All the Devils Are Here [63]
In this misguided stance, Greenspan was blinded, as ever, by ideology. Summers was blinded by his deep-seated need to be viewed as a brilliant man, which in this case meant embracing, uncritically, the complexities of modern finance. As for Rubin, he was blinded by pride.
The Goldman Sachs that Bob Rubin joined in 1966, a young man just a few years removed from Yale Law School, was not the Wall Street juggernaut we know today. Not even close. Though nearly a century old, with a noble history, Goldman had nonetheless spent most of that century struggling to become an elite firm. During the Depression, Goldman was nearly brought to ruin by an excitable senior partner named Waddill Catchings, who had made a series of disastrous investments during the roaring twenties that dragged the firm down for the next decade plus. According to The Partnership , a history of Goldman Sachs written by Charles Ellis, it was saved in part by the forbearance of the ruling Sachs family, which covered its losses for the next twenty years, and in part by the savvy senior partner Sidney Weinberg, who had joined the firm as a janitor in 1907, took it over after Catchings was ousted, and ruled it until his death in 1969.
Weinberg was a Wall Street giant—Mr. Wall Street, the press called him. He rebuilt Goldman as a place where the relationship between a corporate client and its Goldman Sachs investment banker was paramount. More often than not, that investment banker was Weinberg himself. As late as 1956, when he was sixty-five, Weinberg served as Ford’s investment banker when the automaker went public. At the time, it was the biggest IPO in history, and it finally catapulted Goldman Sachs into Wall Street’s top tier.
The senior partner who succeeded Weinberg was Gus Levy, a gruff, no-nonsense trader who had built the firm’s trading department more or less from scratch. In the early 1950s, Levy had been one of the innovators in risk arbitrage, and the firm had one of the leading “arb” desks on Wall Street.
For most of its modern life, Goldman Sachs has been a firm with two cultures—a genteel investment banking culture, represented by Weinberg, and a rough-and-tumble trading culture, exemplified by Levy. In many ways, the two men could not have been more different. Yet Levy, a college dropout who joined Goldman at the age of twenty-three, completely shared Weinberg’s beliefs in how Goldman Sachs should act as a firm. A Goldman man, whether banker or trader, worked impossibly hard, eschewed flashy cars and clothes, and was utterly devoted to the firm. He was maybe just a little smarter than his Wall Street peers, but he didn’t make a big show of it. His Goldman colleagues were his closest friends. He didn’t tell tales out of school. He took great pride in his work, but it was a quiet, understated pride. Senior executives at Goldman did not have palatial offices with private bathrooms. The rugs and furniture were a little shabby. The firm’s offices in lower Manhattan lacked so much as a single sign identifying it as Goldman’s headquarters.
Most of all, Levy subscribed to Weinberg’s lifelong belief that acting ethically on behalf of its clients was the single most important thing Goldman Sachs did. Anything that created even the appearance of a conflict with its clients was not just discouraged, but forbidden. That’s why, for instance, when corporate raiders like Carl Icahn and T. Boone Pickens began their takeover attempts in the late 1970s, Goldman refused to advise them, despite