My Review of Lloyd Blankfein's "Streetwise: Getting to and Through Goldman Sachs"

The Rise of Lloyd Blankfein*

This Jewish street kid from Queens salutes the Jewish street kid from Brooklyn. Lloyd Blankfein, with the help of Jacob Weisberg, describes his rise from the housing projects of Brooklyn to the commanding heights of Goldman Sachs. His father worked the night shift at the post office and his mother worked for a burglar alarm company, a growth industry in Brooklyn at the time. Although I am a decade older than Blankfein, I feel in some respects we led parallel lives. Obviously, his success was far greater than my own.

 

Blankfein grew up in a two-bedroom apartment with his parents, his sister, and his grandmother while I grew up in a one and half bedroom apartment in Queens with my parents, a brother, and a sister. To be sure my neighborhood was far nicer than his. That said, just like his, our living room furniture was covered in clear plastic so no one could mess it up. He married his wife Laura who was a scholarship student at the elite Fieldston School, while had a long-term relationship with Fieldston scholarship student.

 

While he was at Goldman Sachs, I was at Salomon Brothers and Lehman

Brothers. We both witnessed the great bull market in financial assets that began in 1982, the crash of 1987, the bond market collapse of 1994 that nearly brought both Goldman and Salomon to their knees, and we were both in our offices in lower Manhattan at the time of the 9/11 attacks. While I was semi-retired in 2008, we both were caught in the whirlwind of the 2008 financial crisis.

 

Where Blankfein stood out was his raw smarts. He skipped the 8^th grade and received a full ride scholarship to Harvard at age 16. From there he went on to Harvard Law School while I went on to Baruch College and UCLA. He started out in tax law, but he realized quickly that it was not for him and applied to several investment banking firms, including Goldman. Goldman, in its infinite wisdom, turned him down. However, Blankfein did find work at J. Aron, a commodity trader, which was acquired by Goldman. So here was Blankfein with a slew of outer-borough traders trying to integrate into the very toney Goldman Sachs investment banking environment. At the end of the day, it is not clear who had a greater influence over the other as Goldman Sachs soon become dominated by its trading activity.

 

Blankfein quickly became a star a Goldman. Here was a Jewish kid from Brooklyn negotiating a Sharia compliant investment structure for a Saudi prince. He later helped invent an institutional commodity fund that offered a yield by taking advantage of the implicit interest rates embedded in spot versus futures prices. Soon he was running all of Goldman’s FICC group (fixed income, currency, and commodities) that was generating three quarters of the firm’s profits.

 

Blankfein goes into the politics behind Goldman becoming a public company. Thus, in a way Blankfein offers us two books, one being his autobiography and the other being the recent history of Goldman Sachs, of which he becomes a leading player. He certainly succeeded at playing the game of thrones at Goldman to become its chairman in 2006. Along the way we meet Henry Paulson, Jon Corzine, Bob Rubin, Gary Cohn, and David Solomon among many Goldman luminaries.

 

Blankfein chairmanship arrives just in time for the Great Financial Crisis. Early on he realizes something is going awry in the markets. He orders all of his trader to set their positions “close to home,” and he became very strict about the firm’s daily mark-to-market culture. This prepared the firm for the ordeal to come, but with the whole neighborhood burning down, even the most fire-resistant houses are in danger. In an interesting vignette Blankfein describes how Goldman received $5 billion in financing from Warrant Buffet’s Berkshire Hathaway. It was done very casually over the phone while Buffett was taking his grandson to a Dairy Queen.

 

As we all know Wall Street gets bailed, but the senior executives become among the most vilified people in America. Blankfein is no exception and he was required to have permanent armed security for several years and was continually raked over the coals by Congress and the Financial Inquiry Commission. Here Blankfein’s humble roots and his sense of humor came into play when he sparred with such pseudo-populists as Bernie Sanders and Mayor DeBlasio.

 

What struck me was that Blankfein continually kept the entire Goldman team up to date conditions within the firm and the ongoing crisis. He did a series of voice mails for the Goldman community, many of which are published in the book. My sense is that my career would have benefitted me far more by working for him rather than Salomon’s John Gutfreund or Lehman’s Dick Fuld, both of whom I knew.

 

Blankfein gets very personal in his discussion concerning his bout with cancer while still heading Goldman Sachs. He was hospitalized for intense chemo treatment and when he was out, he held Putinesque meetings with his colleagues with him sitting at one end of a long table and the others at the far end. Simply put, his immune system was totally compromised.

 

Here I only scratched the surface of Blankfein’s remarkable life. He comes off as a very real person, and I wish I had a chance to know him and I wish Goldman was more proactive in hiring outer-borough kids.

 

*- With apologies to Abraham Cahan 

Purim War- Part 3, The End Game*

The end game in the Iran War has begun. By attacking Israel’s Dimona nuclear facility and the Temple Mount, the home of Islam’s Dome of the Rock holy site, Iran has demonstrated it has become desperate. To add an exclamation point to it, Iran fired off an intermediate range ballistics missile (IRBM) at the Diego Garcia airbase 4,000 kilometers away to prove it had a missile capable of reaching western Europe. Instead of scaring off Europe, it will bring NATO around to giving full support to our efforts to reopen the Persian Gulf to navigation.

 

The existence of the Iranian intermediate range missile represents a proof text of the existence of the imminence of the Iranian threat.  Simply put, Iran’s strategy is now to take down everything around it as the price of its regime collapsing. Make no mistake, Iran is being run by a death cult thereby making it less likely that the Mullahs would seek an offramp.

 

In response President Trump has threatened to destroy Iran’s electricity infrastructure if it fails to reopen the Strait of Hormuz by early tomorrow evening. The first round would likely be done with an electro-magnetic pulse weapon used in Venezuela that would not permanently destroy the facility. That along with the Saudi move to kick out the Iranian embassy indicates that by early next week the entire gulf will be ablaze with tit -for- tat Saudi/Iran attacks on each other. In this environment the Persian Gulf will be closed to all.

 

Needless to say, the oil and stock markets will reflect this turn of events with oil prices moving sharply higher and stocks sharply lower.  

 

·       See: Shulmaven: The Purim War and Shulmaven: The Purim War: Part 2 )

My Review of Sarah Hurwitz's "As a Jew: Reclaiming our Story....."

Be Strong and Stand Tall

Former senior speech writer to President Barack Obama and head speech writer to Michelle Obama, Sarah Hurwitz has written an important book on the need for American Jews to reclaim their proud identity and go beyond being a “social justice” Jew or a “cultural” Jew. Although Hurwitz was a Bat Mitzvah her experience with Judaism was of the pediatric variety. She didn’t really rediscover her Judaism until she was 36 when she walked into an Introduction to Judaism course. Thus, much of the book is autobiographical.

 

She tells us of her discovery of the very long text-line of Judaism going from the Tanakh, to the Talmud, to later rabbinical commentaries and on to the modern era. She didn’t realize the full depth of Judaism as a way of life and a way of thinking. She also has become learned in the history of antisemitism going back to the early Catholic Church relying on the work of James Carroll’s “Constantine’s Sword.” She goes on to discuss the antisemitism that originated in the Soviet Union and how the Soviet’s anti-Zionism was picked up by the Islamic world.

 

Hurwitz picks up on Dara Horn’s theme distinguishing between Purim antisemitism and Chanukah antisemitism. Purim antisemitism calls for the destruction of Jewry while Chanukah antisemitism is all about societal pressure for Jews to give up their identity. The latter is the antisemitism of the Left in America today.

 

In order to be cool in Left circles Jews have to be social justice warriors and denounce Zionism. I have seen many a letter to the editor signed by an anti-Zionist Jew starting with "as a Jew." She characterizes Jewish anti-Zionism as a luxury belief similar to those who live in gated communities calling to defund the police. Here she goes into the history of the Israel-Palestine conflict where she effectively rebuts much of the pro-Palestinian propaganda that has become mainstreamed in America today.  That said, Hurwitz is a self-professed ‘liberal Zionist” who supports the two-state solution.

 

Her solution is for Jews to lean in to be strong and stand tall against the wave of antisemitism we are now experiencing. We have to reclaim our proud story and to that we have to reclaim our story going back to the beginning.

My Review of Per Hansen's "There Will be the Devil to Pay"

 The Mother of all Financial Crises

This is a book for economic history nerds, not for the typical lay reader. Danish business school professor Per Hansen takes us deep into the financial crisis of 1931 starting in May when the Credit Anstalt Bank of Vienna collapsed and ending in October in the aftermath of England going off the gold standard. Although the crisis has been covered before by Barry Eichengreen, Peter Temin, Liaquat Ahamed and Tobias Straumann (See: Shulmaven: My Amazon Review of Tobias Straumann's "1931:Debt, Crisis and the Rise of Hitler" ), Hansen’s account is the most detailed.

 

Instead of writing history after the fact, Hansen takes us into the minds of four key players in the crisis as they try to make sense of the enveloping collapse. His four players are Montague Norman, Governor of the Bank of England; George Harrison, President of the New York Fed; Francis Rodd, bank of England official on loan to the newly formed Bank for International Settlements; and Harry Siepmann, Advisor to Norman. They all, especially Rodd, took detailed notes. Hansen records many of them in full and he had access to the numerous telegrams that lit up the wires of Europe.

 

For all four of them the maintenance of the gold standard was the highest priority and as Eichengreen, Temin, and yes Keynes noted, it was the fetters of the gold standard that worsened the crisis. Hansen calls out the fact that the United States and France did not play by the rules of the gold standard by failing to ease credit sufficiently to staunch the inflow of gold coming from Germany and England. It was the gold outflow from Germany and England that forced upon them a deflationary spiral from which there was no recovery.

 

All four of them were operating under the lender of last resort rules proposed by Walter Bagehot in 1873. (See: Shulmaven: My Amazon Review of James Grant's "Bagehot: The Life and Times of the Greatest Victorian" )  Bagehot’s crisis rule called for central banks to lend freely, against good collateral at a penalty rate. That works if there is sufficient good collateral to lend against. In the case of Credit Anstalt, there was none. Indeed, Credit Anstalt was more a private equity fund controlling about 70% of Austrian industry, than a commercial bank. Simply put, it was funding long term equity with short term deposits. When the market recognized the bank’s assets were worth far less than was thought, a bank run ensued. What exacerbated the crisis was that Credit Anstalt was a highly prestigious Rothschild bank with a blue-ribbon board of directors. If it could happen to them, it could happen to any bank.

 

The crisis then moves to Germany in July when the Danat Bank failed triggering an internal and external drain on deposits. In an effort to maintain the gold standard, the Bruening government yet again adopts further austerity policies as a condition to receiving aid from the Bank of England, the Bank of

France and the New York Fed. Yes, George Harrison of the New York Fed was in up to his eyeballs in the European crisis. Although he formally needed approval from the Fed’s Board of Governors in Washington, that was a mere formality. As part of the crisis management a standstill agreement on withdrawing international deposits from Germany was put in place.

 

That standstill agreement kept England from withdrawing gold from Germany exacerbating a gold outflow that was already in train. To staunch the gold outflow the Bank of England recommended an austerity budget which triggered a naval mutiny over pay cuts. It was then only a matter of time before England left the gold standard and let the pound float.

 

The German crisis put such a strain on Montague Norman that he suffered a nervous breakdown and was out of action from mid-August to late September. However, there was not much he could have done. Hansen highlights the fact that origin of the European crisis was the after affects of World War I that left a legacy of inflation along with German reparations payments and an inter-allied debt to the United States. In June of 1930 President Hoover called for a one-year moratorium on all debt repayments, but that was scuttled by France. While England would have benefited because it received less reparations payments than what was owed the United States; for France it was the reverse.  

 

Thus, reparations and the inter-allied debts hung over Europe like a dark cloud until the June 1932 Lausanne Conference which suspended all payments. By then the depression was in full force and Hitler was well on the way to power.

 

As someone who read the front page of every New York Times from August 1929 to March 1933 I have to sympathize with the four bankers and others who Hansen portrays. They were living day-to-day in a continual crisis doing the best they can under the circumstances. Hansen takes us into the weeds, which at times makes it difficult for the reader, it is well worth it. They did not know how the movie would end and were forced to make sense out of the situation as they went along. I had the same feeling about the Great Financial Crisis and the COVID crisis. In case of the latter, the Fed threw out the Bagehot playbook, by lending on questionable collateral. It worked, but along with a too aggressive fiscal policy it left a great inflation in its wake.

 

 

The Purim War: Part 2

 We are now nine days into the Purim War (See: https://shulmaven.blogspot.com/2026/02/the-purim-war.html ) where the U.S. and Israeli air forces are pounding the Islamic Republic of Iran. With Iran attacking Saudi Arabia and the Gulf States the war has widened to encompass the entire Persian Gulf with shipping all but shut down in the Straits of Hormuz. At this writing the price of WTI Oil has skyrocketed to $106/barrel. The attacks on the Sunni Arab states are all part of Iran's plan to create chaos in the Gulf to force the U.S. to backdown. In addition as we noted Israel has taken the opportunity to respond to Hezbollah attacks to pound them in Lebanon with the Lebanese government intervening on the side of Israel for the first time.

All of this was expected, but if we step back the Israelis and the Americans have made great progress. Iran's air defenses have been neutralized, weapons warehouses have been bombed, police stations have been taken out and earlier today a major oil depot in Tehran was set ablaze. Tehran was suffering from a severe water shortage before the war, the hit to the depot will only exacerbate an already bad situation.

Make not mistake, from both the Israeli and the American points of view the war is progressing well. Within in two weeks much of Iran's offensive capabilities will be eliminated and with that the Straits of Hormuz will have been cleared.

Today Iran selected Motjaba Khamenei, the son of Ali Khamenei, as its supreme leader thereby undoing a promise of the 1979 revolution to not allow hereditary changes in the leadership. The delay in his appointment signaled major divisions within Iran's ruling circles. By the way Motjaba just happens to own a mansion in London.  My guess is that Motjaba will soon have the same fate as his late father. Once that happens the way will be open for disgruntled members of the Islamic Revolutionary Guard Corps to seize power and open the way for a political settlement. They will be pushed into it when they lose control of the streets of Tehran to the populace and the oil workers at the giant Abadan refinery strike.