The big question for Goldman Sachs: did it cut too much?

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Goldman Sachs over-fire

Goldman Sachs has had a bad run. In the first nine months of the year, its fixed income sales and trading revenues fell 23%, more than at any other investment bank. There are moves afoot to remedy this, but former Goldmanites can be forgiven a twinge of schadenfreude. Between 2012 and the second quarter of 2017, Goldman cut fixed income headcount by 20%. In credit alone, it cut headcount by 30%. And now, doom.

The roster of names who left Goldman in recent years is long, and the names on it storied. They include Tom Cornaccia the former global head of fixed income currencies and commodities sales; Peeyush Misra, a partner and veteran mortgage derivatives trader, Joseph Mauro, the former head of fixed income, currencies, and commodities European hedge fund sales and co-head of European macro rates sales; Peter Secchia, the former head of U.S. derivatives sales; Paul Huchro, the former head of U.S. flow credit and municipals trading; and Peter Selman, the ex-co-head of global equities trading. There are many more.

There's nothing new about managing directors (MDs) and partners leaving Goldman: it's been going on for years. But some of those who left the firm in the past few years suggest the firm cut more zealously than usual. The figures above, provided by Harvey Schwartz in his September presentation, seem to bear this out.

Senior people are almost never fired by Goldman Sachs. In GS parlance, they often retire. There's no indication that those specified on the list above left against their will, although those below them may have done so.  Even so, many of the senior people who left the firm in the past three years have since reappeared elsewhere: Selman is joining Deutsche Bank; Huchro is already there; algo trader Asita Anche went to Barclays; Secchia turned up at Jefferies.

"I don't know anyone that wants to go back," says one ex-managing director MD. "They're all getting on with other things."

Having parted company with a generation of its most senior securities talent and suffering from declining trading revenues, Goldman is now busily hiring people back in again. The firm has doubled lateral hiring this year. The hiring sweet spot seems to be at executive director level,.  2018 will be the year in which this new layer of talent proves itself- or not.

In the meantime, Goldman needs to hope its former MDs and partners don't excel in their new homes. Some seem happy to be away from Goldman Sachs. "Universal banks like Deutsche or Barclays have a better business model," says one. "Lenders with balance sheet will win in the end."

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