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 8th 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
