I don’t think there will be too many out there who can remember the name of Rick Wagoner. Wagoner was at heart a car salesman who somehow rose to become chairman and CEO of General Motors. He ruled from 2000 until 2009 during which time he all but destroyed the company. Wagoner lived by quarter over quarter car sales and, as far as many could see, had no strategic vision whatsoever. He drove full speed until the tank was empty.
In his role there – at the time I was a little more conversant with the ins and outs of the automotive sector – he became the first public figure to whom I attached the sobriquet “Muppet-in-Chief”. As GM, during the Global Financial Crisis, fell into inevitable Chapter 11 bankruptcy its rescue by the Obama administration was tied to the condition of Wagoner’s resignation. That he did, albeit with a redundancy and retirement package which flagrantly belied his disastrous leadership of the now bankrupt company.
For a while there was no more Muppet-in-Chief, although ‘ere long the title was acquired by Jean Claude Juncker, who as President of the European Commission displayed all that was wrong with the EU and who’s overbearing attitude without a doubt played a significant part in the British people’s decision to vote “leave” in the 2016 Brexit referendum. His elevation to Muppet-in-Chief was eventually justified and consolidated when he famously declared with respect to rampant fiscal indiscipline within many of the member countries, especially Greece, “We all know what to do, but we don’t know how to get re-elected once we have done it.” Since Juncker’s term ended, the title has again been vacant.
The time has come, alas, to hand it out again and the proud recipient is of course none other the David Solomon, Chairman and CEO of Goldman Sachs. Just like Wagoner, Solomon has made a wonderful job of burning shareholders’ equity on the bonfire of his own vanity. My dear friend Morris Sachs of the IBWOC.com podcast, along with his co-presenter Liam Allen, have had Solomon in their crosshairs for some time now and I cannot recall whether it was they who placed him in my shooting gallery or whether I put him there myself. Who cares?
Solomon, a former commercial paper salesman at Irving Trust and later Bear Stearns, has made a complete pigs’ ear of running the most powerful firm on Wall Street. Fortunately the firm as a collective is more powerful than any individual and try as hard as he may, he cannot push Goldman’s over the edge. His attempt to bring the firm into the retail banking space is worthy of its own episode of South Park – nod, nod, wink, wink, say no more – and he is now going through his third reorganisation and restructuring, a large part of which is being executed by firing a bunch of people who have had nothing to do with Solomon’s dream of becoming the next Jamie Dimon.
Please don’t get me wrong. I’m not suggesting that Goldman Sachs is done for and that we are about to see it joining the great Street in the sky along with Bear Stearns and Lehman Brothers. I also can’t see it being subsumed like Salomon Brothers was by Citi or Merrill Lynch by Bank of America, or Paribas by BNP for that matter, but it is trapped in no man’s land as it is neither a JP Morgan, nor is it a Morgan Stanley. It would be best served of course if it stuck to being what it is best at and that is being Goldman Sachs, the world’s most powerful and best connected investment bank. Why the obsession with stability of earnings? It is in a boom and not so boom sector and it commanded the stage like no other.
In the 1970s, all the rage was for conglomerates when the ideal company had its fingers in as many uncorrelated pies as possible. Stable earnings in all circumstances. Goldman grew rich, really rich, by being at the forefront of disassembling conglomerates and touting the message that the value of the sum of the parts was significantly greater than that of the whole. Unlocking value and all that jazz was what turned hated corporate raiders and asset strippers into fantastically rich and admired private equity geniuses. Goldman Sachs held a PhD in midwifery and made out like a bandit putting companies together and then taking them apart again.
Solomon, supreme leader of the Vampire Squid, obviously missed the message, tried to turn Goldman into a financial supermarket…. and failed. And yet he is still in the chair, is going around trying to justify himself and has apparently even been seen on the trading floor in New York, a place which he has assiduously avoided for some time. He called a partners’ meeting in Florida and apologised. Not bad scheduling a boondoggle right in the middle of the process of firing 6.5% of the workforce. Not bad choosing that event to express regret for not having fired all those people a year earlier.
I believe that David Solomon, who in his spare time – where he takes that from I struggle to work out – spins discs under the sobriquet of DJSol, has rightfully eared the vacant title of Muppet-in-Chief. I do hope you agree.
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