Does Goldman's Lloyd Blankfein Have A Gary Cohn Problem (And Vice-Versa)?

06/21/2017 02:08 pm ET Updated Jun 21, 2017
Gary Cohn, left  Lloyd Blankfein, right
Goldman Sachs
Gary Cohn, left Lloyd Blankfein, right

Lloyd’s entry level tweet decrying the U.S. withdrawal from the climate accords was an expression of mild displeasure with an administration that’s welcomed, with open arms, a cabal of Goldman executives who’ve been paddling through the muck trying to figure out how Wall Street can profit from last November's surprising turn of electoral events.

Chief among them was Goldman’s brightest star: former Chief Operating Officer, Gary Cohn. As current director of the National Economic Council, Gary maintains high hopes that he’ll be able to make his vision of America great again just like it was before those nasty days in 2008 that brought the sub-prime party — and the world economy — to a crashing halt.

The old saw — there are no problems, just opportunities — seemed to be the operative dynamic for Lloyd and Gary as they both donned Speedos for an eyes-open belly flop into the swamp. In the heady weeks following the election the swamp seemed more like a kitty pool teeming with giddy denizens splashing themselves with moolah. The stock market continued to spill out earnings like a slot machine having hit trip 7s; after all, it seemed like those pesky Dodd-Frank regulations would soon be consigned to the dustbin of financial history.

Outsiders might have thought that Lloyd and Gary were once joined at Goldman’s hip — sort of a financial version of Ben and Jerry — but in recent years there were indications that trouble was looming. It was common knowledge on the Street that Cohn coveted Goldman’s top spot and, equally known, Lloyd wasn’t going to give it up.

One source who knew Gary well offered a hands-down affirmation that he was the smartest/brightest/most hardworking guy down at 200 West Street and if anyone could accomplish the impossible with a new administration, it was Cohn. Consultations with a friend by the name of Jared Kushner resulted in Gary’s deployment to the front lines to help grow the economy through infrastructure projects — turbo-charged by private equity investments — which in turn would create many, many jobs.

There was a credible precedent to this, according to the source, citing President Eisenhower’s pushing of the 1956 National Interstate and Highways Defense Act, which initiated the construction of some 41,000 miles of cross-country highways; at the time, the largest public works project in American history. Ironically, it was another case that involved the Russkis, albeit of the Cold-War type, whose nuclear posturing begged the question of how was the military going to move troops quickly and effectively from coast to coast over roads that were patch-worked together with no particular rhyme nor reason.

In those simpler days before private equity, construction costs were defrayed by adding one red cent, so to speak, to the tax paid on a gallon of gas.

But let’s not forget that while Ike did create jobs, none were filled by illegal Mexican immigrants because the President had deported some 1.5 million in his notoriously effective Operation Wetback two years prior.

Gary Cohn has had his work cut out for him; with all the scandals and controversies the swamp has taken on a quicksand texture and he’s been desperately treading water trying show some real progress with his infrastructure efforts. Then came Lloyd’s entrance into the twitterverse and his objection to Gary’s boss pulling the U.S. out of the climate accords.

It caused a bit of hip dysplasia between the former colleagues and Cohn offered a response; writing an Op-Ed for the Wall Street Journal with H.R. McMaster, the National Security advisor, offering this bit of America First wisdom.

The world is not a ‘global community’ but an arena where nations, non-governmental actors and business engage and compete for advantage .

It was a shot fired over Blankfein’s bow: no more Mr Nice Guy for Uncle Sam. If we’re going to play world leader then screw the tree-huggers, the “Buy the World a Coke” types, all those warm and fuzzy feelers: it’s time to go all Gordon Gekko and if Lloyd needs a friend perhaps he better get himself a dog.

Lloyd seemed to take up the challenge responding with a tweet on June 9.

Lloyd thumbing his nose at his once second-in-command? A nah, nah, nah, nah bit of tweeting one-upmanship?

Now Gary is a big, lumbering, 6-foot-3 bear of a guy, with a reputation for aggressive, in-your-face posturing so perhaps with that in mind, Lloyd thought it best to walk back the intention of the tweet, following up with a can’t-we-all-get-along message inspired by the Virginia ball field shootings.

To date, none of Lloyd’s tweet wishes have been fulfilled — not even close — and the future of Gary’s infrastructure endeavors remain clouded. There has been talk that it’s Janet Yellen’s job that’s on Gary’s radar screen; something he denies. Nevertheless it has been reported that he will lead the search for a “qualified” replacement when Yellen’s term at the Fed expires at the end of January.

Truth be told, a restless Gary may find, with credible cause, that he is the most qualified of the current bunch of swamp-friendly financial types.

For Goldman Sachs — a company known for pivoting with the political winds — there’s nothing that can shake loose the all-in-the-family connection with ex-Goldman alums. Like the mafia, it’s in the DNA, and when I recently asked Jake Siewert, head of Goldman’s PR division, whether the firm still supports Gary’s work, the architect behind the 2013 campaign to turn Lloyd into more of a human being sent me this comment.

I’m glad Gary is there. He’s a pragmatic, sensible voice and we can use more of that in Washington.

Pragmatism has its limits and while a dive into the swamp and a race for the riches was a pragmatic decision for both Lloyd and Gary, considering an exit strategy might also be a wise possibility; especially if the President’s base becomes disillusioned with a lack of infrastructure inspired job creation. One needs only to recall how “Goldman Sachs” was used as a Trump campaign epithet, linking Hillary to the firm, or the shouts of same leveled at Ted Cruz at the RNC convention for his wife’s employment at the Vampire Squid (according to Goldman spokesperson, Michael DuVally, Heidi Cruz, an investment manager, left during the campaign but is now back at her desk).

Looking down the road...

Goldman has more money than God so that Lloyd’s continued work on God’s behalf will continue no matter who sits in the Oval Office.

Gary, however, is vulnerable.

I spoke with former Bear Stearns executive and veteran Wall Streeter, Richard Marin, who offered Cohn this suggestion:

Be wary and lawyer up. The President’s ease of throwing staffers under the bus that that is heading straight for him seems pretty much assured. I hate to see even an erstwhile and accomplished GS veteran get trashed by association.

During these unpredictable times, offering unpredictable outcomes, perhaps Gary and Lloyd might find solace by reaching back into those kinder, gentler, pre-IPO days, when a true statesmen like the late John C. Whitehead stood at Goldman’s helm. A former Deputy Secretary of State under Ronald Reagan his sage advice, the so-called “ten commandments,” remain enshrined in Goldman culture. His global pragmatism led him to become a passionate supporter of U.S. involvement with the United Nations and that’s when I met him. In 1995, Pacific Street Films, my company, produced, In Search for Peace: Fifty Years of the United States in the United Nations (narrated by Paul Newman) which included Whitehead as an interviewee.

Whitehead seemed cast out of the same mold as another character from Oliver Stone’s Wall Street: Lou Mannheim (Hal Holbrook) whose sane and sensible thinking provided a counterpoint to Gekko’s winner-take-all philosophy. His words of wisdom, spoken to eager-beaver Bud Fox (Charlie Sheen), seem severely dated by current Wall Street standards.

The money you make for people helps create science and research jobs, don’t sell that out.

Quaint sentiments for both Lloyd and Gary to consider following the meteoric rise of greed-fueled proprietary trading after Goldman went public.

Again, in another Wall Street tête-à-tête, Bud offers Lou some prescient advice.

The main thing about money, Bud, it makes you do things you don’t want to do.

Take heed guys....

Joel Sucher is a co-founder of Pacific Street Films (together with Steven Fischler) and has written for a number of platforms including American Banker, In These Times, HuffPost and Observer. com. He and Pacific Street Films co-founder, Steven Fischler, are working on a streaming series about their experiences at NYU Film School.

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