Gold men: Inside Sachs culture

Of all the hits Goldman Sachs has taken in recent weeks — the civil fraud suit filed against it by the Securities and Exchange Commission, the criminal probe launched by US prosecutors, the embarrassing all-day Senate hearing and the $20 billion hit to its market capitalization — the harshest blow is that people are talking about them at all.

Goldman, Wall Street’s preeminent firm, has tried for most of its 140 years to be the Street’s silent thriller.

Its closed, almost cult-like culture has helped make it the wealthiest and wisest of Wall Street banks. The headline damage is so severe, in fact, that some are wondering if that famed low-key culture and sterling reputation are irreparably damaged.

PHOTOS: GOLDMAN SACHS’ TALKING HEADS

In interviews with more than a dozen former Goldman executives, the true picture of its culture, of its gold-plated DNA, has emerged.

One ex-Goldman trader, who recently left the firm, said he remembers being at a Manhattan cocktail party when he got into a vigorous political debate with a Goldman colleague. He said his manager at the time, who was also at the party, came over to warn him that getting into political arguments is not the Goldman way.

The former trader, like others interviewed for this story, spoke only on the condition of anonymity.

His naive response to his boss that night at the party? “Why would it matter? I’m good at what I do.”

The manager reportedly told the political debater that numbers weren’t enough. “There may be someone two floors above you who doesn’t like you because of something you said.”

The employee got the message.

That low-key style is even evident in how Goldman executives dress, according to people familiar with the style.

“I’ll tell you this, the cufflinks at other firms are a lot bigger,” said one finance professional.

That low-glitz mantra is repeated right to the top of the food chain, where Blankfein has often told employees not to spend lavishly — which can be hard to police when you hand out the bonuses for which Goldman is famous.

In fact, along with the outsized annual bonuses, Goldman literally hands out a little Blankfein-influenced script that reads something like this: the future’s uncertain so act prudently in your lifestyle and your investments.

The image of Goldman is that it is populated solely by Ivy League graduates and people of privilege — although the firm has many professionals who went to no-name colleges, overachieved and made it to top-shelf business schools.

That’s not to say that Goldman, like other top firms on Wall Street, doesn’t favor top Ivy League schools when recruiting. It certainly does. But in interviews with Wall Street pros, Goldman stood out from other firms for looking beyond brainpower.

The Goldman attributes, these people said, are: brains, hunger/drive, and being a team player. That differs from other firms.

“At Bear Stearns under Jimmy Cayne, you just had to be hungry to improve your place in the world,” said another person familiar with Wall Street.

At Lehman there was a view of pedigree, you needed to have a certain name and be from a certain class, he added, noting that that is also the case at the House of Morgan: JPMorgan and Morgan Stanley, where pedigree was a critical part of how those firms where built.

The brains part of the Goldman equation is, perhaps, the easiest to decode. The firm does recruit from the country’s best business schools and its pay scale certainly attracts the best talent.

Insiders will tell you that Goldman has had a pipeline into Harvard since the days of Sidney Weinberg, who headed the firm for over 39 years — until his death in 1969.

The hunger/drive quotient is determined mainly through the interview process.

To weed out the lesser recruits, college grads have to endure 20 to 30 interviews stretching over months.

“I can vividly remember being interviewed for my job as an associate in the research department at the firm — it was three full days of what seemed like eight hours of interviews each day, meeting about 40 people during that period,” one former employee said.

The questions were less about what you knew and more about how you worked with other people, what sports you played, what groups you joined. Though Goldman culture can be ruthless, they looked for a certain kind of personality. Naked ambition was frowned upon. Cunning was prized.

“They wanted to make sure you were a good fit,” he added. “So, you were getting the same set of questions — some tough questions too — from 40 different people. They were trying to size you up — some HR people, some senior, some junior people, some people from the equities department, the derivatives department, sales and trading.”

Another ex-Goldman em ployee said people who would be in your group later were also interviewing you.

“It was very intense,” he said. “They wanted to see how you would interact with them.”

A second person said it is not uncommon to be going through the Goldman interview process, getting an offer from another firm and having to decide between the solid offer and a gamble on the possibility of more interviews at Goldman.

Another former Goldman employee, looking back at a social gathering of young, up-and-coming employees, noted that it looked like it was cut from an Abercrombie & Fitch advertisement. “Everyone was six feet tall and model-esque.”

After getting a job, the review process doesn’t end there.

Goldman, unlike other firms on the Street, is famous for their 360-degree reviews of your performance as an employee — gathering input about you from your colleagues, managers, subordinates and peers.

“There are lots of things in addition to performance, including personality things,” a former Goldman manager said. “If you don’t have the intensity or same level of dedication” you could be gone.

“Goldman also had a habit of bringing strangers along to see you at your desk just to gather more feedback about you,” another person said.

Of course, much of the behavior, including the low-key, below-the-radar, firm-first attitude, can be perceived as a bit cultish. Many on Wall Street, while quietly envious, talk mainly about the holier-than-thou attitude of Goldman employees.

“One of the things that stands out about Goldman is they just work harder than anybody else,” said a former executive who has worked for several other firms and sees a clear difference. “I mean, it’s not even close. If you leave at 8 p.m. on Friday from Goldman you will be one of the first ones out the door and people will look at you like, ‘What are you doing?’ That’s not true at other places.”

Even with this all-for-the-firm culture, don’t think for a moment that there aren’t plenty of sharp elbows.

Once questioned about his lack of political experience while running for the statehouse in New Jersey, former Goldman CEO Jon Corzine had this to say, as a man who had been on the wrong side of maneuvers within the firm to oust him as co-CEO — “Political neophyte? I worked at Goldman Sachs.”

And you can’t talk about Gold man culture without touch ing upon how Darwinian it is. Unlike any other firm on Wall Street, Goldman lets go of the bottom 10 percent of performers every year. “They are ruthless about it,” said one person who went through the process many times. “They will say, ‘We can’t afford to have this seat occupied by someone performing this way.’ ”

Which may be exactly situation Blankfein might find himself in now.

So far, according to reports, he retains the full backing, support and trust of employees and the board and there have been no reports of any client thinking of leaving.

But the congressional hearings and investigations may change that — and to an extent take Goldman back to its cultural roots.

Blankfein was part of a wave of traders who took over the corner offices on Wall Street during the boom. Where once client-focused investment bankers ruled the corner offices — and the balance sheets — traders became top dogs because of the money they raked in. Goldman now rings up two-thirds of its profits from investing and trading.

Sure, Goldman always traded, but in the past it was only one of the products the investment firm could offer clients. “But now it’s the lion’s share of their business . . . and that’s gotta change,” said one financial veteran. “Everything began changing at the firm when it went public in 1999.”

“Paulson allowed Lloyd to take more and more power and responsibility,” said another person, speaking of former Goldman CEO and Treasury Secretary Hank Paulson, whose departure in 2006 opened the door for Blankfein to ascend to the top spot.

“And all these things that Lloyd was good at, the firm became good at,” he added. “But now there’s no diversity of thought with Gary [Cohn, COO] and Lloyd at the helm.”

Lately, Blankfein has been on the offensive to restore the firm’s reputation. As one employee put it, he is out to “communicate who the firm is to a broader audience.”

But as other Wall Street firms have handed the top jobs back to bankers and brokers — people who, in theory, put making money for clients over making brilliant, complicated trades — Blankfein may find himself in that bottom 10 percent.

“Goldman has got to change the story,” said one person close to the company. “Lloyd’s told people he has no plans to step down. But sometimes to change the story you have to get rid of management.”

Goldman Sachs

Founded: 1869

Employees: 32,500

Alumni:

* Erin Burnett, CNBC anchor

* Jon Corzine, Ex-Governor New Jersey

* Robert Rubin, Ex-Treasury Secretary

* Hank Paulson, Ex-Treasury Secretary

* George Herbert Walker IV, Bush family member