Susanne Craig's story in Thursday's New York Times about Goldman Sachs & Co.'s Lloyd Blankfein and his longtime No. 2 Gary Cohn is, like so many Wall Street stories, a puzzler. The Times starts it off the front page, obviously believing that the argument that Cohn is becoming unhappy with his subordinate, if exceedingly powerful and lucrative role, is important and provocative; after all, it gives the Times the chance to call him "the Prince Charles of Wall Street, a man for whom the crown seems just beyond his grasp." It's difficult to tell for whom that is more insulting: Prince Charles or Cohn.
This is not necessarily a problem with Craig's story, which dutiful reiterates all that Wall Street observers can discern from the outside: Blankfein has somehow survived in the CEO's job, despite periodic blasts of ugly publicity, since 2008, and Cohn, at 52, is aging in Goldman terms. (This is where the Prince Charles analogy breaks down: the royal family is hardly a meritocracy in which the young and talented must be accommodated.) Another generation is pushing up behind Cohn, creating the possibility that he could be passed over. This has happened before. Henry Paulson hung around so long that both of his co-heirs apparent, John Thornton and John Thain, left before their ascension, leaving the field to Blankfein when Paulson eventually decamped to Treasury and history.
But is there something else going on? If there is, it's unclear how much the Times really knows. The sourcing is, to be kind, murky. "Some inside Goldman wonder if he will depart if Mr. Blankfein doesn't soon," the story offers. Yes, but how far inside? In the cafeteria? Are we talking corporate-wide scuttlebutt, which may mean nothing except a reading of history, or intimate colleagues of Cohn, who have discussed the matter with him, or even the man himself? What does it mean to be "restless?" "It is perhaps no accident that whispers of Mr. Cohn's restlessness are now being heard outside the firm's gleaming Battery Park tower." Perhaps that's true, but given the general nature of whispers, it's just as possible that the speculation could come from the outside, in; that talk on Wall Street enters the Goldman scuttlebutt ecosystem, thence to the Times.
Any other hints? A half dozen paragraphs later, we move from "whispers" to "rumblings emerging from Goldman's headquarters," a location that contains thousands of employees, most of whom are unnaturally obsessed with matters of power and hierarchy.
Craig may well have bagged a legitimate insider, though we have to take it on faith, particularly because, as she admits, there are no public signs of unhappiness, restlessness or as the headline suggests, covetousness. The story is a kind of blank slate upon which one can inscribe many interpretations. Craig claims sources on Cohn's mental state, but she says very little about larger mysteries: How has Blankfein managed to hold on for so long? How closely are Cohn and Blankfein viewed as one entity? Has Goldman's PR disasters damaged Cohn as well as Blankfein, and so we're watching the end of an experienced and relatively safe lame duck regime while preparations for a new generation quietly occur? Could those insiders be associated with a younger generation eager to move the old boys out, either Blankfein or Cohn, or both? Could the "whispers" be coming from allies of Cohn, who see themselves moving up if they can create a consensus that Blankfein's time has come? Could the "rumbles" be coming from Cohn himself? (That's unlikely, because a) he's probably not that dumb and b) the Times would want to boast of their high inside access and would dress up the sourcing to, say, highly placed individuals.)
Like so many of these stories about Wall Street, which really is an endlessly spinning machine of gossip and innuendo, the Times personalizes what may not be a personal situation at all. Craig mentions the Goldman tradition of swapping traders for bankers as CEOs. But that Goldman - the firm that was a partnership, not a public company, and in which investment banking and trading operated in an uneasy, if institutionalized, balance - no longer exists. Paulson knocked off his co-CEO, Jon Corzine, a trader, and seized control after the public offering. He stayed in office well past Goldman tradition, by tenure and age (this tradition is fairly recent; John Weinberg presided for 14 years); and his heirs left, opening the door to Blankfein and Cohn. Paulson was a banker, but under him trading reigned supreme. That has not changed, though pressures from Dodd-Frank and regulators to rein in leverage and risk, to rationalize derivatives, and to generally act a lot less like a hedge fund, continue. Unfortunately, while Goldman struggles to adjust to a less transactional climate, the market for classic M&A investment banking has remained lackluster. There are ways to make money out there, but it's probably not going to change the balance of power significantly at the firm. In any event, the strategic direction of the firm in this post-crisis era is still not clear.
Consider a side note that demonstrates some of the depths we're in here. Craig quotes a former Bear Stearns trader now teaching at Adelphi University to the effect that "The head of Goldman is the de facto head of Wall Street." All that's fine on the surface; it's certainly a truism of the media. But what does it really mean? Certainly, everyone watches Goldman carefully, though whether those attempts at imitation help or hinder other banks is an open question. In the old days, in the Glass-Steagall era, the titular "leader" of banking was clearly the old J.P. Morgan & Co., by dint of pedigree and power. When a crisis hit, J.P. Morgan called the meetings and orchestrated the rescue. But that was commercial banking. Wall Street, meaning the clutch of firms, first partnerships then public companies, never really had anyone that was first among equals; even in days of yore it was too competitive, too transactional. (If there was an organizing body, it was the New York Stock Exchange, which has a nice boardroom.) That continues. As trading and transactional finance has taken hold, the situation has grown less coherent. No one really stepped up during the crisis in a way that suggested leadership divorced from self-interest (even, let's be clear, J.P. Morgan Chase & Co.), forcing Treasury's Paulson to frantically rescue or sell off everybody except Lehman Brothers. Do any of the banks trust each other, or, for that matter, Goldman?
Let's say it one more time: This isn't meant to be a knock on Craig's story, which covers the basics of this latest succession round at Goldman and may prove correct. But how can you tell? The firm, despite its troubles and defections, remains complex and opaque. The question to ask about Goldman is: Who does know? Even Blankfein and Cohn could be caught off guard by forces working against them on the board or management committee. Who is not self interested? Who, in short, do you trust?