FILE - This June 21, 2018 file photo shows chief operating officer of Goldman Sachs David Solomon in Beijing. Goldman Sachs announced Tuesday, July 17, Lloyd Blankfein will retire as CEO and chairman on Sept. 30, and be replaced by Solomon. (AP Photo/Andy Wong, Pool)

Goldman's Blankfein to retire as CEO, Solomon to take over

July 17, 2018 - 1:14 pm

NEW YORK (AP) — Another Wall Street veteran of the financial crisis is stepping aside: Lloyd Blankfein is retiring as CEO of Goldman Sachs after 12 years at the helm of the storied investment bank.

Blankfein will be replaced by David Solomon, a long-time Goldman executive who has been seen as Blankfein's chosen successor. Solomon will assume the CEO role from Blankfein on Oct. 1 and become chairman of Goldman in 2019.

The announcement came Tuesday as Goldman announced a 44-percent jump in second-quarter profit from a year ago. The performance was largely driven by the investment bank's core franchises: advising companies on mergers, acquisitions and other deals, and its trading business.

Blankfein took over Goldman Sachs shortly before the Great Recession and financial crisis. Goldman and its competitors accumulated billions of dollars of toxic assets on their books — bad mortgages, collateralized debt obligations and other illiquid assets. In the darkest days of the crisis, it was thought Goldman Sachs may not survive. By late 2008, some of Goldman's key rivals — Lehman Brothers, Bear Stearns and Merrill Lynch — were either bought in distressed sales or, in the case of Lehman, went bankrupt.

Blankfein moved quickly to save the firm, tapping the Federal Reserve's emergency programs set up to keep banks from failure. Eventually and reluctantly, Goldman took money from the $700 billion TARP bailout program, which it repaid.

"Lloyd's market savvy, intellect, energy, enthusiasm, charm and quick wit have helped him successfully steer Goldman Sachs through the financial crisis and position it for the future while earning him great respect and affection inside the firm and from friends and clients around the world," said Hank Paulson, who was CEO of Goldman Sachs before Blankfein. He left the firm to become Treasury Secretary for President George W. Bush.

Goldman and Blankfein had few fans outside of Wall Street in the early years after the crisis. The bank came under heavy criticism that it directly benefited from the 2008 government bailout of insurance giant AIG, and was just as responsible for creating the revolving door of toxic mortgages that led to the crisis. There were also accusations that Goldman's bankers took bets on the mortgage market against their clients' own positions.

Goldman Sachs' employees, among the best paid in finance, continued to be paid well despite the mess Wall Street left for the rest of the country. A scathing article written for Rolling Stone nicknamed Goldman Sachs "the great vampire squid," a term that stuck for years.

Congress eventually passed a law, the Dodd-Frank Act, which imposed new restrictions on Goldman's business. The firm was bought under the oversight of the Federal Reserve, and is now subject to annual "stress tests" like other big banks.

Blankfein worked to rehabilitate the bank's image, and diversify Goldman's businesses beyond the traditional trading and advising. Goldman Sachs now offers online savings accounts and personal loans to consumers, and there are plans for it to enter the credit card business -- all businesses that Goldman shunned before the financial crisis.

"Our firm has demonstrated great resiliency and strength over the last 12 years," Blankfein said in a statement issued Tuesday.

In recent years, Blankfein seem to become more comfortable and open. He joined Twitter, where he often tweets on current events and regularly makes veiled criticism of President Donald Trump and his administration. The once buttoned-up executive grew a beard, and has been more recently photographed without a necktie than with one.

Solomon has been with Goldman Sachs since 1999, joining as a partner (something that's rare for a firm with a culture of lifetime commitment). He held the title of co-chief operating officer along with Harvey Schwartz until Schwartz retired earlier this year.

The 56-year-old Solomon is sometimes better known by his nightlife gig as a DJ at major clubs around the world as DJ D-Sol. With Solomon, along with the firm's relatively new finance chief, Martin "Marty" Chavez, a 54-year old gay Hispanic man with arm tattoos, the firm seems to be portraying a much more open, lower key image compared to the power suits and stuffier white shoe nature that built the firm through the 20th Century.

Blankfein's retirement will leave Jamie Dimon, chairman and CEO of JPMorgan Chase, as the last head of a Wall Street firm who was around during the financial crisis. Kenneth Chenault, who led American Express through the crisis, retired earlier this year.

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Ken Sweet covers banking and the Consumer Financial Protection Bureau for The Associated Press. Follow him on Twitter at @kensweet.

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