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Dear Lloyd:
This may not be the best time to be piling on. But I told you once and I'll tell you again–you're fighting a battle you will never win.
I'm not talking about the SEC's trumped up charges against the firm and your ever-fabulous VP, Fabrice Tourre. That's a dubious legal case that you have at least a 50-50 shot at winning.
No, you are fighting much bigger forces–politicians desperate to cover-up their own past stupidities, journalists eager to stay in the headlines and, of course, the populist mob, enraged by envy and ignorance.
But they aren’t the worst of it. I'm sure you've heard the saying that “We have met the enemy and he is us.” Well, that is Goldman Sachs today. You are your own worst enemy.
Lloyd, do you remember that 1983 New York magazine profile of the firm “Nice Guys Finish First”? I certainly do. In 1986, when I started at Goldman we used reprints of that article to market the firm to new clients. “Within the small club of top Wall Street investment-banking firms, Goldman, Sachs & Co. clearly stands by itself?”
It made for great marketing because most people see the world like an old-time Hollywood movie. There's right and wrong, greedy villains and selfless heroes–and good always triumphs.
Wall Street may have been full of bad guys like Ivan Boesky and Michael Milken. But we at Goldman were the good guys–the cavalry, the Marines, the Yankees, the priesthood?you fill in the blank.
Maybe on the J. Aron trading floor, all this self-important hoo-ha didn't count for much. But for us bankers, the firm's image and its business principles were everything. “Our clients interest always come first” read the first principle. A better pitch for client business has never been invented.
And that is why, 25 years later, you find yourself repeating that first, sacred business principle over and over. You are searching for the moral force and public standing that Goldman once had. You are trying to resurrect the Goldman of the good guys.
But this is probably a doomed strategy. And it's doomed because you aren’t telling the whole truth, Lloyd.
Goldman's first business principle is dead–and everyone knows it. Goldman Sachs is a trading house, looking to multiply its capital as any trader would–and everyone knows it. To pretend otherwise, comes across as disingenuous and evasive.
Consider your recent shareholder letter. It reads like a Mad-Lib exercise designed to use the word “client” in any and every possible sentence: “By remaining close to our clients, we were able to direct our human and financial capital to those businesses within our market making franchise that most reflected client's interests and needs.”
Or consider your not-so-successful testimony before the Financial Crisis Inquiry Commission in January. Sure, some of those folks aren't too bright. But you didn't see Jamie Dimon going through a long, tedious monologue on the role of a Wall Street market maker, did you?
There is no way a trader will convince the world his clients always come first, Lloyd. You shouldn't even be trying–even if you also run Goldman.
And here's the kicker. There is nothing for Goldman Sachs to be ashamed of–other than pretending to be something it's not.
The truth is that most revenue on Wall Street comes from trading–it is 80% of yours. The truth is that you are a public company with public shareholders. And the truth is that as CEO and chairman of the board you have to put your shareholders interests first–even ahead of your clients.
Now, your army of PR advisers, lawyers and lobbyists will say you are crazy to fess up to your uber-capitalism. Didn't the U.S. taxpayer bail you out? Aren't Washington and the EU already hell-bent on killing you?
But haven't you learned by now that every time you give, someone will take? Did any politician thank you for slashing bonuses in 2009?
Goldman will be hated for a long time to come regardless. But you will live on. You are too big to fail. And you are the very best at what you do–certainly when it comes to trading on your own account.
Lloyd, you should just come out and tell it like it is. That may not make you a good guy, but at least you will be an honest one.
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