Goldman Sachs is still the ‘giant vampire squid’: When will it decide to change?

In 2009, writing in Rolling Stone, journalist Matt Taibbi famously described Goldman Sachs as a “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money”.

Soon after his piece appeared, the investment bank’s then chief, Lloyd Blankfein, hit back. He gave an interview to The Sunday Times in which he said his bank did “God’s work”. His justification was that, “we help companies to grow by helping them to raise capital. Companies that grow create wealth. This, in turn, allows people to have jobs that create more growth and more wealth. We have a social purpose.”

Blankfein said this, as it was being reported the Wall Street bank would be paying out more than $20bn in bonuses that year. Blankfein said he had no issue with the colossal earnings as they correlated to his firm’s long-term performance. “Others made no money and still paid large bonuses. Some are not around anymore. I wonder why?”

Mindful, though, that he was speaking while the world was still reeling from having been taken to the brink of financial disaster by investment bankers, Blankfein did concede the animus towards him and his kind: “I know I could slit my wrists and people would cheer.”

As an example of hubris, Goldman’s behaviour back then takes some beating. It was astonishing that an organisation that prided itself on being so smart, ultra-sophisticated and, yes, able to gauge public sentiment in so many things could not see how it was viewed. The “giant vampire squid” moniker stuck, while the ridicule heaped on Blankfein for linking his aggressive, profits-hungry, stop-at-nothing corporation to some sort of higher, spiritual calling was huge.

Goldman had emerged from the banking crisis relatively unscathed, but that was the point. Here was a secretive institution, known for rewarding its employees handsomely, lording it over the rest of the sector and, by extension, all business – and indeed the entire world. Whatever happened elsewhere, to other lesser folk, Goldman appeared to be suggesting, “we don’t care, it’s not our problem”.

While there was much laughter at the bank’s posturing, there was anger as well. Roll forward 10 years and what’s remarkable is that, despite a changing of senior personnel, the introduction of a tougher, less sympathetic regulatory environment and an increasingly hostile public, Goldman is only now trying to make serious amends. Whether it succeeds, however, is a moot point.

The poster corporation of capitalist greed and excess has today become all touchy-feely, embracing diversity among its employees and recruits, and getting down to do business with ordinary people – with its new consumer arm, Marcus. Goldman is also doing what in investment banking’s eyes is boring and mundane. It still wants to attract mega-mandates and commissions for spectacular deals, of course it does. But now, alongside the pursuit of big is best, there is a desire to receive simple deposits and a new focus on the use of technology.

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Too little too late, however, may be the verdict. A recent investor day – a first for the lofty Goldman – in which the CEO, David Solomon, took shareholders through the bank’s strategy and thinking failed to impress.

Part of the problem is that underneath the bonnet, beneath all the declarations of love, Goldman remains essentially the same. It’s still a bank that will hand over $12bn to its employees despite shareholders collecting only $8bn. Even though the department’s profitability is not so great these days, the bank is unable to move on from having the macho, testosterone-fuelled trading floor at the heart of its operations.

I was reminded, reading of the steps it has taken to soften its image, of the occasion when I attended a charity event with two of its star alumni. In-between making soothing noises about the need for caring and sharing, they were checking their mobiles – they each had large bets resting on the closing price of the Dow in New York.

Posting high stakes and collecting mountainous winnings are in the DNA, in the very fabric of the bank. If Solomon is to make a transformational shift he has to be bold, and he has to do much more than at present.

Goldman has to stop being seen as the exemplar of corporate insularity and selfishness and become an outrider for fairness and largesse. In short, the high priest of what is quickly being regarded as old-fashioned, bad capitalism, should present itself as a disciple of a more accountable, responsible capitalism. That means not rewarding its staff so much, promoting women to the very top, and not devising fiendishly clever deals that appear designed to suit only Goldman. And it means publicly contributing substantial funding and resources to charity, becoming known as the bank that helps others, not itself. It means, too, being far more open about what it does, and respected clients coming forward to explain how they benefit from using the bank.

A wholesale cultural revolution is required. And that may mean Goldman reducing its profitable ambition and showing that enough really can mean enough. But the other part of the problem is that the world is moving against it. The once imperious Goldman may have to do the unthinkable and merge.

Ten years ago, being called a giant vampire squid should have served as a warning. Then, Goldman’s reaction was one of denial, choosing to claim it was on the side of God, and anyone who doubted that could go to hell. Now, humility, openness and being seen to do the right thing are the watchwords. But that lost decade may yet prove decisive.