The David Solomon era has officially begun for Goldman Sachs's beleaguered trading division.
Stephen Scherr, Goldman Sachs's finance chief, drew a line earlier today under the company's prior management team when he said the bank would move away from judging the profitability of single trades in favor of taking a broader approach to clients.
Under CEO Lloyd Blankfein, Goldman developed a model to measure the profitability of each potential trade. With higher capital standards buffeting the industry, the idea was that it would give traders a way to determine whether an individual trade was going to hurt the profitability of their own business or that of the firm.about how the firm thought about using its precious capital. In his remarks, he told them about the tool which had by then been rolled out division wide.
Over the subsequent years, however, the model got blamed for encouraging Goldman traders to forego smaller less profitable trades even in cases where it would have served an important client. Many traders said his speech was at least an internal admission that the capital allocation model had incentivized employees to reject smaller trades. Salame and the company declined to comment.
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