Lay low or else the plebs might revolt. That's the message from Goldman Sachs CEO Lloyd Blankfein to his employees.
Under scrutiny for mega bonus payments and big spending after billions in government bailouts, Blankfein is reportedly telling everyone at the Wall Street firm to avoid making monster purchases – at least until the uproar dies down.
Blankfein first began calling for a halt to high-end consumption late last year, but has recently revitalized his efforts as the White House tries to reel in compensation and the firm has been excoriated in a few vitriolic magazine articles, according to a published report.
"This is a sensitive time for us, and [Blankfein] wants to make sure that we're not being seen living high on the hog," one Goldman executive told The New York Post.
Sure, Goldman raked in a record profit of $2.3 billion in the second quarter, but that doesn't mean big bonuses are in store. Senior managers were told to tell their staffs not to expect anything of the sort, the executive told the Post, and Blankfein apparently reminded staff that bonuses are based on year-end results – and there's still four months left until 2010.
Blankfein's words of cautionary spending come as the firm has been lambasted by the media in recent weeks over its ability to rake in the dough regardless of the state of the economy, which has been tanking for some time.
A Rolling Stone piece accused Goldman of sucking the lifeblood out of civilization, referring to the firm as a "vampire squid wrapped around the face of humanity." The article also said Goldman used bailout money to inflate its revenue reports.
"Once the bailouts were in place, Goldman went right back to business as usual, dreaming up impossibly convoluted schemes to pick the American carcass clean of its loose capital," it read.
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A recent New York magazine article also suggested Blankfein was reaping benefit from the bailout of the American International Group, using the money funneled to Goldman from the floundering insurance company to turn its pretax losses into a first quarter profit.
A spokeswoman for Goldman Sachs had nothing to say about the barrage of bad press, according to the Post.
While many of its rivals have floundered in the global recession, Goldman has managed to not only keep its head above water, but make a boatload of money in the process. Rather than drawing applause for its rapid recovery, the firm's profitability is earning anger and skepticism.
How is it possible? Speculators are wondering about everything – from the firm's monster bonuses to its knack for cozying up to Washington policy honchos. Treasury Secretaries Henry Paulson and Robert Rubin, and New Jersey governor and former U.S. senator Jon Corzine have all worked for the bank.
Last year, Goldman gladly held out its hand and took $10 billion in emergency funding from the government to help it cruise through the economic crisis. The bank was quickly able to repay its loan, thanks to record profits, according to the Post.
Aside from warning employees to avoid big consumption, Blankfein is also giving them a pep talk.
According to the Post, the CEO left a company-wide voice mail last week saying the higher-ups are "focused on addressing the negatives news and that [Goldman] remains committed to integrity and excellence. I know you're all working hard."
