You must not say the C word at Goldman Sachs. “Counterparties.” You can say, “clients”, but if you say, “counterparties,” it will be noted down and held against you.
So says the Wall Street Journal. The paper reports that Harvey Schwartz, Goldman’s CFO might be in with a sniff at the president or COO positions being vacated by Gary Cohn (who held both), except that he’s been known to use the word “counterparties” a little too freely.
What’s so wrong with this? Well, “counterparties” is reportedly associated with the bad old days before the financial crisis when Goldman Sachs was all about trading on its own account. A counterparty is simply someone on the end of a trade, to be treated with impunity.
Nowadays, Goldman doesn’t do much of in the way of trading on its own account (except possibly, a bit, in the investing and lending division and in some illiquid markets like high yield.) Instead, it’s all about making markets for “clients”: the people on the other end of a trade are special and must be treated (and referred to) as such.
If the powers that be at Goldman can’t get over Schwartz’s misnomer, then who else is in line to replace Cohn? The WSJ thinks it might be investment banking co-head David Solomon (“gravelly voice”, “imperial management style,” leads “occasionally by fear”). Or maybe Eric S. Lane, the 40-something co-head of the investment management division.
Goldman insiders suggest alternative options: Pablo Salame, the bearded global co-head of the securities division could step up; after all, securities still brings in most of the revenues (although Solomon’s division is twice as profitable). This would leave Isabelle Ealet and Ashok Varadhan as co-heads of the securities division (there are currently three heads), and could pave the way for Jim Esposito to be promoted as securities co-head alongside them. Esposito is currently chief strategy officer for Goldman’s securities division, but is a Blankfein favourite and insiders have been predicting his ascension for months.
Alternatively, it’s thought possible that Ealet – who’s based in London – might be promoted to the position of co-head of Goldman Sachs International, a position vacated by Michael (Woody) Sherwood last month. In this case, Esposito could be promoted to run securities alongside Salame.
2016 was a partner year at Goldman Sachs and the firm has been through a lot of change, with established partners leaving to make way for the new crop. After the new partners were promoted last month, things were expected to calm down. Instead, Cohn’s exit means the political intrigue at Goldman continues. At this stage, several people could become Blankfein’s number two – as long as they use the right vernacular.