At many, many points in your Wall Street career, you will encounter a basic quandary, which is, “should I behave like a douchebag here, or should I not behave like a douchebag at this one particular moment in time?” This question is hard because, on the one hand, behaving like a douchebag often brings immediate cash rewards, and can be fun; but on the other hand, there are longer-term reputational consequences to frequent douchebag behavior. Goldman Sachs has a name for its position on this trade-off, which is “long-term greedy,” and you can go think your thoughts about whether and in what circumstances “long-term douchebag” is a relevant substitution.
Speaking of long-term douchebags, William Cohan can NURSE A GRUDGE, man:
Yet, there is another version of the Bain way that I experienced personally during my 17 years as a deal-adviser on Wall Street: Seemingly alone among private-equity firms, Romney’s Bain Capital was a master at bait-and-switching Wall Street bankers to get its hands on the companies that provided the raw material for its financial alchemy. … I never negotiated directly with Romney; he was too high-level for any interaction with me. Rather, I dealt often with other Bain senior partners, who were very much in his mold. In my experience, Bain Capital did all that it could to game the system by consistently offering the highest prices during the early rounds of bidding — only to try to low-ball the price after it had weeded out competitors.
The complaint here is that Bain would put in high bids in early rounds of an auction for a company, and then when other bidders have been eliminated and Bain’s negotiating position was stronger, it would find ways to re-trade on price. And if you’ve ever worked in M&A, or, um, anywhere else, you are laughing hysterically right now at the notion that Bain partners are the only people who re-trade on price.*
Continue reading »
We’ve noticed that some of the most vocal critics of financial industry pay are those who used to work at investment banks. We’re not sure why this is – maybe the former bankers know how grossly overpaid their ex-colleagues are, or maybe now that they’ve gotten their money they want to pull up the ladder so that their Hamptons vacations aren’t spoiled by crowds of current bankers.
That question came to mind as we read yesterday’s editorial in Bloomberg by William Cohan, former Lazard and JPMorgan banker and current advocate of killing bankers for their pelts. Cohan wants to end the “moral rot” in banking and get back to basics. Some of his suggestions are standard, like a vague Volcker-Rule-Glass-Steagall “Close the Casino” prescription. But more interesting is this:
We could start by creating a new security that represents the entire net worth of the top 100 executives at the remaining Wall Street companies. These people decide what business lines to be in, how to deploy capital, who to promote and how much to pay. This new security would be at the bottom of the corporate capital structure — below corporate debt and shareholder’s equity — and would be the first asset to be wiped out if the company performs poorly. This would ensure that today’s Masters of the Universe are focused on the risks their businesses are taking.
Continue reading »
Earlier this morning, Dick Bové sent out a slightly defensive note to clients, regarding an appearance by writer William Cohan on Bloomberg TV. Dick wrote: “Bloomberg TV did a segment in which it claims that I made statements about the [Goldman Sachs] SEC investigation and that author Bill Cohen states that ‘I am full of hot air.’ Further, Bloomberg and Cohan argue that Goldman ‘got to Bove’.” Richard went on to say that this “getting to” business was bull shit, as Goldman Sachs has not paid for his services “for years,” for reason lost on him (“the company is not a customer and for whatever reason it will not pay for my research”). We hadn’t seen the segment but we Dick seemed pretty miffed, perhaps justifiably, as the comments did seem moderately insulting. Apparently someone was feeling slightly sensitive this morning because while the words “Goldman got to Bové” did exit Bloomberg TV anchor Deirdre Bolton’s mouth (Cohan repeated them but made sure to use his hands to make it clear he was quoting DB), and for which he can be pissed, at no time during the program did anyone say anything about Bové being “full of hot air.”
The tapes are here for Dick to review when he’s feeling better and is ready to come out of his room. Continue reading »
Thornton
For his new book about Goldman Sachs, Money and Power, William Cohan goes inside to figure out the Masters of the Universe’s secrets to success. Speaking to FINS recently, Cohan noted that the firm subscribes to a “work hard, work hard” mantra (as opposed to “work hard, play hard”) and that it goes to great lengths to nail the idea into employees’ heads that failure is not tolerated. For instance, former president John Thornton once mentioned, while pitching a potential client, “If we do not get this mandate, I will personally slit the throats of all my team and drink their blood.” This of course got us nostalgic enough to break into the GS archives for some other motivational quotes by Thornton, all of which, as was the case on the throat slitting deal, got the job done. Continue reading »
A lot of people are of the mind that many of the decisions made by Stan O’Neal were responsible for the fall of Merrill Lynch. Decisions such as the ones to fire very senior, long-time employees once he was named CEO, take on a massive amount of risk, perhaps more than was, let’s just call it “prudent,” in the name of profit, etc, etc, etc. The fact that he increased ML’s investments in CDOs from around $1 billion to around $40 billion (-ish) in about 18 months or so, which caused the bank to writedown $8 billion (give or take a few mill) in October 2007, and book its largest quarterly loss ever ($2.24 billion) are things such people cite when they make this argument. But here’s another theory, which is being tested out this morning. Tell me what you think of it: None of this was Stan O’Neal’s fault.
Now, before you jump down my throat, hear me out. This lesser known interpretation of facts comes from someone extremely familiar with the firm, and events that transpired during the O’Neal era. Someone who could tell us, definitively, if we’ve been wrong all along about the former CEO. Obviously, I’m talking about Stan O’Neal. Continue reading »
