Are you a partner managing director (PMD) at Goldman Sachs? Are you in with Lloyd Blankfein? No? You might want to watch your back.
Goldman insiders suggest the firm is in the throes of a battle for control over the succession to Lloyd Blankfein, and that this is influencing the current round of departures.
As we reported last week, Goldman’s much heralded fixed income sales and trading departures appear to be disproportionately affecting some of the bank’s most senior and long-serving staff. Herman Klein Wassink, a managing director in structured credit sales since 1997 has gone. Guido Filippa, an MD of five and a half years in fixed income sales is understood to have gone too, along with Andrew Wyke, an MD and head of European rates sales since 2008. Peeyush Misra, a partner managing director and veteran mortgage derivatives trader, is said to have retired. The other exits may well have been voluntary too.
Something similar is happening on Wall Street. There, Goldman staff say it’s the most senior people at the firm who are disappearing. Without offering names, one Goldmanite said it’s the guys who “ran desks for ten years” who are off. The exits reportedly include a head of derivative sales, a head of cash sales trading, a head of CMBS, a head Latin American sales and a co-head of equities sales, with some people leaving voluntarily. The Wall Street Journal reported that J. Ronald Morgan, head of execution services at Goldman Sachs was retiring earlier this month. Bloomberg reports today that Carsten Schwarting, a fixed income trading partner, is retiring alongside Misra.
While some at Goldman attribute the disappearance of senior staff to the need to make way for younger, cheaper and sometimes more productive mid-rankers, others detect something more Machiavellian.
Goldman Sachs declined to comment on the exits, but one senior Goldman insider suggests they’re part of the battle to succeed Lloyd Blankfein. Blankfein, who received chemotherapy for “highly curable” cancer earlier this year, has never given a date for his retirement, but lieutenants are allegedly moving into position.
Gary Cohn, Goldman’s COO, has long seemed assured of the CEO title when Blankfein steps aside, but insiders suggest Jim Esposito is also emerging as a contender. An alleged favourite of Blankfein, Esposito was named chief strategy officer of Goldman’s securities division in February, putting him at the forefront of attempts to reorganize the firms’ trading operation. Last week, Tom Cornacchia Goldman’s global co-head of sales, said the firm’s fixed income division is already experiencing “friction” as it moves to more of an agency model and staff are encouraged to sell to clients over the length of a relationship rather than the length of a telephone call.
As this change takes place, Goldman insiders suggest the perception internally is that the most senior cohort of Goldman’s fixed income currencies and commodities (FICC) staff is protected. “The FICC lieutenants who drove revenues for the firm between 2003 and 2007 are still here,” says one Goldman banker, claiming that they are Blankfein’s people, and are mostly on the management board. It’s a group that includes Esposito, CFO Harvey Schwartz, co-heads of the securities division Pablo Salame, Isabelle Ealet and Ashok Varadhan, along with London-based Michael Sherwood. All five men and one woman work in or have a background in fixed income trading and were promoted to MD at the start of the 2000s.
In normal circumstances, Goldman’s heads of business might have retired in 2014 after their pre-crisis option packages vested above water, but the insider argues that they’re hanging on because of Blankfein’s succession. European banks like Credit Suisse and Barclays have been through multiple heads of fixed income sales and trading since the crisis. – Then again, their businesses have performed less well.
With the most expensive PMDs at Goldman seeming to be inviolable, insiders say it’s the tier below that’s disappearing as the firm tries to save money. Hence the apparent departure of so many veterans and heads of desk. It doesn’t help that 2016 is a partner year and that existing partners are often encouraged out to make way for new ones. With the successful 2003-2007 cohort seemingly protected, recently promoted partners from 2008, 2010 and 2012 are said to be watching their backs: “The 2014 partners are safe for one more cycle.”
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