After Tom Montag fell behind in the race to lead Goldman Sachs in 2006, he wasted no time in forging a new path at a Wall Street rival. Now he is on track to return to the bank at a time when it is lagging behind some of its peers.
THE appointment scheduled, announced by Goldman on Thursday, has been in the works for some time. Montag, 66, began talks with the bank about a year ago, according to a person familiar with the matter, as Goldman sought a replacement for Mark Winkelman, another former senior Goldman executive who retired from the board. of directors this year.
Finding yourself in a Wall Street boardroom is a familiar coda for an industry great like Montag. He spent 22 years at Goldman then worked as second-in-command at Bank of America during a productive 13-year run, which ended in 2021 following news stories that raised questions about the culture he fostered.
His return comes amid renewed focus on Goldman’s supposed unease, with the group’s stock market performance lagging rivals and chief executive David Solomon facing a constant barrage of negative media coverage.
The appointment was big news this week at Goldman’s 200 West headquarters in lower Manhattan and also sparked debate among the bank’s alumni network, whose members include prime ministers, chief executives and billionaire investors.
One party expects Montag to be a recall to the board for Solomon, 61, in what is a part-time job. Others see him as a member of the old guard who will add much-needed trading experience to the boardroom and won’t be afraid to point out Goldman’s troubles.
“He has no problem speaking his mind. But he’s not running the company, he’s on the board,” said a former Goldman executive who worked with both Montag and Solomon. .
The Financial Times spoke to a dozen of Montag’s former colleagues at Goldman and BofA. He won praise for his attention to detail and demanding leadership style that could engender deep loyalty. But some who confronted him painted a combative figure, with several former colleagues describing him as a “tyrant”.
Montag did not respond to requests for comment.
“The priority is to always have a strong background in risk management on the board,” Goldman spokesman Tony Fratto said. “It is rare to find candidates with senior-level experience in large, complex global financial institutions who are available to serve as independent directors.”
A physically imposing and dynamic figure on Wall Street, Montag – or Monty as his friends call him – joined Goldman in 1985 when it was still a tightly knit private company controlled by his elite group of partners.
An economics graduate from Stanford University, he worked as a derivatives trader and became a partner in 1994. He furthered his skills by helping run the group’s Japanese operations and co-managing Goldman’s Asian trading franchise .
“He was great in managing the Asia business,” recalls a former colleague.
Beth Hammack, co-head of the global finance group at Goldman who worked with Montag for several years, described him as “one of the most inspiring leaders I’ve worked with.”
“He’s really charismatic and energetic, really knows how to support a business and people, and how to make them feel engaged, caring and get the most out of them,” Hammack told the FT.
Montag became global co-head of sales and commerce, but left Goldman in late 2007 after losing to Gary Cohn and Jon Winkelried in a promotion race to become group co-chairman under Lloyd Blankfein.
In 2010, Montag made something of a reappearance for Goldman in congressional hearings in the aftermath of the financial crisis, when lawmakers seized a June 2007 email he had sent that referenced Timberwolf, a deal $1 billion mortgage that Goldman was working on, as “crappy.”
“How much of this shit business did you sell to your customers after June 22, 2007?” then-Senator Carl Levin asked another former Goldman executive, Daniel Sparks, in 2010. Sparks said Montag was referring to Goldman’s performance on Timberwolf, not the deal itself .
Meanwhile, Solomon joined Goldman in 1999 from Bear Stearns. The pair were both partners in what was then Goldman’s fixed income division, although Solomon was a leveraged financial banker while Montag worked as a trader and they weren’t particularly close, according to sources. people who were there at the time.
Montag joined Merrill in 2008 where he went to work for John Thain, another Goldman alum, after being lured by a $39 million salary package. A few months after joining, Merrill agreed to be taken over by BofA in a hasty merger to save the investment bank.
Montag was instrumental in integrating Merrill into BofA and steadily expanded his portfolio of responsibilities, becoming chief operating officer and president of global banking and markets. He also strengthened the bank’s diversity programs, pushing to recruit from a wider range of schools and leading a recruiting effort in Africa.
“Tom Montag has done an excellent job at Bank of America during one of the most challenging times in financial services history,” BofA said in a statement this week.
He left the bank in 2021 after 13 years, months after a New York Times report alleged that Montag was a polarizing figure within BofA, playing favorites with some staff members and dating some female employees.
Montag last year became chief executive of Rubicon Carbon, a carbon offset software platform backed by California-based private investment group TPG. With a seat on the Goldman board, he will be back on Wall Street.
But he will return to a group significantly different from the one he left 15 years ago. Goldman was transformed into a bank holding company during the 2008 financial crisis and has adjusted to life as a much more heavily regulated organization that can no longer rely on the risky trades of its heyday.
For a while, it looked like Goldman’s next big bet would be a push into retail banking. But next billions of dollars in lossesGoldman is now winding down that business.
Solomon, who took over from Blankfein in 2018, is emphasizing growth plans in asset and wealth management to generate the kind of steady profits that boosted rival Morgan Stanley’s share price for a long time.
But morale was hit by layoffs at the start of the year and traders’ unhappiness over what they were paid for a record performance in 2022. With investment banking still in the doldrums and a boom beginning to fade, we fear that the rest of the year will be difficult.
Several Goldman executives say privately that 2023 is shaping up to be another disappointing year for compensation. More layoffs could come in September, with Goldman also considering cutting staff it deems underperforming, a process that resumed last year after a hiatus during the coronavirus pandemic.
When Goldman reports second-quarter results on July 19, analysts expect earnings per share to have fallen about 8% from a year earlier, according to consensus data compiled by Bloomberg. Rivals JPMorgan Chase and Morgan Stanley, which are less reliant on trading and investment banking, are expected to generate improved EPS.
Montag’s return has sparked speculation on Wall Street that he might still want to run his old bank.
“I bet you in the back of his mind that he thinks he can be CEO of Goldman Sachs,” said a person who worked with Montag at Goldman. “I bet he does.”