By Liz Hoffman and Joann S. Lublin
Lloyd Blankfein is preparing to step down as Goldman Sachs Group
Inc.'s chief executive as soon as the end of the year, capping a
more than 12-year run that has made 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 2006 when Hank Paulson became Treasury secretary.
After this story was posted, Mr. Blankfein tweeted: "It's the
WSJ's announcement...not mine. I feel like Huck Finn listening to
his own eulogy."
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, only
JPMorgan 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
measure 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 Friday at $270.77. 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, 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.
Write to Liz Hoffman at liz.hoffman@wsj.com and Joann S. Lublin
at joann.lublin@wsj.com
(END) Dow Jones Newswires
March 09, 2018 17:30 ET (22:30 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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