Marty Chavez remembers when he went to his sister’s home in San Francisco for Thanksgiving seven years ago and quickly wondered whether he shouldn’t have.
That was a time when having Bubonic plague seemed preferable to being a partner at Goldman Sachs.
“It was almost Manichaean,” said Mr. Chavez, who has been a Goldman partner since 2005 and its chief financial officer since April. “Technology in San Francisco, good. Finance in New York, evil.”
The year 2010 had been a rough one at Goldman. Its executives had been humiliated during an all-day hearing in Washington before the Senate’s Permanent Subcommittee on Investigations. The Securities and Exchange Commission had charged Goldman with civil fraud as a result of its role in creating Abacus, a synthetic mortgage-backed security that lost some sophisticated investors more than a billion dollars. (Of course, it’s worth noting the deal made John Paulson, the hedge fund manager, around a billion dollars, too, because he had the other side of the trade.)
To settle with the S.E.C., Goldman paid a $550 million fine, then the largest by a Wall Street firm. What’s more, Congress had passed, and President Obama had signed, a new law – known as Dodd-Frank – that regulated Wall Street back to the Stone Age.
It was no fun being a Wall Street investment banker, let alone a partner at Goldman, which Matt Taibbi, at Rolling Stone, had famously branded a “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.”
By the time Mr. Chavez arrived in San Francisco for Thanksgiving, the anger directed at Wall Street from Main Street was palpable. During the dinner, he recounted to me recently, one guest turned to him and apropos of nothing said, “Marty, how can you work for that company? How do you look at yourself in the mirror?”
Mr. Chavez thought the comment was a “wildly inappropriate topic for Thanksgiving” and asked, “What exactly do you mean?” The dinner guest said, “Well, Lehman,” referring to the bankruptcy of Lehman Brothers. “Yes, what about Lehman?” Mr. Chavez replied. “I don’t work at Lehman.”
The conversation sort of fizzled out when the man could not articulate what exactly he hated about Goldman Sachs.
“I took away from that, ‘Oh, it was just in the zeitgeist at the time,’” Mr. Chavez said. “I thought, when times are rough there seems to be a human tendency — I’m sure you read “The Scarlet Letter” as a kid, right? — that if we find someone to name and shame and blame then we’re good. And I think bankers have throughout history been useful in that context. This is not the first time, and I remember thinking, ‘This too shall pass.’”
He was right. What a difference seven years makes. Now when he goes to San Francisco, “nobody’s too interested in Goldman Sachs,” he said. “They’re much more interested in the Russian hacking of the election and all their other” — and here he searches for the right word — “mishegas. So times change.”
Just as he once told people he went to school in Boston, instead of telling them he went to Harvard, he used to tell people he worked in finance, instead of at Goldman Sachs. “I don’t do that anymore,” he said. He said he’s actually looking forward to Thanksgiving this year. “Well, I won’t be the center of attention,” he said.
Mr. Chavez is about as far from the stereotypical Wall Street senior executive as you can imagine, and that is one reason his musings about the future direction of Wall Street are listened to carefully.
He grew up in Albuquerque, one of five children, who all went to Harvard. He got a doctorate in medical information sciences from Stanford University. (At that time, he was known by his full name Ramon Martin Chavez.)
In 1990, Mr. Chavez came out, the day after he defended his doctoral dissertation. – “Architectures and Approximation Algorithms for Probabilistic Expert Systems.” He is one of the few openly gay executives on Wall Street. He and his husband have a son courtesy of a surrogate in California. He has large Japanese language tattoos on his arms and for years had the type of un-Goldman-like beard favored by some Major League Baseball players in the postseason.
He stands all day at his specially designed desk – it goes up and down at the push of a button – in his 41st-floor office that has a stunning view of New York Harbor. His energy is kinetic; he speaks quickly and passionately, moving rapidly from one arcane topic to another, such as the efficacy of judging Wall Street firms on their return on equity, a measurement of investment banking performance long favored by industry research analysts.
“Here’s what’s great about return on equity,” he said. “It includes the notion of profit, which I think is really important.”
He views his job as a simple one that is hard to get right: “I’m not paid or evaluated on the accuracy of my crystal-ball predictions,” he said. “I’m paid to enumerate every possible outcome and do something about every possible outcome well in advance, when it’s still possible to do something, because once it’s happened it’s too late.”
Unlike many of his peers on Wall Street, Mr. Chavez does not complain about the extent of the regulation that hit the financial industry as a result of Dodd-Frank. Generally speaking, he says, the regulations have helped banks “confront their problems and capitalize and bolster their liquidity,” making them “stronger as a result,” and the financial system safer and more profitable.
That does not mean he would not like to see some revisions on the margins. “One could ask questions all day about, well, when all these rules were enacted, did we end up with something that we didn’t really desire?” he said. “At the same time, I think it’s important, while asking those questions, to recognize that the rules, broadly speaking, are working. They’re making the system safer and sounder, and so I sure wouldn’t want anybody to throw out the baby with the bath water.”
He’s an advocate of “some sculpting” and “some recalibrating” of the existing rules, as the Treasury Department — in its three recent white papers — and regulators such as Christopher Giancarlo, the chairman of the Commodities Futures Trading Commission, have been hinting will occur.
He said he expected Randal Quarles, Wall Street’s new banking regulator at the Federal Reserve, to put less emphasis on some aspects of the stress tests than did Daniel Tarullo, his predecessor.
Instead of complaining about the extra expense and manpower required to comply with the mountain of new regulations, Mr. Chavez chooses instead to think about it differently. “If you approach the regulations as ‘Oh, we’ve got to comply,’ you’ll get one result,” he said. He prefers thinking about the regulations as, “This makes us and the system and our clients safer and sounder, and yes it’s a lot of work, but what can we learn from this work and how can we use this work in other ways to make a better result for our shareholders and our clients? Everywhere we look we’re finding these opportunities and they’re very much in keeping with the spirit of the times.”
Like any good senior Goldman executive, he does worry. (Lloyd Blankfein, the Goldman chief executive, once told me he spent 98 percent of his time worrying about things with a 2 percent probability.)
His biggest concern at the moment is the risk of “single points of failure” in the vast world of cybersecurity. He worries about any individual “repository of information” that does not have a backup and that can “be hacked.”
He does not even trust Goldman’s own computer system; he treats it as a potential enemy.
He said what got him especially attuned to this risk was when a “group of criminals” last year managed to wire almost $100 million out of the Federal Reserve Bank of New York into the central bank of Bangladesh and from there into a casino in the Philippines “and was never seen again.”
It’s no longer a hypothetical. “If five years ago I would have said I’m really worried about someone heisting $100 million from the Federal Reserve Bank of New York and wiring it to a casino in the Philippines, you would have thought that I really worry about a lot of things in a true paranoid style,” he said, “and then it happened.” As a result, he said, Goldman has been an “early adopter” of cloud services offered by a variety of third-party providers.
What also makes Goldman different from its peers is the firm’s love affair with engineers. At the moment, he said, engineers comprise around 30 percent of Goldman’s work force of about 35,000. It’s what drew him to Goldman in the first place — to work on Goldman’s in-house software, “SecDB,” short for “Securities Database,” an internal, proprietary computer system that tracks all the trades that Goldman makes and their prices, and regularly monitors the risk that the firm faces as a result.
He said the system generates some million and a half points of data that were used to calculate, for the first time, the firm’s “liquidity coverage ratio” — now 128 percent — and that were shared with regulators every day. He’s been busy trying to figure out how the newly generated data can be used to help him understand what the firm’s liquidity will be a year from now.
That way, he said, in his principal role as Goldman’s chief financial officer, he can perceive a problem in plenty of time to do something about it. “We’re able to get much better actionable insights that make the firm a less risky business because we’re able to go much further out into the future,” he said.
He spoke optimistically about Goldman’s ability to rebound from the slump this year in its Fixed Income, Currency and Commodities group and said he expected that business to perform better when interest rates start fluctuating again.
We’ve come to the end of our 90-minute discussion — Tiffany Galvin, from the Goldman press office, was more than ready to wrap things up 45 minutes ago — and Mr. Chavez has made no mention of the firm’s longstanding investment banking prowess, whether it be in advising on mergers and acquisitions or in underwriting debt and equity securities.
He thinks there is nothing unusual in that, and that Sidney Weinberg, the firm’s senior partner in the middle of the 20th century, would not find that omission troubling.
“Given the times, and combined with the people, the brand and the culture, which I’ve been part of for a longtime, that when you put all those things together,” he said, “it makes me super excited about the next 20 years.”