Can Goldman Sachs Survive Losing Its Behind-the-Scenes Wizard?

A key figure prepares to step down.

John Grgurich
John Grgurich
Sep 19, 2012 at 12:00AM

Everyone on Wall Street, and a lot of people on Main Street, know the smart, smirking CEO of Goldman Sachs (NYSE: GS), Lloyd Blankfein. Fewer people know Goldman's No. 2, longtime CFO David Viniar. The company announced yesterday that Viniar is retiring come the end of January. CFOs typically come and go without much fanfare, but Viniar's departure should be duly noted, particularly by bank investors.

A CFO of a different color
In the past four years, Goldman has been through one of the toughest times, if not the toughest, in its 143-year existence. The Wall Street stalwart almost went under in the fall of 2008 and has struggled to find its place in a post-crash world of significantly more restrictive domestic and international regulation, along with similarly suffering peers Morgan Stanley, JPMorgan Chase, Citigroup, and Bank of America.

And while the wily Lloyd Blankfein can rightly be lauded for guiding Goldman through this difficult time, it's questionable whether he could have done it without Viniar at his side. Viniar has been with the bank since 1980 and served as CFO since 1999, and he probably understands Goldman's mind-bendingly complex balance sheet better than anyone else.

Viniar's replacement will be Harvey Schwartz, a Goldman executive who's worked on the investment-banking side of the business since he joined the firm in 1997. Viniar apparently thinks highly of him. In a conference call to reporters and analysts, he said, "I have sought Harvey’s advice on risk judgments and market knowledge for a long time, and I know he will be an outstanding chief financial officer."

The less insanely complex, the better for everyone
The consensus in the press seems to be that Goldman is beginning the process of passing the torch to a new generation of leaders. Viniar is 57. Schwartz is 48. Blankfein himself is 57 but has said on numerous occasions he has no plans to retire. So this could just be a one-off. Time will tell.

Viniar's leaving at a good time, at least. Barring any surprises (which there have been a few too many of in banking recently), Goldman appears to be through the worst of the what the financial crash threw at it. Its stock price has recovered from around $50 in 2008 to $119 per share today.

And the bank is getting out in front of post-crash legislation like the Volcker Rule, trading in its lucrative proprietary lending operations for more stable, if less sexy, lines of business such as monoline insurance and private banking. So with any luck, the bank's balance sheet won't be nearly as arcane as it once was, which should make for a happier CFO and happier investors.

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