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Career advice and job search strategies for the modern careerist

Posts Tagged ‘investment banking

Did Goldman Break Its Diversity Policy?

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For the 11th straight year, industry insiders named Goldman Sachs the most prestigious bank in North America in Vault’s latest ranking. In hindsight then, all the public mudslinging of recent years has done little to upset the bank whether it’s in attracting the biggest deals or the best talent. And according to our survey, bankers continue to want Goldman on their resume.

Ironically, a day after the rankings debuted, the bank’s prestige is under attack by three former female employees who charge, according to The Wall Street Journal, that “The investment bank practices a system in which women are paid less, promoted less and ‘systematically circumvented and excluded.'”

Jobs, Careers and Reviews at Goldman SachsWhat’s astounding about the allegation is the repeated emphasis on intent, i.e., that the bank has a system that almost formulaically excludes women from getting promoted and compensated on par with their male counterparts. While the bank has called the suit without merit, stating that, “People are critical to our business, and we make extraordinary efforts to recruit, develop and retain outstanding women professionals,” it seems it is yet again in the red with the public.

Comments from our Banking 50 survey—culled from responses submitted by over 1,300 banking professionals earlier this year—provide further perspective:

“Supportive and respectful management”

“They could do a better job of promotion as well as placement into areas that are a good fit and utilize skill sets…”

“Having come up through the ranks, from a junior trader to now an experienced one in fixed income products, I must say that I’ve been very pleased with the level of training, support and guidance that I’ve received over the years from the firm…”

“I’m a firm believer in the culture at Goldman Sachs. The firm is team-focused, emphasizing integrity and personal development within the industry.”

“I think we do a good job at getting women and diversity candidates in the door, but for real success we need to work on better retention.”

And, finally a snippet of their Diversity Mission Statement from Vault’s Annual Diversity Survey:

“The firm’s commitment to diversity is evident at the most senior levels and is driven down through the firm by way of our seventh business principle: “We offer our people the opportunity to move ahead more rapidly than is possible at most other places. Advancement depends on merit and we have yet to find the limits to the responsibility our best people are able to assume. For us to be successful, our men and women must reflect the diversity of the communities and cultures in which we operate. That means we must attract, retain and motivate people from many backgrounds and perspectives. Being diverse is not optional; it is what we must be.”

So where does this leave the banking king: A chauvinistic boys club, truly diverse with a few unintentional victims, or the victim of a ploy to take advantage of its current poor reputation? Weigh in by leaving a comment, emailing In Good Company or connecting on Twitter @VaultCSR.

More reading: The complete WSJ report.

What other banks made the Top 10 most prestigious banks in North America this year?

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The Goldman Effect? Poll Says I-Bankers Not Trustworthy

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It’s official: perception of investment banking as a trustworthy profession is rock bottom. Perhaps not surprising given the news cycles recently, but pretty damning nonetheless. As results from our recent home page poll show, investment bankers and corporate lawyers are not seen as paragons of virtue at the moment, scoring significantly below journalists, and not much better than used car salespeople. Management consultants, on the other hand, seem to be riding a wave of positive perception.

Let us know your opinion of the results: do they seem valid, or like a lot of consultants had a lot of time on their hands last week, while the I-bankers and lawyers were all watching Goldman getting grilled by the government? Drop us a comment below, or hit us with an @reply on Twitter.

Trading Opinions/In the News: Understanding the Goldman Case

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If you are having trouble following or understanding the SEC’s case against Goldman Sachs, read this post.

We at Vault are passionate about reading and supporting each other’s work and making sure that the information we share with you is meaningful. Witness the following e-mail exchange between Vault’s Finance Editor Derek Loosvelt and Vault’s Director of Technology Sean Carrington regarding Sean’s post, Why the Goldman Sachs Case is a Witch Hunt.  Read Sean’s piece first.

Derek: Hi Sean,
I read your blog post and wondered if you might have oversimplified some of the facts to the point of misrepresenting them. I was thinking about posting a reply to your position but wanted to ask you a few things before I did so I better understand your position before I do.

Here’s what you wrote:
“So the SEC is suing Goldman because the company made money by selling the securities to the public, then made money in their own account when the bubble burst. In the complaint, the SEC contends that even though Goldman knew there was going to be trouble, they kept selling these toxic bonds to the public.”

In fact, the SEC is not contending anything about whether “Goldman knew there was going to trouble” but is contending that Goldman acted fraudulently when they did not let investors know that a client of theirs, John Paulson, had handpicked the securities to be bundled — securities which Paulson was then able to bet against. (Below I’ve included some info cut and pasted from the SEC site).

If you could perhaps clarify what you meant in the above, that might be helpful.  And as for analysts and traders not riding in the same elevators, I have no idea what that has to do with this. If anything. Maybe I am missing something. So, if you could explain that, that would be helpful to me as well.
Thanks,
Derek

Here’s the complaint from the SEC site (http://sec.gov/news/press/2010/2010-59.htm):

The SEC alleges that Goldman Sachs structured and marketed a synthetic collateralized debt obligation (CDO) that hinged on the performance of subprime residential mortgage-backed securities (RMBS). Goldman Sachs failed to disclose to investors vital information about the CDO, in particular the role that a major hedge fund played in the portfolio selection process and
the fact that the hedge fund had taken a short position against the CDO.

The SEC alleges that one of the world’s largest hedge funds, Paulson & Co., paid Goldman Sachs to structure a transaction in which Paulson & Co. couldtake short positions against mortgage securities chosen by Paulson & Co. based on a belief that the securities would experience credit events.

The SEC’s complaint alleges that after participating in the portfolio selection, Paulson & Co. effectively shorted the RMBS portfolio it helped select by entering into credit default swaps (CDS) with Goldman Sachs to buy protection on specific layers of the ABACUS capital structure. Given that
financial short interest, Paulson & Co. had an economic incentive to select RMBS that it expected to experience credit events in the near future. Goldman Sachs did not disclose Paulson & Co.’s short position or its role in the collateral selection process in the term sheet, flip book, offering
memorandum, or other marketing materials provided to investors.

Sean: Paulson & Co is a hedge fund. They are not a member of the exchange and as such they cannot place trades on their own behalf. Goldman placed trades for Paulson. The SEC did not assume that Paulson had any responsibility to convince the Goldman Analysts that the trades should no longer be sold to the public and that is why Paulson wasn’t named in the complaint.  The two traders who also placed said trades for the Goldman house account were the only two persons named individually in the complaint.

The point of contention is if the traders notified Sr. Management of their position and if Sr. Management agreed with said position. If they did, then in theory, they should have been obligated to pull the plug on the other side of the business.  The problem with that assertion however, is no Sr. Management was named in the complaint and the two traders named had no way of communicating their concerns to the analysts.  (Not to mention the obvious fact, that they were forbidden to do so even if they wanted to).

Derek: Have you read the SEC complaint?

Sean: Yes. Why don’t you explain to me where you think the named individuals should be charged? Or where you think my logic falls down.

Derek: It seems to me, and I haven’t read anything to the contrary (SEC complaint, WSJ, NYTimes, etc.), that the issue is one of “material disclosure” –Did Goldman have a legal right to disclose to investors of the CDO in question that one of its clients picked the securities that were packaged and
then short-sold them?

Is that wrong?

Sean: Fabrice Tourre is the only individual charged specifically in the complaint & I understand him to be a trader on the wholesale side of the house working on the CDO desk. He & Paulson worked together structuring the trades that made so much money. If that is the case then he obviously has no disclosure obligation to the firm’s retail clients.

Now with that said, one of two things may be happening here:
1. It’s entirely possible that my understanding of his role at Goldman is not correct but I’m fairly certain, that is what he did.

2. The SEC may be squeezing him in order to find out who he notified and when in order to work their way up the chain the same way the justice department did with the Enron boys a decade ago.

Derek: My understanding is Fab Fab was charged because he’s the one who arranged the CDO. And yes, per your no. 2, I bet you’re right about that. And already, it seems to be working:
http://www.nytimes.com/2010/04/19/business/19goldman.html?pagewanted=2&hp

Sean: I just read that article and his role seems to be as I suspected. Traders at that level don’t just buy and sell securities. They structure deals that hopefully, make the firm a lot of money. That’s their job, it’s how they are evaluated and it is what their bonus is based on.

Obviously, at the exact same time, other traders both inside and outside Goldman were structuring deals betting that CDO’s and REIT’s would continue to rise. If they weren’t there wouldn’t have been such losses at places like Bear Stearns & Mother Merrill. Fab Fab won, other traders/bankers lost. That’s not criminal. It’s the American way.

Here’s the key: No one has a crystal ball and knows what will happen in the future. We do our analysis & make predictions. Sometimes they we’re right & sometimes we’re wrong. Fabrice Tourrie was betting that the CDO market would drop while others INSIDE HIS OWN COMPANY thought he was dead wrong. Those facts are not in dispute. Now assume for a moment that he was in fact wrong. What would have happened?

His house account & Paulson’s hedge fund would have lost a few million dollars & life would have gone on. There would be no SEC action & no one would care. But because he happened to have been right & made money when others were losing, now it’s criminal. And somehow he was obligated to have convinced everyone else at Goldman & all Goldman’s clients that the sky was about to fall and they should abandon ship? It’s total nonsense.

More of Vault’s take on the SEC vs. Goldman Sachs:
Goldman Sachs Accused of Fraud: God’s Work or the Devil’s Business?
Goldman & the SEC: living a material world

Written by Linda Petock

April 19, 2010 at 1:17 pm

Why the Goldman Sachs case is a Witch Hunt

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When I was an officer at NYMEX I had to get a Series 7 & here’s the problem that those of us who know the rules have with what has happened at Goldman… But first, allow me to give you a little background:

1. Goldman Sachs bundled sub-prime mortgages into mortgage backed securities and marketed them

2. The securities were sold to individuals, pension funds, other trading firms and Goldman’s own in-house traders

3. Two of Goldman’s in-house traders started to believe the housing market was going to drop and they made such a vociferous argument that they convinced their managers to allow them to start SHORTING mortgage backed securities, INCLUDING THEIR OWN.

4. When the bubble burst, the house accounts managed by those two traders made over a billion dollars

So the SEC is suing Goldman because the company made money by selling the securities to the public, then made money in their own account when the bubble burst. In the complaint, the SEC contends that even though Goldman knew there was going to be trouble, they kept selling these toxic bonds to the public. Yes, it looks bad but here’s the problem.

The SEC has VERY STRICT RULES that prohibit the sharing of information between a financial firm’s analysts and the traders. Why? Well think about this. Let’s say the analyst have put a deal together that is going to cause Microsoft stock to go up. If they told the in-house traders, they would all buy Microsoft stock before the deal happened and they would benefit from inside information. So they have what they call a “Chinese Wall” between the analysis side and the trading side of the business. It’s so rigorous that Analysts and Traders aren’t allowed to ride in the same elevators or eat in the same cafeteria for fear that a trader may overhear the conversations between two analysts.

Anyway, if Traders and Analysts ARE NOT ALLOWED TO SPEAK, how the heck is that Goldman Trader supposed to persuade a Goldman Analyst that his mortgage backed securities are about to go sideways & he should stop recommending them to the public? His job was to make as much money as possible by trading his house account. That’s it. He had a hunch, he bet his hunch & it paid off. And now the SEC is going after the poor guy as if he did something wrong.

It’s a public hanging in the interests of “headline justice”.

–Posted by Sean Carrington, Director of Technology, Vault.com

Sean Carrington was Chief Information Officer of the New York Mercantile Exchange (NYMEX) from 1999-2001.

**Update: Sean Carrington and Vault Finance Editor Derek Loosvelt had a substantive email debate over the merits of the Goldman case. Click here to read their discussion, which breaks down some of the key issues at stake in the case.

Written by Linda Petock

April 19, 2010 at 8:25 am

Undercover Boss Hits Wall Street: Bank of America Edition

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It’s official: That piece of celluloid that CBS calls Undercover Boss wants to bring it to Wall Street.

Of course, we at In The Blackwere privy to this news months ago and, in case you missed them, here are two treatments for Wall Street episodes of UB that we came across a while back (episode #1: Goldman Sachs CEO Lloyd Blankfein and episode #2: JPMorgan Chase CEO Jamie Dimon). And below, to whet your chief-executive-stooping-to-blue-collar-level-and-jerking-tears-to-the-sounds-of-electronic-violins appetite yet again, here is a third treatment of a soon-to-be-produced spin-off series starring the chief executives of the most prominent financial institutions in the country:

Brian Moynihan

Episode #3: Brian Moynihan, CEO Bank of America

We open with Moynihan giving a moving 45-second motivational speech on the first tee of Pebble Beach which B-Money and a few other top brass at BofA Merrill have been allowed to play a week before the U.S. Open. B-Money will explain how difficult it’s been to follow in K-Dawg’s (Kenny Lewis’s) wing tips—flash to clip of beleaguered Lewis eating with his family at Charlotte area Hooters restaurant—and how he has not slept more than eight hours a night since taking over the chief post and receiving a $4 million per year pay raise. After B-Money tops the ball and begins his backswing on his second drive, we’ll cut to his first undercover assignment: as an M&A managing director working out of Merrill’s Los Angeles office (not too far from Pebble Beach, which should provide cost efficiencies and thus be appreciated by network in light of overshooting budget in Hooters episode).

We first see B-Money driving in midnight blue Range Rover dressed in Armani from neck to toe. After handing over keys of Rover to valet, B (in a close-up) greases maître d’ of West Hollywood Italian joint (littered with B-level actors). B-Money greets client: elderly owner of leading aboveground swimming pool business. They’re shown to back-room booth. In between pasta and fish, B deflects accusations that K-Dawg did anything crooked during his rein (insert another clip of Lewis, this time walking streets of Charlotte at night, alone; music choice TBD, but thinking Seger or Eddie Money). After three Fuzzy Navels, B pitches various takeover targets to client, both financial and strategic. Some ideas sound ludicrous (“Google’s looking to diversify”) and others, if undertaken would result in several of the owner’s relatives losing their jobs. The executive balks at all of B’s suggestions aside from “a great gig up in the Hills at Billy Joel’s place” and on the deck of Joel’s pad (sparsely-populated with C-level actors) B-Money admits to camera he never knew how hard it could be to put a deal together, or how smoggy it really was in LaLa land.

B’s second assignment is as a BofA HR rep in Hong Kong, specializing in benefits administration. B will dramatically lose his job in 39 minutes when it’s discovered he doesn’t speak Mandarin, has no idea what the difference is between an HMO and PPO, and does not have a valid passport. Sipping a Tsingtao in first class 35,000 feet over the Pacific, B vows to eat more Chinese food and “really read the back of those fortunes in those sugar cookies.”

B-Money’s final undercover assignment is as BofA CEO, Brian Moynihan. Since few people had heard of him before he landed his current job and no one knows what he looks like, it won’t be difficult for B to go undercover as himself. We show B, clad in Callaway from hat to spikes, coming full circle: back at Pebble Beach, entertaining institutional investors. In a panoramic shot, B-Money gracefully hits a 9-iron off the par three seventh and lands on the green two feet from the hole (make sure we budget all day to get this; B has a well-known hook) and while ball rolls even closer B-Money turns to the camera for the money shot/closer: “If I’ve learned anything during the past week, and I’m not saying I have, it’s that the key to this gig is follow-through.”

Fade to black.

–Posted by Derek Loosvelt, In The Black

Four Tips: How to Work on Your Emotions for Career Success

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AP Photo/Mary Altaffer

This guy is interested in a fast-paced risk-taking career in trading but admits he’s not the coolest cat in the alley when it comes to dealing with high-pressure situations. He can’t bluff his way through a friendly game of seven-card stud, can’t watch Man. U. without eating the ends of his nails, and tosses and turns like a four-year old afraid of the dark the night before the big exam. So it would seem that he should chuck in the 400-count Egyptian cotton and ditch his dream of making it big in the world of derivatives, shorts and options, right?

Wrong.

What he should do is this:

Practice.

That’s right, even controlling your emotions, like times tables and state capitals, can be learned (though, certainly, working on your stress-dealing skills might not be as easy as remembering where the heck Montpelier and Bismarck sit on the map).

And here’s how:

#1: Identify your weaknesses. Take the aforementioned wannabe trader for example. He has already taken step one, outlining his weaknesses, citing his “nervous/stressed mindset.”

#2: What do you want? After identifying your weaknesses, you need to communicate, if only to yourself, what you want. In this example, the wannabe trader wants a good poker face, a calmer countenance when the chips are on the line, and the ability to put out of his mind an imminently stressful situation that will occur sometime in the near future.

#3: Put yourself in situations where you have to work on your weaknesses. To keep this example going, the guy should engage in experiences and events where he’ll be forced to bluff, compete, and be tested. So, he might play more poker (though I do not advocate doing this for money) or watch his favorite football side and try not to yell at the TV or get excited or sign up for a an exam where he has to study. (He could also get some of his buds together and play this game, one of my favorites as a kid and one that I challenge anyone to play in a calm, quiet state.)

#4. Repeat #3 again and again and again.

–Posted by Derek Loosvelt, In the Black

Extra Insight: What if Women Ran Wall Street?

Will Public Perception of Wall Street Alter Candidates’ Career Choices?

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Goldman Sachs
With most of the difficult work involved in reforming the U.S. health care system behind them, Democrats can now focus on Big Issue #2: financial regulatory reform.

Reform of the financial/banking system had been slid to the back burner but is now shaping up to be a, if not the major rallying point come mid-term elections this fall—which coincides with the sweet spot of big investment banks’ campus recruiting season. This means that some of these firms will likely be spending serious amounts of time, energy and money to attempt to dispel rumors and set records straight and artificially sweeten the not-so-sweet past when they descend upon undergraduate and MBA institutions after Labor Day.

Currently, as shown in a recent Bloomberg poll, the American people are none too happy with the big Wall Street firms, with 57 percent looking “unfavorably” or “very unfavorably” at the country’s largest financial institutions and about 66 percent looking unfavorably at the executives who run said firms. (It was also shown that two-thirds of Americans have an unsavory view of Congress.)

While banks’ PR outfits and insiders work overtime this fall, would-be investment bankers from some of the top schools across the country (aka candidates for some of the highest-paying entry-level jobs in the land) will be faced with some difficult questions, including this one: Should I go into banking at all?

With public perception of the banking industry at a low, if not all-time low, it’s likely that this year decisions like Goldman or McKinsey, Morgan Stanley or BCG, and J.P. Morgan or Bain will be a whole lot easier than they had been in the past.

–Posted by Derek Loosvelt, In the Black

Written by Phil Stott

March 24, 2010 at 2:14 pm

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