Wednesday, February 17, 2010

The Mouth of Sauron

At its head there rode a tall and evil shape, mounted upon a black horse, if horse it was; for it was huge and hideous, and its face was a frightful mask, more like a skull than a living head, and in the sockets of its eyes and in its nostrils there burned a flame. The rider was robed all in black, and black was his lofty helm; yet this was no Ringwraith but a living man. The Lieutenant of the Tower of Barad-dûr he was, and his name is remembered in no tale; for he himself had forgotten it, and he said: 'I am the Mouth of Sauron.'


'Is there any one in this rout with authority to treat with me?' he asked. 'Or indeed with wit to understand me? Not thou at least!' he mocked, turning to Aragorn with scorn. 'It needs more to make a king than a piece of elvish glass, or a rabble such as this. Why, any brigand of the hills can show as good a following!'

Aragorn said naught in answer, but he took the other's eye and held it, and for a moment they strove thus; but soon, though Aragorn did not stir nor move hand to weapon, the other quailed and gave back as if menaced with a blow. 'I am a herald and ambassador, and may not be assailed!' he cried.

'Where such laws hold,' said Gandalf, 'it is also the custom for ambassadors to use less insolence.'

— J.R.R. Tolkien, The Return of the King

Max Abelson has an interesting piece in print at The New York Observer, profiling Goldman Sachs spokesman Lucas van Praag. In it, Mr. Abelson ponders aloud—and gets several anonymous competitors, PR flacks, and ink-stained wretches from the fourth estate to ponder aloud with him, strictly not for attribution—why it is that Mr. van Praag seems to be making such a hash of his job.

For hash it definitely is, as Your Dedicated Correspondent has observed in the past and Mr. Abelson so ably demonstrates. As mouthpiece for the simultaneously most successful and most hated financial institution in the world today, Mr. van Praag has done a bang-up job buffing the most-hated aspect of Goldman Sachs' image to a blindingly brilliant shine. His superiors and colleagues have certainly given him ample material of an embarrassing, questionable, and even damning nature to deal with and spin to the outside world. But van Praag's "majestic Victorian taunts" (in Mr. Abelson's apt coinage) have only served to alienate potential allies and enablers in the press and project a supercilious institutional arrogance which only serves to confirm the unflattering portrayals offered up by the firm's detractors.

Part of the problem is a matter of style. Mr. van Praag seems to take obvious pleasure in the parries, ripostes, and counter-ripostes he makes to attacks upon his employer. He delivers them with a studied and almost ornate verbal style that conveys the message that not only are you wrong, but also he is smarter and better-educated than you. In my experience, this modus operandi tends to play better in Mr. van Praag's native Britain, where the art of sharp, witty, spirited debate is still seriously practiced by public figures and enjoyed by most spectators.

But here in the United States, schizophrenic home to both the largest number of elite universities in the world and the broadest-based strain of anti-intellectualism known to Western democracy, the aggressive debating style of lobbing witty insults at your opponent only plays well on reruns of Monty Python. If you doubt me, just look at the inarticulate clods we elect to public office. Most of these morons cannot even deliver a coherent speech, much less bandy about gerunds and subjunctive clauses in the midst of a heated argument. Most Americans would probably try to impeach them if they did. This is just not a country where you can use words like "egregious," "febrile," and "chimera" in public without running the risk of being lynched for general asshattery.

Why do you think this blog is pseudonymous?

* * *

But mismatched style, surely, cannot account for all of the problem. Nor can it be that Goldman is unique in having committed acts which caused—or can be seen to have caused—much of our present financial woe. Credible evidence exists that all of the major investment and commercial banks extant helped collect and pour the effluent from a thousand sewers upon the unwitting heads of taxpayers, governments, and investors everywhere. But, as Mr. Abelson relates, JP Morgan's Jamie Dimon and Morgan Stanley's John Mack currently have public images only slightly less saintly than that of Florence Nightingale. Nor is Goldman noticeably incompetent, unlike its universal bank peers Bank of America and Citigroup. A pragmatic and striving lot, Americans love competence, but BofA and Citi are only regarded with contemptuous pity, whereas star performer Goldman is about as welcome in the public sphere as a dose of the clap.

Goldman has other natural advantages. It is immensely rich, and Americans admire rich things. Great wealth is commonly associated with virtue in this culture, if only because everyone wants to be rich. (Or so the advertising industry tells us.) Also, unlike many of its competitors, Goldman is a venerable American success story, headquartered in America. There are many foreign banks and investment banks like Deutsche Bank and Société Générale—which sucked as many billions from the public teat during the gang rape of AIG as Goldman did—which are just as big a target as the Squid. Americans love to bash Europeans (especially the French—hello?!), but it is Marcus Goldman's little commercial paper cart which has remained in the gunsights. Why so?

Well, one theory is that Lucas van Praag is just incompetent. Goldman Sachs may be as pure as the driven snow, and does not merit the slings and arrows sent its way by jealous journalists and pandering politicians. Or, perhaps less unbelievable, Goldman is no better but no worse than any of the other large financial institutions which helped drive the global economy into a ditch. It's just that van Praag is no good at getting the message out.

But this is not credible. His continued tenure as spokesman for the firm would require other senior management to be asleep at the wheel, powerless to influence the message van Praag's department conveys to the public, and/or excessively timid and fastidious about encouraging him to retire to a small private island. None of these are consistent with the image and behavior of ruthless, switched-on Masters of the Universe.

Another theory is that Mr. van Praag is actually fighting a clever and resourceful rearguard action. By slapping upstart journalists down hard and turning the messenger rather than the message into the story—normally a big no-no in public relations—he is distracting attention from other, potentially more damaging stories and revelations. He is consciously and intentionally sacrificing his reputation and political capital with the press for the good of the firm. This theory would be consistent with the type of selfless, jump-on-the-grenade culture Goldman prides itself on and demands from its employees. It would also be consistent with the conspiracy theories of the pitchfork-toting tinfoil hat crowd that Goldman Sachs is the Devil's own bank. In any event, I am afraid there will be no way to tell whether this theory is true until and unless someone unearths more bombshells.

* * *

My preferred theory is different.

I think van Praag is completely on-message. I think he is conveying exactly what Lloyd Blankfein and the other executive managers of Goldman Sachs want him to convey: that Goldman Sachs has done nothing wrong, that we deserve our fearsome reputation and our outsized compensation, and, if you don't like it, you can all go fuck yourselves.

This is a trader's mentality. A trader never apologizes. A trader never admits he made a mistake. A trader never says he's sorry. To do so, in his mind, would be to admit weakness. Another trader could use such an admission against him in the next trade. By the same token, a trader never sits back and takes it. If someone attacks him, he attacks back, preferably in greater strength, to discourage similar attacks from his opponent or others in the future. Perceived weakness is blood in the water in trading, and it attracts other sharks.

At the same time, a trader understands that all other traders behave in the same fashion, and he should not take sharp elbows or direct attacks personally. After all, most trading is conducted among a relatively small number of firms, among a relatively small number of traders, all of whom know or know of each other. At the end of the day, you've gotta shrug off your wounds and bruises from the battles of today and get ready to trade with the same bunch of assholes tomorrow. No harm, no foul. No hard feelings.

Goldman Sachs is run by traders. Lloyd Blankfein is a trader. Gary Cohn is a trader. Lucas van Praag's career at Goldman has coincided with the rise of traders into positions of power during the Great Moderation and credit boom. van Praag made partner in 2006, not too long after Henry Paulson, the last of the Goldman investment banking old guard—corporate finance client guys—left the CEO slot for Treasury. Traders already held most of the executive power by then anyway. Lucas van Praag has been running public relations at Goldman Sachs just like he would have for a giant institutional hedge fund. Because that's what it has been.

I suspect the disconnect in many people's minds—including mine, I must admit, on occasion—comes from the fact that Goldman perfected the image so many years ago of being a selfless, anonymous, client-first organization dedicated solely to their clients' success. Parts of it still operate that way, but the power and most of the money are made elsewhere. And it is made for Goldman alone.

* * *

Intentional or not, however, Goldman's current PR strategy is truly dangerous. It does not take into account that Goldman is simply too big, too interconnected, and, yes, too successful to behave like an arrogant Big Swinging Dick toward everybody. Most of its institutional trading counterparties probably don't give a shit. They probably think Goldman is just a big, powerful bunch of assholes, but they have to trade with it because it is the market axe. Besides, most of them probably figure they would behave in exactly the same way if they were in Goldman's shoes. Corporate clients have mixed feelings about the firm. A lot more of them than in the past truly distrust Goldman's size, power, and proprietary intentions, but a huge number still like having the 800-pound gorilla in their corner. Goldman's clients are not its biggest PR problem.

The rest of the world is. It has to figure out a better way of dealing with politicians, the press, and the general public than its current like-it-or-lump-it strategy. I fear the traders running the place do not understand that, while they are the biggest and baddest players in the global financial markets, who have to apologize or explain themselves to no-one, they don't control the game. Politicians and regulators do. (And they answer, at least indirectly, to the general public.) These are the people they have to appease. Or at least not piss off. These are the people who pay attention to Goldman's public communications strategy.

The Japanese have a saying: the nail that sticks up gets hammered down. Right now, Goldman Sachs is the biggest fucking nail on the board. And Lucas van Praag is the miniature douchebag standing on top of the nail yelling, "Nyah, nyah! Go ahead, hit me! I dare ya!"


More Goldman goodness:
The Fish Stinks from the Head (June 30, 2009)
The Dirt Bag Chronicles (January 22, 2009)
Overheard at 85 Broad Street (June 18, 2008)

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