Man in the News: David Viniar
By Ben White in New York
Financial times
Published: December 21 2007 19:41 | Last updated: December 21 2007 19:41
Call up Goldman Sachs and ask to chat with David Viniar, chief financial officer, and this is the first response you will get: “David hates publicity and would probably rather amputate one of his arms than be interviewed.”
Ring up friends and colleagues and the answers will be similar. “I’ll talk to you,” said one former Goldman executive. “But you cannot possibly quote me. David would rather self-immolate” than be the focus of attention.
Yet there is no avoiding the limelight. In a nightmare year for most investment banks, Goldman just set another earnings record. While others tallied ever-bigger mortgage losses, Goldman made an early call to hedge its mortgage exposure and turned a tidy profit in the process. While no one man, woman or child was responsible for Goldman’s golden call (a fact the bank wants no one to forget), Mr Viniar was certainly a central player, along with Lloyd Blankfein, chief executive, and Gary Cohn and Jon Winkelried, co-presidents.
Mr Viniar was the one who convened the now famous meeting on December 14 2006, in which senior members of the mortgage trading desk, the risk department, the controller’s office and others gathered to discuss the US housing market. They decided that it was time to put hedging strategies in place to prepare for a housing downturn given information from the controller’s office and early losses showing up in Goldman’s mortgage book. The call to hedge was a collective one, but as one senior executive put it: “If it hadn’t been for [Mr Viniar], it probably wouldn’t have happened.”
The hedging worked in fits and starts and eventually produced a profit in the third quarter and left Goldman with a net short position against the mortgage market, a fact Mr Viniar took the rare step of acknowledging when the bank announced earnings.
This week, he returned to form and would not say what Goldman’s stance was on the housing market and added it was unlikely he would ever again acknowledge a proprietary Goldman position.
Mr Viniar, 51, is more than a traditional chief financial officer. He is also in charge of Goldman’s massive back office operations, an area referred to within the bank as “the federation”. (The phrase back office is never uttered at Goldman, presumably because it sounds pejorative.) At some banks being in charge of the back office would not be much to brag about. Not so at Goldman, which places enormous value on technical expertise and the power to crunch massive amounts of data.
John Thain, former Goldman president and now Merrill Lynch chief executive, rose to power through the federation after working as a banker. So did Mr Viniar after Mr Thain plucked him out of investment banking in 1992. So by virtue of what he oversees, Mr Viniar, is extraordinarily powerful for a CFO.
“He is the most influential CFO on Wall Street,” says one former Goldman executive who left recently. “That reflects not only his capabilities, which are enormous, but also Goldman’s treating the back office as an equal partner.”
The fact that other banks do not treat the back office in this way may also explain why they ran into so much more trouble with the mortgage crisis.
Like most Goldman executives, Mr Viniar operates almost entirely behind the scenes, save for his conversations with analysts, investors and reporters during earnings season.
Like Mr Blankfein, Mr Viniar was born in the Bronx. He studied economics at Union College in Schenectady, New York, where he played basketball, a sport he follows to this day with informal games near his home in New Jersey that often include other Goldman executives. He donated $3.2m to the college to build a basketball arena that bears his name. The passion and energy he invested in basketball, Mr Viniar insists, helped him get to the top of his career game. He told the student magazine: “I loved the team and my teammates. I was one of the first ones to show up at practice, the last to leave.”
In a rare personal interview three years ago, Mr Viniar told Institutional Investor magazine: “I’m a very slow, very small forward . . . But I can hit the 15ft jump shot.”
Mr Viniar went on to Harvard Business School and joined Goldman in 1980, where he began as a banker in the structured finance department before moving to head the Treasury department in 1992, the year he became a partner. He became co-chief financial officer in 1994 and chief financial officer just before Goldman went public in 1999.
Mr Viniar, who earned more than $30m last year, played a critical role in 1994 when Goldman was losing millions of dollars a day due to bad proprietary trading bets, an experience colleagues say shaped his approach to risk management. “When you go through a war like that it changes you,” said one former Goldman executive who was then in a senior position. “No one had any clue what was going on.”
The experience did not make Mr Viniar risk averse (Goldman is among the biggest risk takers on Wall Street), it just made him more dedicated to consistently monitoring positions and testing for the worst possible scenarios. Mr Viniar is known to say no often to traders who want to take big bets but also to be careful to ensure the bank is taking enough risk to weather downturns in other parts of the business.
He is known as a quiet, self-effacing family man who never missed a basketball game when the youngest of his four children was at high school. “He would always say we are in a marathon, not a sprint, so take vacations, take time with your family,” said someone who worked under Mr Viniar. “He really did the whole work-life balance thing.”
Of course, when he went to basketball games, he would work in the car on the way there and the way back home or to the office.
If there is criticism of Mr Viniar, it is one that also applies to Goldman as a whole and it is that he provides too little information to investors and analysts about how Goldman makes money in its proprietary trading operations, an area of the bank that some refer to as a black box. “They do a horrible job at investor relations. They refuse to take their investors in as partners,” said Dick Bove, analyst at Punk Ziegel in New York. He added that Mr Viniar “is strong-minded and has a clear sense of what he is willing to do and what he is not willing to do. He has some of that Goldman Sachs arrogance about him. But who cares? The job he has done as CFO is impeccable.”