Peter Nagy was tired and sore and his lips were chapped. But after two nights sleeping in a bag a few feet from the revolving doors of Goldman Sachs’ headquarters, he was ready for another day of action.
Mr Nagy, 29, was among a group of about two dozen demonstrators camped on the south-east corner of Goldman’s lower Manhattan headquarters on Thursday morning. Some
waved “Government Sachs” banners and heckled workers; others wore monster-green bobble hats, mocking Donald Trump’s campaign pledge to “drain the swamp”.
All were there to protest a long list of appointments of Goldman-linked people to senior positions on the president-
elect’s team. Mr Nagy, a housing organiser, said he worried that under the new president, the grip of Wall
Street on Washington could be stronger than ever, at a time when Goldman is enjoying a surge in profits.
“The financialisation of this country is ruining the economy, it’s destroying jobs and it’s concentrating wealth at the very top of our society,” he said. “Trump went from talking about Goldman Sachs and Wall Street having heavy influence on the government, to them literally running it.”
It has been a while since Goldman was cast as a proper villain. Since the financial crisis, when it became a symbol
of Wall Street excess - kept alive by bailouts, then subject to countless lawsuits alleging wrongdoing - the bank has worked hard to stay out of trouble.
No more does Lloyd Blankfein, chairman and chief executive, make glib remarks about “doing God’s work”, for example. Instead, the tone is earnest. The bank promotes its sponsorship of initiatives supporting women and small businesses, and talks a lot about “impact investing” - backing assets that offer easurable social or environmental benefits as well as financial returns.
In October, the bank had the confidence to launch its consumer-focused lending venture as “Marcus by Goldman Sachs”, rather than plain Marcus as it had intended, judging that the brand was no longer tainted. But the controversy over MrTrump’s appointees has brought the bank back into focus at a tricky time. For decades Goldman has been the go-to institution of the rich and the powerful, focused on brokering big deals and raising huge amounts of money. Within the past year it has made a pivot towards Main Street, supplying simple products such as loans and savings accounts, in an attempt to offset the revenue-draining effects of new rules put in place since the crisis.
In that sense, big reputational hits could hurt a lot more. Steven Mnuchin, Mr Trump’s pick for Treasury secretary, this week tried to distance himself from the bank during a long confirmation hearing on Capitol Hill. Mr Mnuchin spent 17 years at Goldman, following in the footsteps of his father, a legendary trader known as “Coach”. He then reinvented himself as a hedge fund manager, film financier and, latterly, chairman of Pasadena-based One West Bank.
“I think of myself as a regional banker, not Goldman Sachs,” he said. Goldman insiders say they see no problem with its senior people heading off to top jobs in Washington. If executives are much in demand for public service, Mr Blankfein told the New York Times last week, it is because they are talented and hardworking and can afford to take a pay cut. Many people leave the bank in their late forties or early fifties to give something back, he said. Two good examples would have been Hank Paulson and Robert Rubin, both of whom led Goldman (as co-chair and chief executive respectively) before running the Treasury department.
On a call with investors this week, Harvey Schwartz, the bank’s chief financial officer, discussed the departure of Gary Cohn, its former president and chief operating officer, to become director of theWhite House’s National Economic Council. Mr Cohn joined Goldman in 1990 as a silver salesman and became a partner in 1994, the same year as Mr Mnuchin. If Mr. Mnuchin is confirmed by the Senate, the old Goldman colleagues will hold the two top economic jobs in the country.
“Obviously we’re all going to miss Gary,” saidMr Schwartz. “It’s fantastic that he’s willing to contribute all of his experience to our country. And it’s a long tradition of senior leaders at Goldman Sachs doing that. We’re all quite proud of what he’s decided to do.” Analysts, too, are sanguine about the string of Goldman-linked appointments, which includes Stephen Bannon and Anthony Scaramucci, both ex-investment bankers, and Dina Powell, former president of the bank’s charitable foundation. Jay Clayton, named to head the Securities and Exchange Commission, the market watchdog, is aWall Street lawyer who acted for Goldman on the injection of government money in the depths of the crisis. retchen Butler Clayton,his wife, works at Goldman as a private wealth adviser. All this after Mr Trump accused oldman of “owning” Ted Cruz, his rival for the Republican nomination,and challenged Hillary Clinton over her paid speeches to banks, including Goldman.
Devin Ryan, an analyst at JMP Securities in New York, said Goldman’s core business is probably in better shape as a result of the moves - and the controversy surrounding them. “Right or wrong, there’ll be a perception from clients, whether in sales or trading or investment banking, that the bank has a better view into DC,” he said. “The publicity probably helps,on the margin.”
Not that Goldman neededmuch of a boost. All across Wall Street, banks have their tails up. The so-called “Trump trade” - the promise of lower taxes, higher interest rates and lighter regulation - has pushed shares steadily higher since the election. Many of the biggest banks saw a dip in their stock prices this week, but fourth-quarter results confirmed that the outlook had brightened.
In particular, the banks’ bond-trading arms, which were particularly hard-hit by the post-crisis rules, did much better during the quarter, thanks largely to investors resetting portfolios to get set for Mr Trump.
At Goldman, revenues from that unit rose almost 80 per cent during the quarter from a year earlier. Overall profits tripled. Over the whole year, pay crept up as a percentage of revenues, suggesting that the bank is digging deeper to reward its star performers. Of the 30 stocks in the Dow Jones Industrial Average, Goldman is easily the best performer since the election, up 27 per cent.
“As we come into 2017, activity levels are quite high,” said Mr Schwartz. “We’ve come out of a very low-volume, low-volatility environment for a number of years . . . But with the shifting policies around the globe, it’s an xtraordinary catalyst for client dialogue, for decision-making and for content. And that’s really where we, as a firm, want to drive value.”
Prospects for regulatory relief look good from here, too. For years, banks have complained that they’ve been squeezed too hard by the 2010 Dodd-Frank Act, which placed curbs on risk-taking and forced the banks to operate with much igher levels of capital and liquidity.
If Dodd-Frank is not ripped up completely, as some hardline Republicans would like, certain provisions can get emoved. And even if they stay, the operating environment could improve anyway.More than 4,000 political appointees,
many of whom hold leadership and policymaking positions at the financial regulatory agencies, will be heading out the door with the change in administration, analysts note. That should mean real changes in the way the existing rules are interpreted and enforced.
During his confirmation hearing, Mr Mnuchin said he backed the Volcker rule ban on banks betting with federally insured deposits, which big banks have denounced as unworkable. But he also said he supported reviewing the rule’s enforcement, a view that should come as some relief to bankers struggling to make head or tail of it.
“The path to deregulation will not be an easy one, but it’s going to happen,” said Medy Agami, Chicago based managing director at Opimas, a consultancy.
Meanwhile, the protesters say they will not let up. Leaders packed up camp yesterday morning then planned to head to Mr Mnuchin’s apartment on the Upper East side, before a stop at the nearby Mnuchin Gallery, still run by Bob, teven’s father.They aimed to end up at Trump Tower on Fifth Avenue.
Some drew parallels between this week’s demo and Occupy Wall Street, an anti-bank movement that began in a park a few blocks from Goldman’s downtown HQ, and which fanned out around the globe in late 2011.
“We need to pull the curtain that is over everyone’s eyes,” said Charles Khan, a 28-year-old activist.
“[Trump] ran on saying Hillary Clinton and Ted Cruz were in the pocket of Goldman Sachs,” he said. “But now we’re really seeing who is in the pocket of Goldman Sachs. All three were.”
