Sideways: Goldman Sachs – investing in people

COPYING AND DISTRIBUTING ARE PROHIBITED WITHOUT PERMISSION OF THE PUBLISHER: CHUNT@EUROMONEY.COM

By:
Jon Macaskill
Published on:

Goldman Sachs almost certainly made a good investment when it paid Hillary Clinton $675,000 for three speeches.

Hillary Clinton Stronger Together-R-600
Democratic presidential nominee Hillary Clinton makes her point

Clinton is likely to be the next president of the US, and even if she enacts some policies that work against the broad interests of Wall Street, she will probably feel an obligation to provide access to Goldman in the future. The bank played along with her desire to keep the transcripts of her speeches secret when she was contesting the Democratic presidential nomination with Bernie Sanders, which helped her to fend off accusations that she is too close to corporate interests. 

Goldman’s leverage from potentially disclosing the transcripts will diminish if she is president and details of what are assumed to be pro-business remarks in her speeches could then be filed under the category of a minor embarrassment. But the bank’s loyalty as Clinton faces a genuine political threat will surely have some future value for Goldman and its leaders.

The recent decision to hire José Manuel Barroso as non-executive chairman of Goldman Sachs International might take longer to bear fruit. Barroso’s move to Goldman less than two years after he left his position as president of the European Commission, a role he held from 2004 to 2014, has drawn widespread condemnation. 

A petition calling for Barroso to have his EC pension suspended while he works for Goldman had attracted over 80,000 signatures by the end of August and French president Francois Hollande joined the chorus of disapproval by dubbing the move “morally unacceptable”.

Barroso’s value for Goldman lies in his contacts with other members of the European governing classes (he served as prime minister of Portugal before becoming president of the EC), not with his limited popular appeal, however. So the investment in hiring Barroso – for “his perspective, judgment and counsel” as Goldman put it in a press release – is still likely to reward the bank’s famous aim to be “long-term greedy”. 

The announcement of Barroso’s appointment just over a week after Sherwood made his uncomfortable appearance before parliament at least served to share the burden of being the Goldman employee the unwashed masses most love to hate 

And in the short-term the vituperation heaped on Barroso should help him to form a bond with Michael Sherwood, co-head of the GSI unit where the former EC president will be deploying his perspective, judgment and counsel.

Sherwood became the focus of the many and energetic Goldman haters in late June when he reluctantly appeared before a UK parliamentary committee to discuss the bank’s involvement in the disastrous acquisition of retail firm BHS. 

Sherwood managed to avoid serious censure for Goldman over its informal advisory role, but his close relationship with billionaire Philip Green was widely discussed and left the banker sharing some of the opprobrium that Green attracted. 

So the announcement of Barroso’s appointment just over a week after Sherwood made his uncomfortable appearance before parliament at least served to share the burden of being the Goldman employee the unwashed masses most love to hate.

The impact of regulatory changes and higher capital requirements is increasingly making Goldman look like a member of the pack of big banks, rather than the slightly mysterious engine of profit that once inspired awe and envy among its competitors. 

But it still stands alone in its ability to foster connections with senior policymakers and inspire both jealousy and rage over the potential influence that these links confer. Other banks hire semi-retired members of policy elites – former Bank of England governor Mervyn King has started advising Citi and JPMorgan has a controversial relationship with former UK prime minister Tony Blair, for example.

Goldman remains unrivalled in creating an aura of access, however. 

The practical worth of Goldman’s connection to Hillary Clinton will be difficult to gauge, even after her political career is over. The perception that the bank has ties at the very top may endure longer.