Goldman Sachs CEO David Solomon did not have a good week in what's been a difficult year for the head of the giant Wall Street investment bank.
Goldman Sachs's stock managed to eke out a gain of about 0.8% this week, but that's only half the 1.6% rise this week of the Dow Jones Industrial Average. Meanwhile, the stock of rival JPMorgan Chase rose by 1.7% this week.
There was news this week of a fresh Justice Department inquiry into Goldman's role as both a banker and securities acquirer of Silicon Valley Bank in the period leading up to SVB's collapse. In addition, The Wall Street Journal reported about criticism of Solomon from some of the firm's partners and its ex-CEO, Lloyd Blankfein
The past week's underperformance comes after a less-than-stellar year-to-date showing for Goldman Sachs stock compared to JPMorgan, Morgan Stanley (MS) and the Dow Jones Industrial Average. (See chart below)
So far in 2023, Goldman Sachs's stock has fallen by 1.3%, while JPMorgan Chase's has risen 6.9%; Morgan Stanley's is up 4.1%; the Dow Jones Industrial Average has gained 3.9%; and the S&P 500 is up by 15.3%. The only major bank that has done worse is Bank of America, which is down 11.4% so far in 2023. Wells Fargo is up by 2.3% and Citigroup is up by 6.7%.
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The latest headache comes in the form of the government inquiry into Goldman as both a purchaser of securities in Silicon Valley Bank's portfolio and as an adviser on a capital raise that was proposed in the days leading up to the bank's takeover by federal regulators on 10 March, as initially reported by The Wall Street Journal.
Regulators are focusing on whether investment bankers at Goldman Sachs and the bank's trading unit were communicating improperly about the portfolio sale.
Columbia Law School Professor John Coffee told MarketWatch that based on what's surfaced in reports thus far, he doesn't see a strong case of insider trading against Goldman Sachs with Silicon Valley Bank.
"There is no smoking gun here because Goldman does not appear to have traded in Silicon Valley stock; thus, they did not use any insider information that they may have possessed," Coffee said.
There was no evidence in what's been seen thus far that Goldman Sachs traded Silicon Valley Bank stock during this period.
"Goldman may have had privileged information but they did not use it," Coffee said.
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The bank's notification to SVB that it would need an independent adviser on the sale of securities shows that the bank took steps to protect against an appearance of a conflict. "They sensed there was a problem," Coffee said.
The separate WSJ report on partners complaining about Solomon featured gripes about Solomon's hobby as a disc jockey being a distraction. Others are reportedly upset about Goldman's setbacks related to its push into consumer banking under its Marcus unit, which is now being restructured.
For his part, Solomon has been visible, including an appearance on CNBC-TV earlier this week when he said, the U.S. economy remains resilient. "I would say that I have been surprised," Solomon said.
Tomi Kilgore contributed to this report.
This article was published by MarketWatch, part of Dow Jones
