Gary Cohn's move from Goldman to Trump is a trading decision

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After 26 years, aged 56, Gary Cohn may be leaving Goldman Sachs. The man who could have replaced Lloyd Blankfein as Goldman CEO has reportedly been offered a position as director of Donald Trump's National Economic Council and assistant to the president for economic policy.

It's not yet clear whether Cohn will accept the offer, but if he does it won't be a surprise. Cohn has reportedly indicated that he'd quit Goldman for Trump if only Trump offers him a job. As jobs go, head of the National Economic Council doesn't sound bad, although it's not on a par with the Treasury Secretary role Trump reportedly considered offering Jamie Dimon (but actually handed to another ex-Goldman banker, Steve Mnuchin).

This prestige of the new role may not matter though. Cohn's exit from Goldman is more likely inspired by financial considerations than career goals.

Cohn owns around $212m of Goldman stock. Thanks to Trump, Goldman shares are now the highest they've ever been. If Cohn quits Goldman for a government role now, he'll be able to cash-out at the top. This is because individuals who leave the private sector for executive roles in the federal government must sell their financial assets immediate to avoid conflict of interest regulations.

By comparison, if Cohn were to retire from Goldman Sachs in normal circumstances, or to join a competitor, he'd be bound by Goldman's deferral period of five years plus. - And by 2021, the 'Trump rally' may have passed. 

In joining Trump, Cohn is therefore exiting his position in Goldman Sachs in the most profitable way possible. It's made even better by the fact that, under so-called "divestiture rules" Cohn can save $11.7m in capital gains tax if he joins the federal government in a senior role and promptly reinvests his monies in U.S. treasuries or diversified funds. Hank Paulson, the former CEO of Goldman Sachs, benefited from something similar in 2006. 

In other words, Cohn won't be necessarily be entering the new administration out of a sense of public service. This is not a career move: it's a trade.

Contact: sbutcher@efinancialcareers.com

Photo credit: Gary D. Cohn - World Economic Forum Annual Meeting Davos 2009 by World Economic Forum is licensed under CC BY 2.0.

 

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