The Man Goldman Is Banking On
Lloyd C. Blankfein is probably one of the few vice-chairmen on Wall Street who wears a pager to monitor real-time currency and commodity prices. He still walks the trading floors -- and chats late into the night over his BlackBerry with employees about the global markets.
"Sometimes, I make the mistake of going to bed at 2 a.m. and wake up at 4:30 a.m. and there will be 17 messages from him," says Gary Cohn, co-head of fixed income, currency, and commodities at Goldman, Sachs & Co. (GS ). That drive and attention to detail enabled Blankfein, the son of a Brooklyn postal worker, to become the first in his family to go to college. He went on to rocket up the ranks of Goldman, where his trading operations brought in much of the firm's profits last year.
But will Blankfein be able to keep Goldman the gold standard for investment banking as the markets and mergers pick up again? On Jan. 15, Blankfein, 49, was scheduled to become Goldman's president and No. 2 to CEO Henry M. Paulson Jr. Blankfein has earned the respect of insiders for his ability to integrate the firm's equities, fixed-income, commodities, and currencies businesses. Now, it will be his job to implement Paulson's vision of offering a sophisticated financing solution to any problem. But Blankfein will need the allegiance of the firm's bankers, many of whom have not worked for a boss who came up through trading since Jon S. Corzine, a former bond trader who is now a U.S. senator from New Jersey, lost to Paulson in a 1999 power struggle.
BRAIN DRAIN. The most pressing question for many on Wall Street is whether Blankfein can plug Goldman's brain drain. In recent years, the firm has been run by a trio who all hailed from the banking side -- Paulson and co-COOs and Presidents John A. Thain and John L. Thornton. Paulson & Co. gave Goldman's bankers a lot of rope. In turn, they maintained Goldman's hold on the top spot in mergers and acquisitions. Last year, it advised on roughly a third of deals announced worldwide, worth $393 billion, estimates Thomson Financial (TOC ). "They were a terrific team," says Blankfein.
Today, though, both Thornton and Thain are gone: Thornton retired last March to become a professor at Tsinghua University in Beijing, and Thain was named CEO of the New York Stock Exchange in December. "Thain's departure is the worst thing for Goldman Sachs," says a senior banker at a rival firm who asked not to be named. "He has a pair of safe hands and is highly respected."
Blankfein has already demonstrated his skills as a leader. In April, he was named to Goldman's board of directors after honing one of the most competitive fixed-income, currency, and commodity-trading divisions on Wall Street. It brought in $5.6 billion, or 35%, of the firm's revenues last year. Blankfein earned $20 million in 2003.
Still, Blankfein is an enigma to many of Goldman's bankers. As they'll find out, he's not your typical Wall Street starched shirt. Blankfein got himself through Harvard University on financial aid and now co-chairs the university's financial-aid task force. Unlike many bankers, he is not afraid to admit to colleagues that he's nervous about his new job or that he got into Goldman through a back door. The firm rejected him when he interviewed in the 1980s. Later, Goldman acquired J. Aron & Co., where Blankfein was a gold coin and bar salesman. That said, Blankfein has little reason to try to rein in Goldman's hotshots. "I take comfort from having colleagues who are the best in the industry," he says. He has few rivals in his knowledge of how markets work. Nor in his intensity: When on vacation with his wife Laura, a former corporate lawyer, the history buff often takes five books along.
If successful, Blankfein may be the next in line for Paulson's job -- although the CEO, at 57, is not expected to retire anytime soon. In the meantime, Blankfein has to assure Goldman's bankers that they're still in good hands -- but without squeezing too hard.
By Emily Thornton in New York, with Stanley Reed in London