Today could be a difficult day for Goldman Sachs employees and alumni. The drop in the stock price since the announcement of SEC charges must hurt, but that may not be the real source of longtime pain for the Goldmanites. Many senior Goldman executives have both the ambition for and a strong sense of entitlement to political careers. They may be richer than most of us can ever imagine, but a block on the assumed paths to “public service” and political power may leave them feeling unfulfilled.
The SEC charges, coupled with the public and humiliating (at best) Senate hearings this week, may mark the end, or at least a pause, in the era of Goldman executives moving from the bank to public service. How could anyone in this generation of Goldman leadership possibly be approved for government service, and what politician would be want the public relations baggage of a tainted Goldman banker?
That dynamic may not apply in China.
Under the auspices of the “Thousand Talents Scheme“, the Chinese government is actively recruiting successful Chinese finance executives to return to China and work for either state-owned banks or financial regulators. In December the government hired PIMCO’s Zhu Changhong to be the Chief Investment Officer of the State Administration of Foreign Exchange (SAFE).
The highest profile “returnee” recruit is Lee Zhang (???), who just joined Industrial & Commercial Bank of China as a vice president. Most recently he was China chairman and Asia regional head of global banking at Deutsche Bank. Prior to DB he worked for Goldman Sachs. Zhang already has political experience as a delegate to the China People’s Political Consultative Conference and as an economics advisor to Heilongjiang Province.
There are also uncomfirmed reports that Fred Hu (???), who recently stepped down as Greater China Chairman of Goldman Sachs, may become a vice-governor at the People’s Bank of China or a top executive at a large state-owned financial institution. These types of appointments are approved at very high levels of the Chinese government and take a long time to go through. This issue of Caixin’s Century Weekly has an article on Lee Zhang’s appointment that describes the selection process. The story makes no mention of Fred Hu.
According to Caixin, these appointments are approved by the Communist Party’s Central Organization Department after a very rigorous selection process. The government started with a list of about 100 names, 50 people made it to the next round, but only Lee Zhang made it all the way through. The final interview was conducted by 9 senior officials, including Liu Mingkang, Lou Jiwei, Chen Yuan and Guo Shuqing. The Caixin article also states that Li Yuanchao, Politburo member and head of the Organization Department, was present at the interview. There is no translation for the article yet; when there is I will post it. In the meantime here is the Chinese description of the selection process:
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The fact that the Caixin article makes no mention of Fred Hu may have no significance. Or perhaps he did not make it through the selection process and is instead headed to an even more lucrative career as private equity investor. We will find out in the coming months.
Will the government decide that experience at Goldman Sachs is still good for the development of China’s finance industry, or are those Chinese Goldman alumni possibly now as tainted as the American ones? Goldman has been very strategic in its China hiring, and my guess is that the Chinese government still “likes” Goldman Sachs. At least in China, Goldman may have again skated to where the puck is going to be.