FCN: Lloyd Blankfein Prepares to Exit Goldman Sachs as Soon as Year’s End … WSJ March 09, 2018 at 04:50PM


Firm’s co-presidents, Harvey Schwartz and David Solomon, are leading candidates to replace the 63-year-old CEO

By Liz Hoffman and Joann S. Lublin

Lloyd Blankfein is preparing to step down as Goldman Sachs GroupInc.’s GS +1.10% chief executive as soon as the end of the year, capping a more than 12-year run that would make him one of the longest-serving bosses on Wall Street.

Goldman is likely to follow an announcement of Mr. Blankfein’s departure with a quick transfer of power and isn’t looking beyond Goldman’s two co-presidents, Harvey Schwartz and David Solomon, to replace him, people familiar with the matter said.

The timing of any moves could still change, and the 63-year-old Mr. Blankfein is firmly in control of his exit, the people said. The current thinking, though, is that he will retire ahead of or early in Goldman’s 150th anniversary year in 2019, a fitting send-off for the history buff.

Mr. Blankfein has often joked he will die at his desk, and his enthusiasm for the job has led many within the firm to believe he might outlast another set of would-be successors. Gary Cohn joined the Trump administration after tiring of life as Mr. Blankfein’s understudy. That set off the promotions of Messrs. Solomon and Schwartz and a new chapter in Goldman’s succession planning.

That planning effort has intensified of late, people familiar with the matter said, as expectations have risen among top executives and board members that the clock has started ticking on Mr. Blankfein’s tenure.

At a Goldman board meeting in February, Mr. Blankfein briefed the bank’s fellow directors on what he considers the strengths and weaknesses of his two likely successors, but he hasn’t shared his preference, the people said.

The departure would conclude a 36-year Goldman career for Mr. Blankfein, the son of a Brooklyn postal worker who rose to the pinnacle of Wall Street. In 1982, he quit his job as a tax lawyer and joined Goldman’s commodities arm as a gold salesman. He rose through the ranks of the firm’s trading business and was named CEO in 2006when Hank Paulson became Treasury secretary.

It isn’t clear what Mr. Blankfein will do after he steps down or whether he will retain his position as chairman of Goldman’s board. His three immediate predecessors left for government service, a path that appears less open to Mr. Blankfein.

Mr. Blankfein has run Goldman longer than anyone since Sidney Weinberg, who died in 1969. Among current Wall Street CEOs, onlyJPMorgan Chase & Co.’s James Dimon has been in the top seat longer.

Mr. Blankfein steered Goldman through the financial crisis, intact but browbeaten. The firm was publicly vilified, and Mr. Blankfein personally chastised in Washington, for its role in the mortgage meltdown. On his watch, Goldman paid $550 million to the government to settle allegations it had lied to investors about a mortgage bond that later blew up.

The financial crisis humbled Goldman in other ways. Its traders can no longer rely on big sums of borrowed money to juice returns. The resulting stretch of calm markets and simpler investor preferences hasn’t favored Goldman, the onetime whiz kid of Wall Street.

Mr. Blankfein has acknowledged that he failed to appreciate how lasting the effects of the crisis would be. He has fielded criticism for being slow to reposition Goldman’s trading business, which he ran from 2002 to 2004. Goldman’s return on equity, a return of how profitably it invests shareholders’ money, fell from more than 30% before the crisis to 10.8% last year.

Yet the bank’s stock price has set all-time highs in recent weeks. It closed Thursday at $266.34. A shareholder who bought on Mr. Blankfein’s first day in June 2006 would have doubled their money, although that performance lagged behind the broader market over that time.

And the firm is on stronger footing in other ways. It has adopted safer ways of funding its operations and has more capital to protect it in the event of another crisis.

As the crisis receded from view, Mr. Blankfein worked to rehabilitate Goldman’s reputation and rewrite his own legacy. The bank has dropped some of its trademark secrecy, declared itself a technology company and launched initiatives to support entrepreneurs and women-owned businesses. Goldman is pushing into retail banking, introducing itself—or, rather, Marcus—to millions of consumers.

Along the way, Mr. Blankfein survived a bout with cancer, grew a beard and assumed a role as senior industry statesman. He joined Twitter, where he has espoused socially liberal, pro-business views on issues such as immigration, infrastructure spending and global warming.

Mr. Blankfein said during a television interview last year that he wanted to leave Goldman “stronger than it was when I found it.”

The race to succeed Mr. Blankfein currently has two contenders.

Mr. Schwartz, 53 years old, is a karate black belt who ran Goldman’s trading division before becoming chief financial officer. Mr. Solomon, 56, is a hard-nosed investment banker who DJs on the side. Their promotions 15 months ago reignited the race for one of Wall Street’s most-coveted jobs.

Mr. Schwartz joined Goldman as a derivatives salesman in 1997, working for Mr. Blankfein. Years later, running the trading division as the crisis unfolded, he pushed the firm to stay aggressive as competitors pulled back. The gambit worked: Goldman’s traders made $33 billion in 2009, a record unmatched before or since on Wall Street.

In 2013, he was named chief financial officer, where he navigated the political and market forces that reshaped banking after the crisis. He is well-known in Washington and is seen as strongest in the areas of risk and regulation.

Mr. Solomon came to Wall Street in the mid-1980s, selling commercial paper at Drexel Burnham Lambert. He joined Goldman as a rare outside partner in 1999 and for a decade ran its investment-banking arm, which is the firm’s most-profitable division.

He is known less as a superstar deal maker than a strong manager, able to marshal Goldman’s resources behind big initiatives. He has spearheaded the firm’s efforts to lighten the workload for junior bankers and helped drive Goldman’s push into lending, which is now the central pillar of its $5 billion growth plan.

When Goldman’s CEO job last turned over, in 2006, there was little suspense. Mr. Blankfein was sole successor-in-waiting to Mr. Paulson. This time around, even senior Goldman executives say they can’t tell which of the two heirs apparent holds an edge.

Mr. Blankfein isn’t giving any hints. At an annual gathering of Goldman alumni in December, when he introduced Messrs. Solomon and Schwartz for a fireside chat, he pretended to forget their names, fumbling in his jacket pocket for his notes.

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