Not counting the outright failures of several multibillion-dollar firms, one of the most staggering things about the financial crisis has been Goldman Sachs’ fall from its rarified and sparkling place in the public imagination. It isn’t just that the cooed-over firm has become the iconic scoundrel of an entire era. It’s also how much worse they’ve made things for themselves with a continuing communications and PR policy that’s basically a stiffly extended middle finger, waved in the air for all to see.
The first thing Wall Street thought when it saw chief Goldman spokesperson Lucas van Praag’s greatest phrases compiled into a post on New York magazine’s Web site on Monday, Feb. 1, was that the man has a way with words. Mr. van Praag owns a dazzling vocabulary that’s allowed him, in the last three weeks alone, to bemoan the shoddy tittle-tattle of the Sunday Times and The Wall Street Journal’s preposterous effluent.
But the second thought is that all of these majestic Victorian taunts might not be in the best interest of a firm that large sections of a beleaguered country are quick to pounce on every time the Dow takes a dip. Nevertheless, the message from Mr. van Praag and his team has been that criticism of the firm is not only moronic—“chimera produced by a febrile mind”—but that criticizers are troublemaking simpletons who, as he likes to say, are doing their readers a great disservice.
“The firm has to make its case that it is not some black-hearted villain. And when you’ve got somebody who is openly disdainful towards the press, making that case is very difficult,” said another communications executive at a finance firm. “It’s not as though it’s ineffectual. It’s positively causing harm.”
There have been some bursts of public meekness, to be fair, but nothing like the relatively persistent humility from Morgan Stanley’s chairman, John Mack, and JPMorgan chief Jamie Dimon. And Mr. van Praag has made clear that periodic Goldman charm offensives are merely obligatory.
In interviews this month, other Wall Street PR chiefs, Goldman alumni and major financial journalists wondered how the famously shrewd firm, not to mention its savvy and droll spokesperson, have allowed things to veer this far off course. Even beyond obvious gaffes like Lloyd Blankfein’s “God’s work” quote, given by the firm’s CEO to London’s Sunday Times, whenever a Goldman executive insists that the financial crisis just wasn’t scary for them, and Mr. van Praag repeats that those who think otherwise are ill-informed tattlers, Goldman gets uglier.
“At a time when people perceive banks to be elitist and beneficiaries of the bailout at the expense of average homeowners, to go around and stick your head out of the sunroof of your Bentley and say, ‘Fuck you, critics,’” a business editor at a major publication said last week, “is counterproductive.”
MR. VAN PRAAG, 60, is predisposed to a certain debonair resolve. His father, Louis, was an English textile manufacturer and design consultant who spoke unimpeachable French, and was described in his obituary as “charming, stubborn, and very funny.” He spent decades trying to convince the English that they needed to catch up with foreign designers, but he did it with a persuasively “cosmopolitan air.”
And he wore a monocle. Goldman’s spokesperson does not, though he is known for a pinky ring. “His carriage is very Masterpiece Theater,” the writer Joe Hagan said. “I think he enjoys being Lucas very much,” John Arlidge, who did the “God’s work” interview, said recently. “He’s living the Lucas life.”
Mr. van Praag graduated from the University of Durham, the oldest British university after Oxford and Cambridge, with a joint honors degree in economics and economic history. He was a Merchant Navy officer, spent 10 years at Bankers Trust, left to run a British manufacturing company and worked through the ’90s at the Brunswick Group, where he was said to be a right-hand man to the public-relations guru Alan Parker, whose son’s godfather is Prime Minister Brown.
No doubt about it, Mr. van Praag is charming. In 2001, new to Goldman, he persuaded a Financial News reporter curious about an anonymous buyer of the firm’s shares to instead write about “the talents of his brilliant artist brother-in-law,” who was about to have a gallery show.
There were dark moments back then, but the stakes weren’t the same. In 2002, after he’d been promoted to be Goldman’s global head of corporate communications, Michael Oxley’s House Committee on Financial Services accused the firm of “spinning”—granting IPO shares to important investment banking clients who flip for big profits. Mr. van Praag called it “an egregious distortion of the facts,” saying the committee drew a conclusion that was “completely inaccurate. It’s rubbish.” And in 2005, his response to the report that Goldman was linked to both sides of the New York Stock Exchange’s takeover of Archipelago was so gorgeously smug that conspiracy Web sites picked it up. “Life is filled with conflicts,” he declared, “some real, some imagined.”
But those were different times, and the clamor was balanced with calm. He called it extremely embarrassing when a senior Goldman economist was charged with insider trading, ruminating on how “a single act has the potential to undermine the best efforts of everybody.” When the firm, along with nine others, agreed to a $1.4 billion S.E.C. settlement after investigations into investment-banking influence on research, he moved away from the egregious-rubbish line: “With the benefit of hindsight, it’s clear that we all—everybody in the industry—could have done better.”
In October 2006, he made partner at Goldman. “Congratulations to Lucas van Praag,” said The Daily Telegraph, “surely the world’s highest paid mouthpiece.” A while later, he and his wife paid $7.85 million for an uptown townhouse with radiant-heat floors. He would not comment for this story.
“LOOK, LUCAS IS an amazingly brilliant guy,” a former communications colleague said. “In the best of times, he can come off as arrogant, slightly pompous, flippant and condescending.” In bad times, the financial crisis has brought a new octave to Mr. van Praag, and his message has become, as he would say, febrile.
In response to the September 2008 Times cover story that reported on the many billions of dollars tying Goldman to AIG, Mr. van Praag told Reuters that it was simply wrong to suggest his firm might have been worried about the insurance giant’s fate. The piece was “seriously misleading,” he said, because “our exposure to AIG was, and is, not material.”
That firm’s counterparty list—the firms on the other side of trades with AIG—was released last March, with Goldman Sachs’ name right at the top: “For the record then,” the Financial Times said, “it certainly was not the NYT that was ‘seriously misleading.’” Afterward, Goldman insisted that it would have been fine without the historic AIG bailout. The American government paid counterparties at 100 cents on the dollar, which meant $12.9 billion for Goldman alone.
However much you know about the details of opaque derivatives agreements, or whatever you feel about the firm’s splendor or evil, it is exceedingly difficult to conceive of a scenario in which Goldman lives through an AIG failure and the ensuing chaos. But in last month’s interview with Vanity Fair’s Bethany McLean, before she finished asking if the firm could have survived without the government’s widespread intervention, Goldman’s president, Gary Cohn, says, “Yes!” And when their stock price sunk from above $207 in early 2008 to below $48 in November? “It wasn’t,” he said in the piece, “scary at all.”
Meanwhile, Andrew Ross Sorkin’s Too Big to Fail, a distinctly unhysterical chronicle of the crisis, describes in no uncertain terms the panic at Goldman that September. Mr. Cohn even moved to a downstairs office so he could watch the trading floor, and personally called a billionaire who took most of his money out of Goldman. In some ways, denying vulnerability is a worse message to send then Mr. Blankfein’s half-joking blunder in the Sunday Times this November, when he said the firm does God’s work. Because this says, with a straight face, that Goldman is God.
That’s why, even if some of the national Goldman outrage is unreasonable, what makes even less sense is how terribly the firm has responded. “What I would have said is, ‘Listen, guys, I don’t think anybody’s buying it,’” a communications executive at a rival bank said. “Is it that these guys just smoke their own crack, that their culture is so insular that they don’t have someone giving the perspective that this is just ridiculous?”
Indeed, it’s hard to imagine that he hasn’t been encouraged by Mr. Blankfein, CFO David Viniar and longtime Goldman major-PR-domo John Rogers (the “slight, retiring man with a preference for tan raincoats,” as a Landon Thomas profile once put it), because they’re toeing similar lines. “We did not have a near-death experience,” Mr. Cohn told The Times in August.
IT’S ARGUABLE THAT in some cases, like a quote in the Post that called a recent magazine profile “garbled nonsense,” Mr. van Praag has helped soften journalistic blows. But then there’s Matt Taibbi’s Rolling Stone epic, whose second sentence called Goldman “a great vampire squid wrapped around the face of humanity.” The article wasn’t even online when Mr. van Praag, in that wondrous style, disparaged the piece and its author to Reuters’ Felix Salmon. After a similar Post item, The New York Times reported on Goldman’s response. “If I were in their position,” Mr. Taibbi said recently, “I would have just ignored us. We’re a music magazine.”
“In any crisis, the spokesperson, or the head of the company, has to proceed with modesty,” the PR elder statesman Howard Rubenstein said, though he wouldn’t comment about Mr. van Praag. “Stick to the facts, be clear, don’t belittle, and you will protect the client.” When Mr. van Praag wrote a letter to the Financial Times last year, he mocked a reporter’s facility with numbers along with his article. “I note,” he wrote at the end, “that he did manage to convince the Huffington Post,” the Web site on which, last week, Mr. van Praag posted a critique of The Times.
In December, Charlie Gasparino wondered aloud on the Daily Beast if Mr. van Praag might lose his job. “I think that this is such an unmitigated disaster,” another veteran Wall Street writer said last week, “that eventually it will require something public and substantive to happen.”
Then again, why would Goldman Sachs suddenly have a change of heart? The era of vilification, just like the era of sparkle, could very well pass. “Oh, absolutely, there’s no question,” The Wall Street Journal’s Susanne Craig said recently. “All of these things go in cycles.”