“Lloyd is Lloyd,” says Gary Cohn, Goldman’s COO, whom Blankfein hired off the trading floor twenty years ago. “And one of the great things about Goldman Sachs,” Cohn continued, with an entirely straight face, “is that it allows individuals to be who they are.”
That characterization will come as a surprise to anyone with a passing knowledge of the firm, but imagine for a moment that it’s true, and that when no one is watching, the blue-shirted number-crunchers that stream lockstep into Goldman buildings around the world every day are free to let their freak flags fly.
Who would ever know? In addition to its reputation for bland conformity, the firm is famous for its extreme secrecy. To a remarkable extent, this corporate culture is nurtured by John F. W. Rogers, Goldman’s longtime chief of staff and overseer of its government, media, and client relations. Under Rogers, a Zelig-like personality with the sort of face that looks incomplete without a cigar poking out of it, policies ordinary for large financial firms are imbued with deep significance: Employees are expected to abide by fourteen strict principles—“We have no room for those who put their personal interests ahead of the interests of the firm and its clients,” etc.—and maintain a code of silence. “You don’t talk about the firm. It’s just not done,” says one former employee, who asked to remain nameless owing to a contract restraining her from saying anything that might be construed as disparaging about the firm “in perpetuity.” As at most large financial companies, conducting personal communications over the company system is verboten, although perhaps only at Goldman do compliance officers stage annual dramatic readings of their employees’ most embarrassing e-mails to drive the point home. (“Are you wearing lingerie, stuff like that,” the former employee says.)
“John Rogers’s philosophy always was that Goldman was this mystical, magical place,” says a former executive at the firm. “It was hiiiiigh in the mountains in this golden city. And every now and again, the clouds would open and it would come down and talk to you. And then up it would go again, and maybe it would be months before we would see Goldman again.”
The Goldman Way, as it has become known, was set when the firm was private, but it continued to pay dividends even after the company went public in 1999. Journalists literally kissed their asses to get a callback,” says Charlie Gasparino, now a Fox Business Network host. If that wasn’t affection enough, they also showered the firm with positive news coverage.
“We were Teflon, much to the fury of our competitors,” sighs Lucas van Praag, who moved from London in 2001. A 61-year-old with curly silver hair and a gap-toothed smile that makes him look rakish, Van Praag has endeared himself to business journalists. He may sometimes be “economical with the truth,” as one puts it, but his fondness for vodka on the rocks (with lime), his willingness to share entre nous gossip, and his hilariously disdainful mwahaha laugh make the onerous process of extracting Goldman nuggets more fun. (“Do we do that?” he asks gleefully of the annual e-mail readings. “If so, I must get in on it!”)
It falls to Van Praag, as head of Goldman’s public relations, to marry the cultural dicta set by his direct boss John Rogers with the personality of his ultimate boss Lloyd Blankfein. For the first year of Blankfein’s reign, this wasn’t a problem. Then the financial crisis happened. As Van Praag would put it, “Nightmare.”
“Lucas always tells me, ‘Don’t be yourself,’ ” Blankfein said before sitting down at the diner.
“I always tell him to be himself,” Van Praag protested, although one suspects he was being economical with the truth.
Recall, if you will, the mood in early 2009. The Working Families Party was organizing bus tours to the homes of AIG executives; that company’s CEO told Congress that someone had threatened to strangle him with piano wire. At Goldman Sachs, which had just announced record profits, the idea was to keep their heads down even more than usual. Lower-level employees were leaving their logoed gym bags at home lest they be accosted by mobs. Blankfein was receiving, according to one report, 75 to 100 pieces of hate mail a day. People were yelling things like, “Why don’t you kill yourself?” and “You should be in jail” at Cohn in the street. Van Praag deleted his Facebook profile.
After it was revealed that some of the billions of dollars in bonuses Goldman planned on paying out that year had been made on the back of ailing AIG, it started to become clear that Goldman’s hiiiiiigh-in-the-mountains public-relations strategy might be ill-suited to the moment. As conspiracy theories about “Government Sachs” intensified, Cohn went into Rogers’s office. “We’ve got to do something,” he said.
Rogers looked at him. “When the wind is blowing 100 miles an hour, you don’t try and change direction,” he said. “You’ll rip the sails off. You’ve got to keep going with the wind. Eventually the winds will die, and then we’ll turn the boat around.”
Though Goldman wouldn’t get out in front of bad press, it did defend itself—though usually in such a way that only made matters worse. The firm infuriated the Obama administration by repeatedly insisting it hadn’t needed a government bailout; the reams of paperwork it provided to demonstrate that its exposure to AIG “rounded to zero” was widely mocked in the media. Van Praag became infamous for his elegantly scathing dismissals of rumors, such as press reports in 2009 suggesting Goldman’s record profit levels were owed to market manipulation, which he called a “chimera produced by a febrile mind.” (“Lucas is British,” says a former co-worker by way of explanation. “He doesn’t speak in American.”)
As for Blankfein, his interactions with the press were strictly limited. After the grilling of bank CEOs in front of the Senate Banking Committee in February 2009, he was spirited out a side door without talking to the media, while Jamie Dimon sauntered over to the press table. “Can I help with anything?,” he asked winningly.
When, in July of that year, Rolling Stone published Matt Taibbi’s now-famous description of Goldman Sachs as a “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money,” no one at the firm took the story seriously. “A hysterical compilation of conspiracy theories,” Van Praag told the Post. “Notable ones missing are Goldman Sachs as the third shooter and faking the first lunar landing.”
But much to their surprise, the vampire squid “picked up a head of steam,” as Blankfein puts it. Soon after, they broke with tradition and grudgingly set up interviews with Vanity Fair and Van Praag’s hometown paper, the London Sunday Times. The former delved into the firm’s conflicts of interest and said that Goldman under Blankfein “doesn’t have clients—it has counterparties.” During the latter, the CEO learned the limits of his corny, self-effacing jokes. He’s just a banker “doing God’s work,” he tossed off as he was leaving the interview.
That was around the time the nuns got interested.
Shortly before Christmas, after Forbes had likened Blankfein to the “cautionary tale” of a fraudulent Italian banker who was murdered by mobsters and President Obama had scolded “fat-cat bankers,” the members of the Pine Street Group, Goldman’s in-house leadership council, broached the subject of the firm’s interactions with the public. What should employees say about Goldman Sachs if buttonholed at holiday parties? someone asked. Van Praag put forth a bold proposal: “I think we should explain what we do and how the bank makes money,” he said.
The group settled on a more palatable response: “Change the subject.”
And so the bank remained silent, and the stories kept coming. At one point, Goldman’s slowness in paying veterinary bills on a litter of kittens found in the basement of its 200 West Street headquarters became international news. “There was a caricature of the greedy evil banker that needed to be filled,” says Neil Barofsky, the former inspector general of the TARP program. “And Goldman stepped into that role.”
Blankfein was, he said, “stunned” when the news flashed across his computer last April that the SEC was charging Goldman with defrauding clients on the long side of a CDO called Abacus, which the firm had created in order for the hedge-fund manager John Paulson to short the housing market. Improbably, he had reason to be: Breaking with its own policy, the agency had neglected to warn Goldman’s counsel until after the press release went out. According to its own records, the SEC investigators who brought the case didn’t think it was “that big a deal,” but it was the first large case to be brought against a financial institution since the crash, and the e-mails that were uncovered, from an amorous, 31-year-old French vice-president at the firm named Fabrice Tourre to his two girlfriends, in which he called himself “Fabulous Fab” and described CDOs as “monstrosities,” were so entertaining the media barely noticed the SEC’s other release that day, which detailed the agency’s failures in investigating a $1.5 billion Ponzi scheme.
About a week later, Blankfein, Tourre, and other members of the mortgage desk were summoned to testify in front of the Senate Permanent Subcommittee on Investigations.
Things started out pleasantly enough. “I just want to say, in many ways, the focus on just your firm is tremendously unfair,” Senator Claire McCaskill told Blankfein. “In fairness, there ought to be another four or five CEOs sitting with you.”