When Goldman's new CFO talks, insiders listen

Mon Jan 14, 2013 10:42am EST
 
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By Lauren Tara LaCapra and Carrick Mollenkamp

(Reuters) - In 2004, Harvey Schwartz, who was then head of the financing business at Goldman Sachs Group Inc's GS.N investment bank, came up with a new way for the bank to make money from a seemingly mundane activity: helping companies buy back their shares.

He created a product that could save companies money by getting them improved pricing on buybacks while generating fees and trading profits for the bank. To build what became a multibillion-dollar market, Schwartz had to convince dozens of skeptical Goldman sales people, derivatives traders, corporate finance specialists and lawyers that they could make buybacks more enticing, said Martin Chavez, a Goldman quantitative analyst who worked with Schwartz.

"He said, 'I know the details are going to be immensely complicated, and it's going to seem impossible. But there is a solution here. We're all going to work until we figure it out,'" Chavez recalled Schwartz as saying. "And when Harvey says that, people listen."

At the end of this month, Schwartz will need many more to listen when he takes over as Goldman's chief financial officer from David Viniar, the firm's long-time finance chief who is seen by insiders, analysts and investors as a tough act to follow. Viniar, 57, will remain a Goldman director.

How Schwartz, 48, who has so far worked in relative anonymity as co-head of the firm's securities and trading unit, fills those shoes could have far-reaching impact on Goldman's outlook and even its culture. After 15 years of selling products to clients and inventing ways to generate revenue for the firm, Schwartz will now be responsible for reining in risk-takers and worrying about costs.

About half of Goldman's 32,600 employees will report to Schwartz, including staff in finance, accounting, legal and technology. As CFO, he will have a vast and diverse portfolio, overseeing everything from the bank's $949 billion balance sheet to risk-management and Goldman's relations with analysts, investors and regulators.

NITTY-GRITTY

Schwartz declined to comment for this article. But interviews with Goldman executives who know the incoming CFO give insights into why the bank picked him for the job and what he may do with it.   Continued...

 
Harvey Schwartz, CFO of Goldman Sachs is pictured in this undated handout photo from Goldman Sachs obtained by Reuters January 11, 2013. REUTERS/Goldman Sachs/Handout