Lots of people are talking about what is happening at Goldman Sachs. This is a column about what is not happening at Goldman.
Despite all the bad headlines — the accusations of fraud, the talk of a big settlement, the risk, however remote, of criminal charges — there’s an inconvenient truth that’s been largely ignored: Most of Goldman’s big customers are not bolting.
To the contrary, nearly all of them are standing by Goldman, despite come-hither looks from Goldman’s rivals.
What gives? To many people, Goldman has become America’s most reviled engine of capitalism. Even now, as thousands of barrels of oil gush into the Gulf of Mexico every day, people think less of Goldman than they do of BP, according to the BrandIndex daily survey of consumer perceptions conducted by YouGov.
Postcrisis, Goldman has gained a reputation as, in the felicitous phrase of Rolling Stone, the Great Vampire Squid — accused of duping its clients, of stonewalling investigators, of betting against entire economies. By its own admission, Goldman seeks to manage conflicts rather than avoid them.
For its part, Goldman keeps insisting that it plays fair. To which its critics say, come on. Are you really sticking to that story, after all the public outrage? Who do you think believes you?
As unsatisfying as this may be to the firm’s detractors, the people who seem to believe in Goldman are the ones who pay its bills.
“We trust them,” Jeffrey R. Immelt, the chief executive of General Electric, told an audience at the 92nd Street Y in New York last month. “People need to tone down the rhetoric around financial services and stop the populism and be adults.”
In recent weeks, BP went looking for advisers to help it think through the liabilities of the spill. Considering BP’s own public relations problems, you might think it would stay far away from Goldman. But no, Goldman is now one of those advisers. (Goldman, it should be noted, happens to also be an adviser to the New York Times Company.)
All of this may have you questioning why the public is so outraged — ostensibly on behalf of wronged Goldman clients — when many of the clients themselves seem unconcerned.
Revelations about Goldman’s business practices have raised important questions about the social utility of many products that are sold on Wall Street and the need for stronger oversight. What is unknown is whether Goldman is losing prospective clients. It will be interesting to see what happens to its market share over the next couple of months, as the various government investigations unfold.
But the widely accepted narrative that Goldman almost single-handedly caused the financial crisis, that it is somehow worse than firms that failed like Lehman Brothers and that it consistently undermines its clients at every turn, doesn’t seem to square with its own clients’ perception of the firm.
And it’s not as if executives are blind to times and mores. Thomas J. Pritzker, the chairman of Hyatt Hotels and a long-time Goldman client, says he’s wise to Goldman’s practices.
“I’m a big boy,” Mr. Pritzker told me. “I understand that they are in many businesses. I go into it with my eyes wide open.” He added, “I don’t feel any outrage, just the opposite.”
That is not to say that all clients have stuck with Goldman or that none are dissatisfied. Some have stopped using the firm or are re-evaluating their relationship in light of the civil lawsuit brought by the Securities and Exchange Commission. But most of those clients are linked to government agencies, where appearances, and politics, matter.
The Metropolitan Transportation Authority, for example, has severed its ties, as have some public pension funds. Interestingly, the American International Group had planned to drop Goldman as its main adviser, after some well-publicized deals that put them in conflict and left A.I.G. on the losing end. But then A.I.G.’s attempt to sell its Asia business fell through recently — a deal that would have helped A.I.G. pay back some of its debt to taxpayers — and now Goldman is back on the case.
Indeed, Goldman’s franchise has endured — no, prospered — through one of the most tumultuous periods in the bank’s history.
Yet rarely has the view from the corner office been so at odds with the view from just about every other corner.
“Goldman has been politicized, and it is important to look beyond the demagogy to examine the facts,” Joseph M. Zubretsky, the chief financial officer of Aetna, the large health insurer, told me in an e-mail message. “Our experience with Goldman is that they conduct themselves consistent with the values we expect from a close adviser.”
Goldman has been good to corporations like Aetna and G.E., and vice versa. Goldman has helped companies raise money and cut deals that keep shareholders happy. G.E. and Goldman even share a big-name benefactor, Warren E. Buffett, who has invested billions in both companies.
So even if some clients do have misgivings, they might not want to speak ill of family. Its critics might suggest that its clients are so close to the action that they are missing the bigger picture.
The former chief executive of Washington Mutual sent an e-mail message about Goldman, disclosed as part of the S.E.C.’s civil fraud suit, that said, “They are smart, but this is swimming with the sharks.” His colleague added, “We always need to worry a little about Goldman because we need them more than they need us and the firm is run by traders.”
Another reason for clients’ steadfastness, of course, could be inertia. Most of Drexel Burnham’s clients, for example, did not abandon it until the bitter end. Either way, executives and investors seem to have concluded that the benefits of doing business with Goldman outweigh the risks. At least for now, pending another shoe dropping.
Reflecting on accusations and revelations that Goldman sometimes wore multiple, seemingly conflicting, hats, Mr. Pritzker told me that in one instance, such tactics might have served Hyatt well. When Goldman was advising Hyatt about selling a stake in its hotel chain and an investor dropped out, he said, Goldman’s own private equity arm swooped in. Did Goldman profit? Probably. But Mr. Pritzker was just glad the deal got done.
“That deal would have failed if they hadn’t done that,” he said.
Mr. Immelt has his own concerns about Goldman.
“I wish they’d take care of their own compensation,” he said in his remarks at the 92nd Street Y, suggesting Goldman is paying its people too much. “It just shouldn’t be this kind of problem. I trust them to manage their own reputation.”
On that score, even Goldman’s most loyal clients might say the firm has work to do.
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