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Culture shifts at Goldman Sachs

By A. James Memmott

December 17, 2009 at 11:20am

Readers of The New York Times Wednesday must have been floored to learn that Goldman Sachs is in it for the money.

And it’s not doing it the old-fashioned way, one client at a time.

In a story headlined “As Goldman Thrives, Some Say an Ethos Fades,” reporter Jenny Anderson wrote that current Goldman Chairman Lloyd C. Blankfein has emphasized short-term profits over long-term business relationships.

Anderson contrasts Blankfein’s approach with that of the late John L. Weinberg. He led Goldman from 1976 to 1990 and stressed building and sustaining client relationships at the expense of quick profits.

As Anderson notes, Blankfein and Weinberg represent two cultures within Goldman.

Weinberg, who died at age 81 in 2006, was the son of Stanley Weinberg, Goldman’s chairman from 1930 to 1969.

He served in the U.S. Marines in World War II and joined Goldman, then a privately held firm, in 1950. He took a leave to serve in the Korean War, and then returned, becoming a partner in 1956.

Weinberg started in corporate finance at Goldman and than ran the fixed-income department.

In 1976, he became co-senior partner with John Whitehead. They ran the firm together until 1984, when Whitehead left to become deputy secretary of state.

Weinberg then served as sole senior partner and chairman until 1990. He was then senior chairman until 1999.

Over the years, he developed strong relationships with various clients and served on several corporate boards including those of Knight Ridder, the former newspaper company, and Dupont.

In all of this, Weinberg’s mantra was to put the client’s interests first.

“I don’t think John ever thought about money,” Robert E. Rubin, who succeeded Weinberg, as co-chairman told the Times when Weinberg died. “It goes back to his father - when he dealt with clients he never thought about the transaction, he thought about them.”

Weinberg wouldn’t allow Goldman to be involved hostile takeovers.

He also resisted taking the firm public, something that didn’t happen until 1999 under the leadership of then Chairman Henry Paulson, the future treasury secretary.

But Weinberg did lead Goldman to buy J. Aron & Company, a commodities trading firm, in 1981 for $120 million.

At the time, Blankfein was a metal trader for J. Aron, and he came with that company to Goldman.

Like Blankfein, several members of Goldman’s current leadership have their roots in trading, a part of the firm that produces the majority of the Goldman’s profits.

Given the traders’ success, the bankers are being urged to change their ways, the Times reported.

“Bankers who once spent years cultivating corporate clients in hope of one day landing lucrative work like advising on a big merger, are now being urged to squeeze more revenue from their customers,” Anderson writes.

The Times does not say what role John L. Weinberg’s son, John S. Weinberg, has in this shift in emphasis.

He is one of three Goldman vice chairmen and has been co-head of the firm’s investment banking division in the Americas since 2002.

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