Bailout

Goldman reputation datapoint of the day

By Felix Salmon

Roben Farzad, in his BusinessWeek cover story on Goldman Sachs, had to mention the reputation issue:

Goldman’s reputation with its clients?who must have at least $10 million to open an account?has never been better. Among the general public, however, the perception is that Goldman is the toxic epicenter of everything wrong with Wall Street.

Viniar says Goldman’s decision to explain its motives and actions during the crisis isn’t fleeting, that it is committed to changing its popular image. “We believe our franchise is as strong as it has ever been and that our clients, our people, and our shareholders are happy with our performance,” he says. “But we’re also very aware of public opinion and the backlash against Wall Street, and we’re doing our best to address it.”

But I’m not at all sure that Farzad is right when he says that Goldman’s reputation with its clients has never been better. In fact, I think that reputation took a hit when the bank went public, and has never really recovered.

Today we learn from Aaron Elstein about an interesting pair of emails from within Washington Mutual in October 2007, long before Matt Taibbi and others turned Goldman into Public Enemy Number One.

WaMu’s Todd Baker, executive vice president for corporate strategy, had been receiving pitches for a deal which would get some toxic assets off its books. He told CEO Kerry Killinger that Goldman was his first choice, with the smartest banker. Still, he added, there was a downside:

However, Goldman “is very expensive and we may have trouble getting John’s full attention…We always need to worry a little about Goldman because we need them more than they need us and the firm is run by traders.”

Killinger lost little time in vetoing the Goldman idea:

“I don’t trust Goldy on this. They are smart, but this is swimming with the sharks.”

If plugged-in bankers like Killinger were thinking that way in 2007, at this point I think most of corporate America must be wondering what the downside is of hiring Goldman’s investment bankers when the firm will always be run by traders. It’s true that a lot of Goldman’s competition has merged or disappeared. But old firms will start fighting back, and new ones will emerge. And Goldman might well learn that what it considers popularity among its clients is really just a function of their not having a lot of choice right now.

Full post as published by Macroprudential on April 13, 2010 (boomark / email).