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Posted by Tim Cook | Report as abusive

“As ye sow, so shall ye reap”

Posted by Steve Numero Uno | Report as abusive

Why not quit with all the analysis and talks of reputation and just admit there’s active manipulation. At that point, who cares about all your word salad.

Posted by Bernard Parsons | Report as abusive

I hope the greedy bastards go out of business or are tortured by the US government with regulation. I’ll never do business with them!

Posted by Dave | Report as abusive

Goldman Sachs thinks they are equivalent to Uncle Sam, why do they need to care for the average Joe, or how Joe thinks about them?I suppose those who will get the fat bonus from GS or other banks will laugh at average Joe for their generous and stupid bailouts. Cheers GS for being saved while the average Joe are sinking in the great US of Titanic!

Posted by Rose Eli | Report as abusive

Gekko & Taibbi were both right, but got only half the story – everything that eats, eventually gets eaten. Monsters feeding on other’s delusions will succumb to their own and greedily swallow their doom.

Posted by Where’s Mine | Report as abusive

It’s the beginning of the end for them and others like them. Humanity has to realize that there really is a puppetmaster and for the last 80 years it’s been Goldman Sachs. Would you keep a friend that not only didn’t have your best interests at heart but would happily step on your head if it meant making another dollar? So….

Posted by Sean | Report as abusive

Somehow this fiasco of greed and flaunting ethical business practices will end with a crash. There might be individual or multiple crashes but it will come. When the digging starts as to who was paid off then the furor will rise to a crescendo. Most of the people in the United States are giving people and their word is their bond. They know that there is a day of having to make good on all the rotten things that they did. I think that quite a few members of Congress will have to face up for their greed pretty soon.

Posted by f belz | Report as abusive

Goldman doesn’t need friends; they’ve got lots of those in Washington. What they need is a basic understanding of ethics and why ethical conduct is important in a civil society. But since that seems very unlikely, I would say let the anger mount. It is right and it is natural. Let the chips fall where they may.

Posted by Amandus Colver | Report as abusive

For six years I worked for GS dwarf clone – Bear Stearns. Not only higher management in this kind of companies usually consists of vicious greedy sub-humans, but even regular employees become rat racers equipped with poisonous fangs in bloody battles for super bonuses.

Posted by Alex | Report as abusive

The time of the Gorden Gekko Movement is over. People are no longer willing to accept greedy or corrupt behaviour by high profile people.Now all the Gekkos of the world need to adapt to a new form of behaviour. Also known as the Obama Movement:”Portray an image of ethics, charisma and understanding. That way, people will never realise that all you are doing is maintaining the status quo.”As the sheep change, so too must the wolf.

Posted by Anon | Report as abusive

There´s only one way to repair the sorry state of the US economy, through innovation and investment into new projects and technologies. While its easy for MT to make a scapecoat of Goldman through hair brained conspiracy theories, if it wasn´t for the Wall Street banker working 100 hour weeks we wouldn´t have cell phones, IPODS, TVs, or anything else that the average drooling American can´t wait to put on their credit cards.Goldman won because they new better than to lend money to poor people without hedging their bets. It´s called risk management and we should all be grateful they´re still around.

Posted by Alejandro | Report as abusive

IPODs, TVs and cell phones are around thanks to the engineers and scientists working 150 hours weeks thru the school first, and than at the lab. And they are not 100% driven by greed….Investment banker’s role in this “enterprise” is usually “lend money” to fund the research usually after it has been proven to work with at least 70% chance or more, and then make a quick 10000% profit from the IPO. And to get there – some bunch of geeks-engineers have to bust their chops in the garage for few years ….

Posted by Michael | Report as abusive

<>Amen to that. This is not a matter of image or public relations; this is the matter of an elite group of influence- and money-wielding businessmen running a colossal scam on most of us, and making sure they have their hand in the kitty when the going gets rough. Hard to believe there aren’t five Pecora committees out for their blood. If the weak-livered Democratic politicians ever figured out that their ticket to (re)election is to stand up and say what most Americans think, we’d be making some progress. But of course that would violate their obligation to their masters at Goldman and their Goldman-like cronies. You could say we have the best government that money can buy! Too bad that isn’t true of our health care . . .

Posted by JD | Report as abusive

If FASB gets its spine back and reverses that terrible mark-to-myth ruling, many more banks will fall like dominoes.The depth of the deception in 2nd quarter earnings goes far, far beyond Goldman. But like the government, they will not let the upcoming financial crisis go to waste.

Posted by rayman in CA | Report as abusive