Too Big to Fail [97]
Goldman’s Mark Winkelman was given the task of taming this unruly crowd. The Dutch Winkelman was one of Goldman’s first foreign partners, known for his analytical brilliance; he was one of the first executives on Wall Street to recognize the importance of technology for trading, as computers became smaller and more powerful. Winkelman first noticed Blankfein when he saw the short salesman wrestle the phone away from a trader who was trying to yell at a client who had cost him money.
He shielded his protégé from a wave of job cuts at J. Aron that came the following year, the first widespread layoffs at Goldman. Blankfein was fortunate in other respects as well. Goldman had decided to make a major push into trading bonds, commodities, and currencies, and to take on larger risks. The firm had been a pioneer in commercial paper and a leader in municipal finance, but remained an also-ran in fixed income, compared with Salomon Brothers and others. Winkelman and Jon Corzine overhauled that part of the business and recruited talent from Salomon.
Impressed by Blankfein’s well-honed diplomacy and his obvious intelligence, Winkelman placed him in charge of six salesmen in currency trading and, later, the entire unit.
Robert Rubin, who then ran fixed income with Stephen Friedman, was opposed to the move.
“We’ve never seen it work to put salespeople in charge of trading in other areas of the firm,” Rubin told Winkelman. “Are you pretty sure of your analysis?”
“Really appreciate your experience, Bob, but I think he’ll do all right,” Winkelman responded. “Lloyd’s driven, and he is a very smart guy with a very inquiring mind, so I have some confidence.”
The young lawyer soon demonstrated his trading prowess by structuring a trade that allowed a Muslim client to obey the Koran’s prescriptions against interest payments. At the time, the complex $100 million deal, which involved hedging Standard & Poor’s 500 contracts, was the biggest Goldman had ever done.
Blankfein was also a serious reader, taking stacks of history books with him when he went on vacation. Never flashy or self-promoting, he was an almost ideal embodiment of the culture at Goldman, where no one ever said, “I did this trade,” but rather, “We did this trade.”
Winkelman was crushed when he was passed over for Corzine and Hank Paulson in the top jobs at Goldman in 1994. Blankfein, who was made partner in 1988, was one of four executives named to take over Winkelman’s responsibilities. Winkelman left the firm.
By 1998, as co-head of fixed income, currency, and commodities, Blankfein was running one of the most profitable businesses at the firm, but he was not seen as an obvious candidate for the top job.
Eventually, Paulson was won over by Blankfein’s raw intellect and made him his co-president, prompting John Thain to leave the firm. For his part, Blankfein shaved his beard, lost fifty pounds, and quit smoking. When Paulson was nominated as Treasury secretary in May 2006, he announced that he had selected Blankfein as his replacement.
For as long as Blankfein could remember, Goldman had been thinking that it might need a partner. In 1999, during Paulson’s stewardship, he had held secret merger talks with JP Morgan, soon after the firm had gone public. Those discussions ended