Over the weekend, Time published an interview with Goldman Sachs CEO David Solomon that started off with a question about what the Wall Street investment bank should be doing about Russia following its invasion of Ukraine. Solomon, who recently pulled his bank out of the country and is winding down its contracts there, took an interesting stance in his response:
Well, I don’t know that it’s the job of large financial institutions to ostracize Russia. We operate in a financial system that has a regulatory and government overlay. The [U.S.] government, I think in this case appropriately, has decided to place sanctions on Russia. And it’s our job to make sure that we are executing against the legal letter of the law of those sanctions, but also the spirit of those sanctions, which basically require us to wind our business down in Russia …
I don’t think businesses are supposed to decide how global trade works in the world. Government sets policy and then businesses follow that policy. I happen to agree very strongly with the policy. What’s going on in Ukraine is absolutely horrible. I think the actions taken are reasonable and powerful actions. But you ask, “are we doing a good job, ostracizing Russia?” That’s not our job. And by us, I mean the financial industry broadly. But it’s not … I know on social media at the moment, there’s a call for companies to ostracize Russia. I don’t understand how we ostracize Russia. We follow the laws — both in the letter and the spirit.
What is a Wall Street CEO to do these days? Lloyd Blankfein, Solomon’s predecessor, told me that Russia’s invasion had “crossed everyone’s moral threshold,” and supported the unprecedented economic sanctions that governments around the world implemented. Goldman, as Solomon mentions in the interview, has already pulled out of the country and is winding down contracts, even though it is still reportedly pitching Russian bonds to hedge funds and advising them to sock it away in personal accounts to avoid scrutiny. (This is allowed by U.S. sanctions, and the bank told CNBC, which broke the story: “Winding down our operations in Russia and supporting our clients around the globe in managing and closing out their market obligations are not mutually exclusive.”)
But unlike the tone that Solomon struck in the interview, Goldman has not taken a passive role on Russia’s economic policy during the last 30 years. In 1992, the bank rushed in to advise former President Boris Yeltsin on the “shock treatment” transition to capitalism after the fall of the Soviet Union. It has collected more than $114 million in fees there over the years. During the Clinton administration, former Goldman co-chairman Robert Rubin — who was then Treasury secretary — was one of the architects of a failed loan from the International Monetary Fund to prop up the country, before Russia devalued its currency. It’s not like the term “Government Sachs” came out of nowhere.
Wall Street’s overall record on activism has also been mixed at best. Back in 2018, Citigroup, Bank of America, and other major banks stopped doing business with companies that sell firearms. That led more conservative and gun-friendly states to say they’d stop doing business with them. Texas passed a law that would bar the state from doing some of its underwriting business with companies that “discriminate” against gun companies, and legislatures in Arizona, Kentucky, Missouri, Ohio, South Dakota, and West Virginia have proposed similar bills. And if that had any effect on the firearms industry, it doesn’t appear to have shown up in recent sales — as 2020 and 2021 were the two biggest years for gun sales on record.
In reality, Goldman has a history of ignoring the social costs of doing business with unsavory governments. As Bloomberg reporter Sridhar Natarajan points out, Solomon didn’t wait too long to show his face in Saudi Arabia after Mohammed bin Salman’s elite security detail lured a Washington Post journalist to his death. Solomon has also aggressively moved into China after the country cracked down on Hong Kong’s independence.
Still, the U.S. is engaged in an economic war against Russia, and Goldman — as a private-sector agent of that economy — is caught in the middle. Even saying we’re just going to follow the law amounts to a kind of policy prescription, at least for how other companies should act. It’s also a bit of a rebuke to companies like Facebook parent Meta, which went out of its way to play footsie with nation building by briefly allowing for users to call for the death of Vladimir Putin.
Goldman has a history of entering and leaving Russia as its economy has gone up and down. Solomon, as the head of an investment bank that does business with oil producers and miners and governments, wouldn’t want to stop doing business with one of the world’s largest and most natural-resource-rich countries in the world if and when the war is over.