This is definitely not a good look.
At a time when the federal government is struggling to manage its $2 trillion bailouts for main street and SMEs, a handful of Goldman Sachs insiders (probably high-ranking executives) have apparently decided to sandbag CEO David Solomon, who is already reeling from the blowback to his latest raise, the highest among his peers despite $GS's lagging performance.
BBG reported Friday that Solomon recently OK'd the purchase of two private jets, breaking with a longstanding corporate tradition.
For years, there was an allergy inside Goldman Sachs to owning a private corporate jet. Top bankers had access to rides on planes shared with others, but didn’t want to erode their less-than-stellar image on Main Street with the unnecessary extravagance of having their own.
Until David Solomon took over.
The CEO has ordered up a pair of top-of-the-line Gulfstreams for the firm, according to people with knowledge of the matter. The firm chose a G700 model that sells for about $75 million each, is powered by Rolls-Royce engines and offers cabins so long and wide they contain a master suite with shower.
Understanding why Solomon's decision might have rankled so many within Goldman requires some knowledge of the firm's recent history. The bank has long used the fact that it didn't own a private jet for its executives to travel in as a PR bulwark against liberal Democrats and other critics. Instead of owning a jet outright, Goldman allowed its executives access to chartered planes via an arrangement with NetJets, the Berkshire subsidiary that brokers part ownerships in business aircraft.
Of course, as BBG points out, at the highest levels of Wall Street power, private jets are an expected perk. Goldman is an outlier for not owning one, or even several, and rivals like JPM and MS have had theirs for years. Looking forward, it's also possible that the use of private jets becomes more accepted in the age of coronavirus as flights become vectors for spreading disease.
Not only did Solomon buy two jets, but he and the firm chose a G700 model that sells for about $75 million each, is powered by Rolls-Royce engines and offers cabins so long and wide they contain a master suite with shower. According to BBG, marketing material for the G700 advertises a speakerless surround sound and "the industry’s only ultra-high-definition circadian lighting system."
It's exactly the kind of unwanted attention that might draw public scrutiny or outrage, or even possibly prompt the Feds to reconsider certain legal agreements struck between the bank and the DoJ over its handling of 1MDB.
As Bloomberg reminds us, when Congress dragged the CEOs of the big Wall Street banks to Capitol Hill in the aftermath of the crisis, they were asked which of them arrived in a private, company-owned aircraft.
All raised their hands - except Goldman's then-CEO, Lloyd Blankfein.
"Let the record show," said LA's Democratic Congressman Brad Sherman, that "all the hands went up except for the gentleman from Goldman Sachs."
It was a rare PR win for the firm, and a moment that actually resonated with the public. Though as we've learned, Goldman's lack of a private jet is merely a ruse, and nothing more. It is in no way indicative of the culture at the firm, which was recently described by a former banker who turned against the bank to cooperate with the Justice Department in the 1MDB investigation, as "a culture of secrecy" where bankers were encouraged to bring in big deals and ignore compliance's misgivings.
At least when GE had its private jet scandal, John Flannery was able to at least blame it all on his predecessor. This is one of the first Goldman scandals where Solomon distinctly does not have that luxury.