Wednesday, May 05, 2010

Life after Blankfein? Goldman scenarios

Wall Street Journal examines the current "what-if" scenarios surrounding Goldman Sachs and its chairman/CEO Lloyd Blankfein.

Here's an excerpt:

"Some executives and powerful alumni of Goldman Sachs Group Inc. are talking about whether Chief Executive
Lloyd C. Blankfein can survive the legal and public-relations storm swirling around the company, according to people familiar with the situation.

The conversations being held among some partners, managing directors and other current and former executives are informal, and there appear to be no plans for a management shake-up.

The various hypothetical scenarios include whether Mr. Blankfein should resign, whether there should be a broader house-cleaning of top Goldman management or whether to separate the chairman and CEO posts now held by Mr. Blankfein...

As noted in yesterday's post, Goldman & chief Blankfein are now in damage control mode, hoping to part the dark clouds that have formed as a result of the recent SEC complaint and more recent talk of a pending criminal investigation.

As a result, chatter about Blankfein's possible departure from Goldman has been building this week. While one large shareholder quoted in the Journal piece stated his fervent hope that the firm's problems would go away "in the next month or so", this outcome seems highly unlikely.

If anything, the talk about Blankfein's departure as CEO will probably grow louder over the coming weeks (for a variety of reasons). Here's my quick take from Twitter earlier:

Starting to think the play of the week was/is to go long Blankfein departure futures on InTrade (no pos.) $GSWed May 05 17:40:38 via web

So, while we consider possible outcomes that seemed like distant long-shots just two weeks ago (nice call, Keith), it's important to remember (as Fitch reminds us in their latest ratings update on Goldman Sachs) that minding your reputational risk is key for companies, and "critically important" for financial firms dependent on capital markets.