Blankfein to step aside as Goldman CEO, Solomon to take over
NEW YORK (AP) — Another Wall Street veteran of the financial crisis is stepping aside: Lloyd Blankfein is retiring as CEO of Goldman Sachs after 12 years at the helm of the storied investment bank.
Blankfein will give way to David Solomon, a long-time Goldman executive who has been considered Blankfein’s chosen successor since earlier this year. Solomon will assume the CEO role from Blankfein on Oct. 1 and become chairman of Goldman in 2019.
The succesion announcement came Tuesday as Goldman announced a 44-percent jump in second-quarter profit from a year ago. The performance was largely driven by the investment bank’s core franchises: advising companies on mergers, acquisitions and other deals, and its trading business.
A long-time Goldman employee who rose through the ranks in commodity trading business, Blankfein took the reins of Goldman Sachs in 2006, not long before the Great Recession and financial crisis. Goldman and its competitors accumulated billions of dollars of toxic assets on their books — bad mortgages, collateralized debt obligations and other illiquid assets. In the darkest days of the crisis, it was thought Goldman Sachs may not survive. By late 2008, some of Goldman’s key rivals — Lehman Brothers, Bear Stearns and Merrill Lynch — were either bought in distressed sales or, in the case of Lehman, went bankrupt.
Blankfein moved quickly to save the firm from its near-death experience, tapping the Federal Reserve’s emergency programs set up to keep banks from failure. Eventually and reluctantly, Goldman took money from the $700 billion TARP bailout program, which it repaid. He pushed the firm’s trading desks to aggressively take positions through the market’s volatility and in 2009, only a year after the crisis, Goldman reported record earnings driven largely by trading revenue.
“Lloyd’s market savvy, intellect, energy, enthusiasm, charm and quick wit have helped him successfully steer Goldman Sachs through the financial crisis and position it for the future while earning him great respect and affection inside the firm and from friends and clients around the world,” said Hank Paulson, who was CEO of Goldman Sachs before Blankfein. He left the firm to become Treasury Secretary for President George W. Bush.
But the efforts gave Goldman and Blankfein, a son of a postal worker who grew up in housing projects, few fans outside of Wall Street in the early years after the crisis. The bank came under heavy criticism that it directly benefited from the 2008 government bailout of insurance giant AIG, and was just as responsible for creating the revolving door of toxic mortgages that led to the crisis. There were also accusations that Goldman’s bankers took bets on the mortgage market against their clients’ own positions.
Goldman Sachs’ employees, among the best paid in finance, continued to be paid well despite the mess Wall Street left for the rest of the country. A scathing article written for Rolling Stone nicknamed Goldman Sachs “the great vampire squid,” a term that stuck for years.