News of a good year, performance-wise, at Goldman Sachs and of compensation to match for the firm’s employees and executives has set some of our competitors — and no doubt, plenty of other New Yorkers — into singing carols of socialism. The New York Post’s Sean Delonas, one of the great humorists in town, drew a cartoon, published in the paper, depicting the Goldman bankers as common criminals, complete with bandit masks.
It’s something to imagine Rupert Murdoch reading that over his cornflakes in the apartment on Fifth Avenue for which he reportedly paid $44 million. The Daily News ran an editorial declaring, “Something is wrong when one firm’s bonus pool is big enough to end poverty in America’s largest city.” We wonder under which one of Mortimer Zuckerman’s Picassos the News’ proprietor was sitting when he read that screed.
Well, if no one else will defend Goldman Sachs, let us have a try. Our view is that while it may be fashionable to disparage success, succeeding deserves celebration, especially when, as at Goldman, it comes at a meritocracy. The Goldman Sachs chief executive who earned about $54 million this year, Lloyd Blankfein, grew up in the far reaches of Brooklyn, the son of a postal worker, and attended Harvard on a scholarship. His rise represents what is right about New York and capitalism, not what is wrong with it.
And his story is just one of thousands that could be told about Goldman employees — many of them not as rich or as famous — who found their way from humble backgrounds to a firm with a reputation for attracting the best and the brightest. They are a diverse group, including increasing numbers of women — it’s not just Abby Joseph Cohen any more — and aspiring immigrants and children of immigrants and minorities, especially lower in the firm’s ranks. They want and will deserve bigger riches when they get to the top.
Goldman, albeit with tax breaks, has stayed in New York City and even in Lower Manhattan as many of its clients and even some competitors have fled to Connecticut, Florida, and New Jersey. The bonus money flows through the Goldman employees not only to BMW dealers and real estate brokers and fancy restaurants, as the press delights in reminding us, but also to the city’s charities. One doesn’t always hear about it because the Goldman culture emphasizes low-profile teamwork rather than Donald Trump-style flashiness. But there’s hardly a major museum, hospital, college, orchestra, or anti-poverty group in the city that doesn’t have a Goldman partner or retired partner leading the way.
We think of Robert Hurst’s presidency of the Whitney Museum, Esta Stecher’s service on the boards of Columbia University and the Metropolitan Council on Jewish Poverty, and Barrie Wigmore’s service as a trustee at the Metropolitan Museum of Art. Goldman’s Robert Menschel is chairman of the Museum of Modern Art. Eric S. Schwartz is on the board of the New York Public Library. Ms. Cohen is a trustee of the Jewish Theological Seminary. Goldman’s president, Gary Cohn, is on the board of NYU hospital and Harlem Children’s Zone. Mr. Blankfein himself is on the board of the Robin Hood Foundation, a big backer of, among other things, charter schools in the city.
Goldman has even enriched the political life of the country. Whatever you think of Senator-Turned-Governor Corzine, of President Clinton’s Treasury secretary, Robert Rubin, or of the current Treasury secretary, Henry Paulson, they are all Goldman alumni and undeniably talented. While the compensation of the current Goldman employees, especially when publicly disclosed, is raising eyebrows, the dollar figures are in line with — and in some cases, even less than — what other star bankers and traders are making at other banks, hedge funds, and private equity firms.
As far as whether too much of the compensation is going to employees as opposed to shareholders, it strikes us that the firm’s management has been up front about this with shareholders all along. Besides, no one is forcing anyone to own Goldman stock, and, with the price of a Goldman share up more than 50% year to date, those who do own it aren’t likely to be complaining. So where do others come off complaining about what a law-abiding company pays its executives?
Another anti-Goldman argument is that the firm doesn’t actually make anything other than money. Bah humbug. Truth is, customers in the highly competitive markets for asset management and capital-raising these days are increasingly savvy, and they don’t pay fees for nothing. The days of big brokerage commissions are pretty much over. Goldman makes money by helping to finance plenty of companies that actually do make things. Many of the firm’s profits come from trading that puts Goldman’s own capital at risk, particularly in developing markets such as China and India. Many of the firm’s bankers and executives work long hours and travel relentlessly. In a sense, they are doing the work of the ship captains that once plied the piers of Lower Manhattan, bringing American business knowledge to new markets in trade relationships that benefit both sides.
The state comptroller, Alan Hevesi, reported yesterday that Wall Street bonuses overall — including those at Goldman Sachs and the other firms — “will generate $1.6 billion in tax revenues for New York State and another $500 million for New York City.” As Mr. Hevesi put it, “When Wall Street does well, New York City and New York State do well.”
There’s a downside to this story, but it’s not the Marxist argument that has generally greeted the news of Goldman’s bonuses. It’s the far more substantive argument sketched by the Manhattan Institute’s E.J. McMahon, who points out that we are now in a situation in which it can be said that when Wall Street catches a cold, New York government budgets get pneumonia. What that means in policy terms is not that Goldman’s success should be derided but that New York’s economy needs more Goldmans, in more industries, not fewer of them. And that New Yorkers should be rooting for their success. So let others sing their sad carols. These columns wish Goldman Sachs an even better year in 2007, with larger profits and bigger bonuses. It’d be good not only for the bankers and traders but for all New Yorkers.
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