Lucas van Praag’s departure after 12 years as Goldman Sachs Group Inc. (GS)’s chief spokesman and the possible hiring of a former U.S. Treasury Department aide to replace him signal that Wall Street is ready to change its tone.
Van Praag, whose retirement was announced in an internal memo yesterday, had a taste for dismissing negative press reports about New York-based Goldman Sachs as “chimera produced by a febrile mind” and “effluent.” The 62-year-old British citizen’s style was described in a New York Observer profile as “basically a stiffly extended middle finger.”
That may have suited the pre-2008 era, when Goldman Sachs was still the most profitable securities firm in Wall Street history and its employees the most richly rewarded. After an economic collapse, taxpayer bailout, anti-Wall Street protests and declining profits and pay, the entire industry has to find a new approach, said Mark Arena, a former spokesman for Zurich- based UBS AG (UBSN) who rates public relations efforts on prverdict.com.
“It’s far bigger than Goldman Sachs, it’s really a whole shift in the way the industry is viewed,” Arena said in a telephone interview. “The perception that they’re the smartest people in the room has faded.”
Arena, who worked at UBS, Switzerland’s largest bank, for 14 years and ran communications in the Americas before leaving 18 months ago, said Wall Street had become accustomed to being a “glamour industry” thanks to its high pay and complexity. Bankers and traders have been slow to recognize that the press and public are no longer willing to accept Wall Street’s views without question.
“A PR strategy that basically says, ‘If you don’t understand it you’re an idiot,’ that only works when markets are going very high,” he said. “But when suddenly the industry was having to be bailed out and there are all sorts of regulatory problems, then the mood needs to change and you need to be much more in listening mode, conciliatory mode, explanatory mode.”
Goldman Sachs, led since mid-2006 by Chairman and Chief Executive Officer Lloyd C. Blankfein, 57, has had an especially hard time adapting. As a private partnership until 1999, the firm’s employees were warned to avoid media attention. By 2007, Goldman Sachs’s industry-leading profits -- and Blankfein’s record-setting $67.9 million bonus -- gave the firm an aura of invincibility.
That was stripped away in 2008 when the firm converted to a bank one week after smaller rival Lehman Brothers Holdings Inc.’s bankruptcy and accepted a $10 billion rescue from the Treasury Department -- led at the time by Henry Paulson, Blankfein’s predecessor at Goldman Sachs.
Rolling Stone writer Matt Taibbi dubbed the firm “a great vampire squid wrapped around the face of humanity” in a 2009 article. An interview Blankfein granted to London’s Sunday Times that year backfired when the paper splashed his sarcastic quip that the firm’s employees were doing “God’s work.”
Goldman Sachs’s image hit a low in April 2010 when the Securities and Exchange Commission sued the firm for fraud, alleging it misled investors about a mortgage-linked investment sold in 2007. The company paid $550 million in July 2010 to settle the charges, admitting only to making a “mistake” in marketing materials.
“Wall Street never had a lot of really bad press after World War II until the present period,” said Charles Geisst, a finance professor at Manhattan College in Riverdale, New York, who has written about the history of Wall Street. Now Goldman Sachs is “the most maligned financial institution in this country and probably will remain so for a very long time.”
Goldman Sachs is considering replacing van Praag by hiring Richard L. “Jake” Siewert Jr., a 48-year-old former aide to Democrats including Treasury Secretary Timothy F. Geithner and former President Bill Clinton, people familiar with the matter said last week.
Siewert, who hasn’t been hired yet, has the career of a Washington policy technocrat compared with the drama of van Praag’s. The Goldman Sachs spokesman joined the British Navy after being kicked out of boarding school, worked on an oil rig and spent a decade at Bankers Trust where he arranged ship finance, sold currency swaps and used his French and Dutch language skills during a stint in Brussels.
Siewert is a graduate of Yale University and the University of California at Berkeley’s law school. He started his Washington career as communications director for the Democratic Governors Association before working for Gene Sperling at the National Economic Council during the Clinton administration.
President’s Press Secretary
He worked his way up in Clinton’s communications department, eventually succeeding Joe Lockhart as the main press secretary in the last few months of the presidency. At age 37 he joined Pittsburgh-based Alcoa Inc., the largest aluminum company, and managed corporate development and public strategy before joining Geithner at Treasury in 2009.
William Cohan, a Bloomberg View columnist who interviewed Siewert last year, said he seemed “very open and honest and frank.” Cohan, whose book “Money and Power: How Goldman Sachs Came to Rule the World” was published last year, said Siewert seems “more like a regular guy” than van Praag.
“I do sense a little that because of Lucas’s demeanor, the way he was brought up, that he might have seemed arrogant and condescending,” said Cohan, who said he himself found van Praag “warm and charming.”
He doubts that the public perception of Goldman Sachs will change as long as Blankfein is running the firm and economic distress and regulatory change limits revenue.
“They think that they’re just a few innings away from the status quo being restored but actually is there something else going on, is there a real paradigm shift going on?” Cohan said.
Even as Goldman Sachs was distributing a memo to employees yesterday about van Praag’s retirement at the end of March, Chief Financial Officer David A. Viniar was telling investors at a conference in Miami that the company’s declining profit was a temporary setback similar to the 2001 downturn.
During the question-and-answer session, one man -- who described himself as a Goldman Sachs competitor and observer for more than 40 years -- asked Viniar what Wall Street can do differently to get its “collective voice” heard again.
Acknowledging that “it’s a hard question,” Viniar said that time has to pass and the economy has to improve. In its contacts with regulators about new rules, Goldman Sachs is trying to emphasize what will help markets and the economy and to talk less about what will be good for the industry, he said.
Good for Business
“We need to convince people that’s really what we care about, and obviously, those things will be good for our business,” said Viniar, 56. “We have to make sure that those things are more aligned than many had thought they were aligned in the past.”
To succeed, Wall Street has to find a new voice in an era where “people are less interested in what they have to say and question their motives all the time,” said Arena, the former UBS spokesman.
“Even if the message from the firm doesn’t change, sometimes all that’s needed is a shift in tone,” he said. “A tone that seems appeasing rather than instructive, that’s more conciliatory rather than didactic.”
To contact the reporter on this story: Christine Harper in New York at email@example.com