Jon Corzine: People Envy Goldman

Includes: BAC, C, GS
by: Wall St. Cheat Sheet

By Damien Hoffman

Yesterday, Jon Corzine, New Jersey governor and former CEO of Goldman Sachs (NYSE:GS), spoke to Bloomberg Television. Here is the video.

Highlights are below …

On the future of Goldman Sachs:

It is very likely that in due course you’ll see people coming from investment banking leading Goldman Sachs. This is an issue that has gone on as long as I have followed the firm. We have had traders, Bob Rubin, Steve Friedman, and others — …it is interesting to describe it as ‘trader’s row.’ Trading and leverage will be less of a part of financial institutions going forward. They will not be eliminated, but not carried on the same balance sheet. The merger business will still be an important element – giving fundamental advice on a corporate finance level — very important. Goldman Sachs will see people come from various areas. Money management might be the side of the firms that generate the leader of the future.

On CEO Lloyd Blankfein’s performance:

He has done a much better job than some of the publicity surrounding him says. This was an incredibly challenging time for any financial institution, and that institution has gotten through this better than most, held the team together better than most, and has continued to serve clients better than most.

On CEO Blankfein’s remarks that the firm was doing God’s work:

When you’re successful it brings envy…It is easy to mis-phrase something at the wrong time. Maybe you thought you were tongue in cheek. These things are at a time when people are extremely sensitive — and the other issue is that people are broadly frustrated with the financial institutions, and since it is the leader of the industry and has shown great success over a long period of time, I think it’s more vulnerable.

On what Goldman may have done wrong:

One of their leading managing directors said they should have brought more transparency to the currency swaps associated with Greece. There is always is a tendency to be less transparent,... and there are always the issues of how to explain [some of the activities]... We were just talking about the Toyota (NYSE:TM) press release, and of the gentleman from Toyota talking about how mixing up quality and volume ahead of safety could be a threat. Those kinds of mistakes [can have] long-term implications. They get repeated over and over again, and Goldman suffered from some of that.

On whether bad PR will hurt Goldman’s business:

Of course there will be worry. On the other hand, the best thing to do is kind of what the PR consultants said, speak a little less, do a lot to serve your clients and your shareholders. I think, sticking to the…fundamentals of your business is the way to try to meet those challenges that come from the public attack on the brand.

On what he thinks of the Volcker rule:

I’m not generally in favor of the Paul Volcker rule. I think that you’re just going to create the same kinds of risks in other institutions [that] were not subject to it. I am not sure it will accomplish its good intentions. On the other hand, and I will turn off a few listeners, but I do believe the system tax, the bank tax makes sense. We’re looking first to pay back what was necessary to get through this systemic crisis. But there should be a build up, have it more broadly applied than just to "too big to fail" institutions.

On taxing banks:

It would be better to set up a pool of funds ahead of time allowing the government to be able to deal with crises, which by my read of history will happen again. It is just a matter of whether it is just as serious. I have seen this for the 35, 40 years I have been in the financial services world.

On what is next for Corzine career-wise:

I’m looking at three or four different kinds of options, working with people in financial institutions. I think I can make a contribution as a consultant, adviser — you know, a grey hair, I wish I had some hair! The interesting idea to examine is whether there is room for an institution not too big to fail, too little to hit the screen and grow into a financial-services as you go forward. We will look at all of those options.

On whether Corzine talked to Bank of America;

No to Bank of America (NYSE:BAC), to that situation. We never had any conversation. The state of New Jersey has done a lot of business with Bank of America and it is a little awkward. I was governor. I would have had trouble even allowing myself on a conflict basis to enter into those talks.

On whether he would return as the CEO of another financial institution:

It had better happen fast since I’m getting a little older. But I will look at each individual situation. There are turnaround situations I think are exciting for building a franchise. [John Thain’s role at Citi (NYSE:C)] is a great opportunity for him…Those things might provide an avenue of exploration at some point.