Harvey Schwartz's Work Here Is Just Beginning

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I don't know Harvey Schwartz but I feel some obscure loyalty to all the weird subcultures that I've been a part of, and Goldman's Americas Financing Group was one of the weirdest.1 As Harvey lived there in his early days at Goldman, I salute him and wish him the best as Goldman CFO. But that's no reason not to armchair psychologize his - surprising-ish? - choice as Goldman's new CFO, so let's do that quickly.

I suppose there are two overlapping jobs for a CFO, particularly a financial institution CFO:

  • smoke cigars and pal around with shareholders, bondholders, and analysts; and
  • chain-smoke and freak out about liquidity.

Bones's merits on the first front were obvious, but the main impression he gave off was an obsession with the second; he never missed an opportunity - including on his last-ish call as CFO this afternoon - to remind people that his list of concerns consisted of "liquidity, liquidity, liquidity." Now it happens that he lived in interesting times, in which markets and analysts turned out to be a lot fonder of the liquidity obsessives than the misplaced bankers.

So let's ponder this:

Prior to becoming global co-head of the Securities Division, Schwartz was global head of Securities Division Sales, where he helped oversee the Division’s relationships with clients including corporations, asset managers and institutions. Before that, he was co-head of the Americas Financing Group within Investment Banking, which centralizes financing-related advice, origination and execution for clients.

You might make of it what one analyst asked on the call: "so, Harvey, you are a client and sales guy, huh?"2 Running sales, and previously running the business that helped companies sell securities to investors, seems to be the sort of background that trains you up in, um, selling securities to investors. This is a good skill to have if you are selling securities to investors, or otherwise managing corporate relationships with pesky stockholders, bondholders, and their self-appointed sell-side representatives. It is a far from negligible skill if you are, say, convincing unwilling repo investors to take your name. But it is not necessarily where you learn to obsess about liquidity risk management. Of course, running the securities division - Schwartz's current job - is where you learn that, and he was quick to point out that in that role he runs a (huge) balance sheet and manages the division's liquidity, but as a background it's definitely more salesy than treasury-y.3

From this you might move on to what another analyst said on the call, which is basically: "so, David, did you decide to retire now, after 32 years, because you expect things to be calm and boring for a while?"4 Viniar's answer was of the calm-but-not-boring variety, but you can see the guy's point, right? You'd prefer, all else being equal, to do a CFO transition during a relatively quiet period. And in the last few years Viniar steered Goldman's balance sheet through a rough time - an existentially rough time, the sort of rough time where you come in in the morning worrying about whether you'll make it through the day, not the sort of rough time where you complain about your stock price moving sideways.

That worked out well, existentially! But as Mike Mayo pointed out on the call, the stock price is the one blemish, or at least meh, on Viniar's record; it's still stuck below where it was in 2005. So in picking a successor to Viniar, is your first choice to get someone who obsesses single-mindedly over liquidity, or someone who can leave that obsession to his staff - mentioned repeatedly on the transition call - and add a bit of salesmanship and pizzazz?

It depends, right? If you think that the next few years are going to be full of drama, and that banks will be distinguished by their balance-sheet acumen and knife-edge liquidity risk management, then perhaps you go with option A. If you think - due to, say, changes in the industry and/or regulatory climate - that banking is going to be boring, well, then, you might want prefer that your CFO spend some time spicing things up.

Harvey M. Schwartz to Become Chief Financial Officer at the End of January 2013; David Viniar to Retire and Join Board of Directors [GS]

1.The name alone! You want an apostrophe, but there's no apostrophe! It's PLURAL. Mind-blowing.

2.Paraphrased of course. Do I look like a reporter?

3.Or what you might call, if you knew Goldman or, I guess, Star Trek, "Federation-y," meaning dealing with operational and reputational risk as well as the risk of, like, accounting fraud. This is a good article from 2011 on the CFO succession race; they note that "The CFO role at Goldman Sachs is already broader than at some other companies. The entire administrative side of the firm -- known as operations, technology and finance or by its nickname 'The Federation' - all report to Viniar." And they picked two obvious successor candidates, controller Sarah Smith and treasurer Liz Beshel Robinson, who you can think of as Viniar's deputies for Federation risk and liquidity risk, respectively. And now it's neither of them. Incidentally we hear that neither of them knew until today that Viniar was stepping down, so there's that.

4.Recurse!

Related

Know Your Chief Financial Officers: Harvey Schwartz

What do you know about soon-to-be Goldman Sachs CFO Harvey M. Schwartz? Probably not much, but luckily Bloomberg profiled the guy today and came back with a couple moderately amazing tidbits about longtime chief financial officer David Viniar's successor. Such as one, the fact that he likes his women with some gunshot wounds ("Schwartz...lives with Annie Hubbard, whom he met in 2003, a year after she was shot helping subdue a hostage-taker at an East Village bar") and two, to date he is the only known Goldman Sachs executive to play a role in a chick lit novel that went on to become a major motion picture (Jon Winkelried's cameo in The Notebook, which was left on the cutting room floor, sadly does not count). Schwartz and Hubbard make an appearance in the best-seller “Eat, Pray, Love,” where they’re credited with helping author Elizabeth Gilbert buy a house for a friend in Indonesia. “I sent out this e-mail to everybody that I knew, and I got an e-mail back from Annie saying that her boyfriend, Harvey, would like to contribute $10,000 to the cause,” Gilbert said in an interview. In addition to his generosity, shareholders will also be happy to hear that there's no risk of Schwartz pulling a Jimmy Cayne, i.e. working on his golf game in moments of minor to major crisis ("Jim Rothenberg, who plays with Schwartz about three times a year, said Schwartz’s high-teens golf handicap is a reassuring sign he’s not playing too much. 'I wouldn’t say Harvey’s a good golfer, which is a good thing if he’s going to be CFO of Goldman Sachs,' he said.") Schwartz Shrugged Off Black Monday In Rise To Goldman Sachs CFO [Bloomberg]

David Viniar's Work Here Is Done

Back in 2009, Goldman Sachs Chief Financial Officer David Viniar, whose face may not be as recognizable to you as that of Lloyd's but whose voice you've likely found just as if not more soothing each time you hear it during the firm's earnings calls, decided he was ready to move on after a three-plus decade long career with The Firm. Normally, that would have been just fine; people would have wished Viniar all the best as he happily waved good-bye to all his colleagues and friends from the gondola lift made of fluffy clouds and money that transports all Goldman Sachs executives to retirement. Unfortunately for DV, however, it was around the time that he started to think about leaving that Goldman hit some unfortunate rough patches that included "a civil fraud suit by the Securities and Exchange Commission over marketing of mortgage-related securities, a federal criminal probe on the same matter, and a civil suit brought by a hedge fund that bought a Goldman CDO." And while other higher-ups-- no names: Jon Winkelried-- would have thought nothing of abandoning Lloyd in his time of need or what kind of message it would have sent that a top official was calling it quits, David "Bones" Viniar is  a little more loyal than that. Lot more loyal in fact ("He's so loyal he's only going to do anything when the timing is appropriate," one person said at the time, adding that "David will do whatever the firm asks of him") and so he stayed. Stayed by Lloyd's side during his darkest hour. Stayed when the Goldman needed him most. And although some might have hoped he'd forget about wanting to leave; that he could be tricked into staying "just one more year" and another and another and another after that; that that good-bye he put on hold would stay on hold forever; that, if all else failed, Gary Cohn could put him in a sleeper hold with his legs...that good-bye has come. Goldman Sachs today announced that Harvey M. Schwartz, the global co-head of the Securities Division, will become Chief Financial Officer at the end of January 2013. After a distinguished 32 year career at the firm, including 12 years as the Chief Financial Officer, David Viniar has decided to retire and will join the Board of Directors as a non-independent director at that time. The firm expects to appoint additional independent directors to its board in the near term. David Viniar retiring as Goldman CFO [FT Alphaville] Related: David Viniar Stands By His Man