Part II: The Lloyd Blankfein Meethod — Run To The Problem
The Rise of a Titan of Wall Street From Brooklyn Public Housing Projects
At Goldman Sachs, if you want to have a good career, you run to the problem.
Lloyd Blankfein wasn’t born to run Goldman Sachs — he was born to run through packed aisles at Yankee Stadium, hawking sodas to the world’s most impatient fans. Dodging shouts and outstretched hands, he learned timing, persuasion, and how to read a crowd — who was in a rush, who wanted a deal, who could be upsold. He didn’t know it then, but it was his first experience on a trading floor, and Blankfein was honing the instincts that would one day make him a Wall Street titan.
A distinguished lineage wasn’t part of the package. Blankfein’s father made a meager living as a postal worker, his mother a receptionist in an office building. He grew up in Brooklyn’s Linden Houses, a public housing complex for mostly immigrants and ethnic minorities. Those were the status symbols he was born with.
But on the plus side, the only currency that mattered in Brooklyn was ambition and intellect. Money was tight, but jokes were in endless supply. It helped that he could make people laugh, but that would also land him in trouble one day.
“We were poor, but we weren’t powerless,” he once said. “In my neighborhood, you had to think fast and talk faster.”
Blankfein did both.
He worked his way through Thomas Jefferson High School — one of the rougher schools in East New York, Brooklyn — and earned a full scholarship to Harvard. That does not happen every day or every decade.
Years later, those instincts — it may seem far-fetched, but that is what early experience does to someone, reading people, anticipating moves before they happened, knowing when to push and when to hold back — would serve him well. No longer in the bleachers but in the boardroom and on the high-stakes trading floor and the C suite of Goldman Sachs.
From Public Housing To Winthrop House
Harvard was a long way from Brooklyn.
Blankfein arrived in Cambridge in 1971 on a full scholarship, stepping onto a campus where old money and legacy were the norm. His classmates had last names carved into the facades of Harvard’s buildings. His name was on an acceptance letter — and that was enough. At Harvard, everything was unspoken. A place where rules were unspoken and hierarchies were obvious but invisible.
“It was a culture shock,” he admitted years later.
He lived in Winthrop House, where the dining halls were more than places to eat — they were boot camps for future billionaires. The famed storied residency has a long history of notable alumni, including JFK and economist U.S. Treasury Secretary Robert Rubin (who, like Blankfein, later became a Goldman Sachs chairman).
But Blankfein wasn’t just different, he was odd by the ways of Harvard. Some students had prep school confidence, effortless social grace, and an innate understanding of power like his predecessor Hank Paulson, a BMOC from an elite family. Blankfein had Brooklyn hustle, and an ability to read people, a skill he had learned in the bleachers of Yankee Stadium.
He enjoyed observing them. Watching how they operated — how they spoke in measured tones, how influence was wielded subtly, not declared outright. He adapted.
There was a code that one had to be good at languages to learn. Blankfein was fluent in Brooklynese, a fast-talker when needed. But he could also speak “Harvard intellectual “when required. Winthrop House was more than a dorm, it was his first lesson in navigating power. He must have asked a thousand times, would he ever belong?
He studied history, not finance or economics — not because he saw himself in Wall Street’s future, but because he wanted to understand how the world worked. How power shifted. How leaders adapted. That instinct — to understand the game better than anyone else — would define his career.
After Harvard, the expected path led him to Harvard Law School.
And then, just as quickly, he wanted out.
From Law to the Trading Floor
After graduating with a law degree, Blankfein took a job at Donovan, Leisure, Newton & Irvine, a prestigious white-shoe law firm. The kind of job that looked impressive on a résumé. The kind of job that bored him.
“The law is about managing things that already happened,” he later said. “I wanted to be where things were happening in real-time.”
That place wasn’t a courtroom. It was a trading floor.
In 1982, Blankfein walked away from law and into J. Aron & Co., a scrappy commodities trading firm known for its ruthless speed and instinct-driven deals. No polished suits. No drawn-out negotiations. Just numbers, gut decisions, and survival.
J. Aron was soon acquired by Goldman Sachs, and the smart but inexperienced commodities trader quickly made himself indispensable. He wasn’t from the traditional Wall Street mold. He didn’t build client relationships over years of careful handshakes. He operated in the chaos of real-time markets, where decisions had to be made in seconds, not months.
That trader’s mentality — fast, adaptable, clear-eyed about risk — was where he would shine, and it was a light so bright, everyone had to notice.
The Last Partnership
By the late 1990s, Goldman Sachs was at a crossroads.
It was still a private partnership, where the firm was owned collectively by its senior partners. But that era was ending. Goldman was going public. Blankfein had already become a rising star, but he never let go of the firm’s old-school partnership ethos.
“We were the last major partnership on Wall Street,” he explained. “When we became public, we carried our partnership culture into the public company. We have an ownership culture. No one at Goldman Sachs gets paid out of their own P&L. It matters how your business is doing, but it matters more how the firm as a whole is doing.”
The culture shapes everything — how Goldman takes risks, manages talent, and navigates crises. A cornerstone of its approach? Mark-to-market accounting, which revalues securities daily rather than relying on outdated book values. In Lloyd Blankfein’s words, this real-time balance sheet acts as an early warning system — essential for both risk managers and regulators.
But numbers alone don’t keep a firm steady. Blankfein believes risk managers should stand toe-to-toe with traders — and when conflicts arise, the risk manager’s call should win. Goldman’s philosophy? When something looks off, look deeper.
As Blankfein added in our interview, “At most investment banks, people ran away from problems to avoid blame.”
At Goldman?
“If you want to have a good career, you run to the problem,” Blankfein told me.
That made Goldman different. It also made Blankfein the perfect leader when the crisis hit.
The hands-on trader merged with the formidable philosophical CEO under Blankfein, and as he told us, he never stopped taking the pulse of the markets. He wanted a sense of where things were at all times.
Word has it that Blankfein made more than 100 calls per day to members of his team:
“I grew up in the middle of a trading room, and it’s just all noise. But if somebody 30 or 40 yards away, in just the din of the white noise, says something wrong, the whole room comes to a dead stop. It’s the same way with my phone calls.”
Last Firm Standing
By 2008, Lloyd Blankfein’s instincts would be tested like never before. The world wasn’t just teetering on the edge of collapse — it was already in free fall. The numbers told a staggering story.
• More than 10 million homeowners were underwater on their mortgages.
• Over $8 trillion in stock market wealth evaporated in months.
• Financial institutions lost $2 trillion in toxic mortgage assets.
• The unemployment rate soared, wiping out over 8.7 million jobs.
By 2008, Lloyd Blankfein’s instincts would be tested like never before. The world wasn’t just teetering on the edge of collapse — it was already in free fall.
Housing foreclosures exploded, mortgage-backed securities turned toxic, and banks were hemorrhaging billions. Lehman Brothers, a firm that had survived since 1847, was gone. Bear Stearns, founded in 1923, had disappeared overnight. Two century-old institutions were wiped out in days.
There was a reason for it.
Storm Warning
While Lehman and Bear Stearns kept doubling down, convinced the music would never stop, Goldman Sachs did what traders do best — it read the room. It started pulling back, reducing exposure. Not because they knew the market would collapse, but because they knew their own risk. As he told me in our interview:
“We started to see some assets weren’t holding up. If you’d asked me in late ’06 or early ’07 if real estate prices would collapse, I wouldn’t have known. But what I did know was the risks we were running, and the idea that we should get closer to home. We’re in the world of risk management, not the world of guessing. And through this period, I was sure we were selling things we’d regret selling.”
That distinction — not predicting the crash, but managing exposure before it hit — was why Goldman Sachs survived while others crumbled.
Goldman Sachs was the last man standing. And in an industry that didn’t tolerate outliers, that made him a target.
The Accidental CEO
Two years earlier, Hank Paulson had left Goldman Sachs to become Treasury Secretary. When it came time to pick his successor, many assumed the firm would do what it always had — elevate a blue-blooded investment banker, someone with deep client relationships, a smooth political touch, and the polish to reassure markets.
Instead, Goldman chose a kid from the Brooklyn projects. It was an inspired decision as much as a culture shift — the equivalent of appointing a battlefield grunt as a four-star general.
For decades, Goldman had been built by rainmakers, the kind of executives who closed billion-dollar deals over rounds of golf, who played the long game with patient diplomacy.
Blankfein? Remember, he came from the bleachers, not the boardroom. Having spent his career in the high-stakes, real-time world of trading, where markets didn’t wait for permission, and hesitation was fatal, his appointment wasn’t just unexpected. But it was unorthodox, especially for those who don’t speak Brooklynese.
Brooklyn Breeds Survivors
Because Brooklyn breeds fighters. Hustlers. Rebels. Outliers like Ruth Bader Ginsburg fought her way onto the Supreme Court. Howard Schultz turned coffee into a global empire. Jackie Robinson broke baseball’s color barrier while wearing a Brooklyn Dodgers jersey. Mike Tyson didn’t ask permission — he took the brass ring.
Blankfein fought his battles on street corners long before he took on the most powerful trading floor in finance. But the mindset was the same. You don’t wait for an invitation. You break down the door.
Goldman Sachs had always been an elite institution, a fortress of power and tradition. Now, it had a street fighter at the helm. And in the storm that was coming, that is what saved it.
Mr. Blankfein Goes to Washington
Mr. Blankfein Goes to Washington
Lloyd Blankfein sat before Congress, eyes blinded by the klieg lights, staring down a panel of lawmakers who had already made up their minds. He may not have been able to see his accusers clearly, but he did see they weren’t here to learn. Nor were they here for the truth. They were here to make a trade — his neck for their glory.
Admittedly, a bad deal. But it was the only one being offered. Goldman Sachs had survived, and that was the problem. The very skills Blankfein had used to save the firm were precisely what troubled these senators. They liked carnage and destruction, as long as they held the hammer.
They weren’t after justice. They were after a scalp.
His.
The Not-So-Grand Inquisition
First came Senator Carl Levin (D-MI), a man who had been in the Senate so long that some of his colleagues had resigned in disgrace before he finished his first term, gruffly barked into his microphone.
Levin adjusted his Ben Franklin glasses and scowled for the cameras.
“Mr. Blankfein, did Goldman knowingly sell worthless bonds?”
Blankfein blinked. How could someone this politically seasoned be this boneheaded? Surely, he thought, the chairman of the committee understood how markets worked.
Blankfein kept his voice steady.
“Senator, we didn’t sell worthless bonds. We sold securities that investors specifically asked for — sophisticated institutions that wanted exposure to the mortgage market.”
Levin narrowed his eyes, determined to win the soundbite war.
“So you’re saying that these investors wanted to lose money?”
Ah. That’s how this was going to go. Every time Blankfein took a turn, another roadblock went up, steering him straight into a ditch.
Blankfein exhaled sharply.
He was trained in the law and spent his career in trading pits. But he saw that the main skill among the Senators was theater.
“No, Senator. I’m saying that the investors made their own decisions. That’s how markets work. Some bets win. Some bets lose. But Goldman didn’t cause the mortgage crisis.”
Senator Claire McCaskill (D-MO) came up to bat. She built a career on populist outrage but had her own ethics scandals brewing back home, and jumped in with a relish reserved for cheeseburgers at a Sunday picnic. She made a name scolding executives before and here was a ripe opportunity.
“Mr. Blankfein, would you say that Goldman Sachs is above the law?”
Where was this coming from? One question was more loaded than the next. Blankfein’s Brooklyn instincts kicked in.
“Absolutely not. But I’d also say that Goldman Sachs follows the law — exactly as written by this body.”
A murmur rippled through the room. A Harvard Law School graduate was schooling them on just who wrote the rules. They had. And Goldman followed them.
Senator John McCain (R-AZ), a man who had survived worse interrogations than this, took a different approach. At least his question made sense.
“Do you believe your firm had a moral obligation to warn investors?”
Blankfein held his ground.
“We were doing what a market maker does — providing liquidity and facilitating transactions. That’s our job.”
McCain, a former member of the Keating Five, knew a thing or two about financial scandals. He had once defended Charles Keating, a man whose savings and loan empire had collapsed, wiping out thousands of retirees’ savings. But now was — and here he was grilling Blankfein on morality.
The irony was rich.
Now the cameras shifted back to Levin, who had been waiting for his big moment. He flipped through a thick binder of internal Goldman Sachs emails and read one aloud. The theatricality was B movie quality but entertaining nonetheless.
“Your own traders described some of these deals as, and I quote, ‘crap.’ Were you knowingly selling products you thought were bad?”
Laughter rippled through the press gallery. If only Congressional emails could be subpoenaed for the same level of scrutiny, everyone including the senators, were thinking.
But it was Blankfein on the hot seat.
The cameras zoomed in. The headline moment was here. Blankfein refused to take the bait.
“Senator, I can’t control every trader’s offhand remark in an internal email. What I can tell you is that every trade was fully disclosed. Investors knew what they were buying. We didn’t mislead anyone.”
The senators didn’t like that. They wanted contrition. They wanted a confession. This was an inquisition, not a genuine investigation, and the only outcome they were interested in was one in which only they came out smelling like a rose.
More theatrics. This time Levin jabbed his finger toward Blankfein.
“So, you don’t take responsibility?”
Blankfein leaned forward, he was full on Brooklyn this time.
“We were doing what a market maker does — matching buyers and sellers. That’s our role. We didn’t force anyone to buy these products. We didn’t manufacture the crisis. We survived it.”
For a split second, the room went silent. Would they listen? Maybe. But the hunt for a villain wasn’t over, as it turned out. It would go on for years.
Flashback: The Call That Became a Crime
To understand how Lloyd Blankfein ended up grilled like a ribeye before Congress, you have to go back three years earlier, to a phone call made in 2007 — when the U.S. housing market was still red hot and European banks were treating mortgage-backed securities like they were printing money in the basement.
The phone rang on Goldman Sachs’ trading floor at 200 West Street.
“We want more mortgage bonds.”
It was IKB Deutsche Industriebank, one of Germany’s most sophisticated financial institutions. This wasn’t a mom-and-pop savings bank. It wasn’t a naïve investor bamboozled by fast-talking Wall Streeters. This was a global investment bank — with a deep bench of analysts, economists, and risk managers who were supposed to know exactly what they were buying.
IKB had been aggressively loading up on U.S. mortgage-backed securities for years, chasing higher yields while ignoring the risks. The Goldman trader, already pulling up inventory on her screen, asked:
“How much are you looking for?”
IKB’s response?
“As much as you can sell us.”
Goldman did what it was supposed to do. Make markets — that means matching a willing buyer with a willing seller. It was a routine transaction, the kind of deal that keeps financial markets functioning. And yet, three years later, as the world turned, Washington would pretend it was a crime.
How a German Bank Turned Into a Senate Sob Story
Why in early 2007, European banks were feasting on subprime mortgages?
Because in a world of low interest rates, they needed higher-yield investments — and Wall Street offered exactly that. IKB wasn’t just dipping its toes into this market. It was going all in. They weren’t deceived. They were demanding more. You could add they were greedy, as the easy money had been made on mortgage securities, and the recent dip was just that. A blip. It would come back and when it did, their bonuses would skyrocket.
IKB had some of the most sophisticated risk analysts in Europe — but after the housing market turned, and then continued to turn, they suddenly pretended they had been duped simply because at the same time as they bought, other banks were selling. Which is how markets work.
By mid-2007, the cracks in the U.S. housing market began to show. Home prices stalled. Subprime defaults spiked. And by July 2007, IKB was on the verge of collapse, drowning in mortgage-backed securities it had begged to buy. The German government bailed them out, stepping in to prevent total ruin. A year later, the entire global financial system imploded.
Just like that, Lehman Brothers collapsed. Bear Stearns disappeared. AIG was on life support. By 2010, Washington was looking for someone to punish. And Goldman Sachs was the last man standing.
Back to the Hot Seat
The IKB deal became the centerpiece of the U.S. government’s case against Goldman Sachs.
The SEC accused Goldman of misleading investors — specifically IKB — about the risks of a synthetic collateralized debt obligation (CDO) called Abacus 2007-AC1. The media pounced. No one understood the arcane world of mortgage securities and the ways they were sliced and diced a thousand cuts before anyone understood who got paid and what. That didn’t matter now that the dust had settled and a bankruptcy in Düsseldorf had turned into a convenient crime in Washington.
The story was too good to resist:
Goldman Sachs — the titan of Wall Street, the profit-hungry bankers who had supposedly rigged the game — betting against their own clients while peddling toxic assets.
The truth?
IKB hadn’t been tricked. They had come demanding these deals, pushing banks like Goldman to provide them with exposure to the mortgage market. IKB felt they understood the market better, and were placing a high-risk, high-reward bet. When housing prices were soaring, they couldn’t get enough.
But the moment it all collapsed, they needed a villain. And Washington was happy to oblige — even if it meant coming to the rescue of a foreign bank.
Yes, that’s right.
The U.S. Securities and Exchange Commission — tasked with protecting American investors — was now carrying water for a German financial institution that had made its own reckless bets.
The Verdict
Goldman Sachs paid the price — not for wrongdoing, but for political expediency. Even Warren Buffett said, “When the government comes after you, you say how much?” Meaning there is no way out.
The case ended with Goldman agreeing to a $550 million settlement — the largest SEC penalty against a Wall Street firm at the time. But it wasn’t a legal victory. Nor was it a moral victory. It was a political one.
By 2010, Washington had already decided who had to take the fall. Not Congress, which had pushed homeownership policies that fueled the subprime boom. Not the Federal Reserve, which had kept interest rates artificially low, driving investors into riskier assets. Not the U.S. Treasury, which had bungled the Lehman Brothers collapse, triggering a financial panic. Not Fannie Mae or Freddie Mac, whose government-mandated subprime lending had created a ticking time bomb.
No.
The real culprits were too politically sensitive to blame.
So they went after Wall Street instead. And Goldman Sachs — the bank that had survived when Bear Stearns and Lehman Brothers crumbled — was the perfect scapegoat.
As one Goldman executive put it privately:
“If IKB had made money instead of losing it, would we even be having this conversation?”
Lloyd Blankfein, looking back on the absurdity of it all, summed it up simply:
“We were doing what a market maker does — providing liquidity and facilitating transactions. That’s our job.”
But in the post-crisis world, being a market maker wasn’t enough. Blankfein saw to it the firm was recast in a different mold. Unlike other firms where traders hoarded profits and passed blame, Goldman built a system where success was measured firm-wide.
That discipline extended to how Blankfein built his team. His leadership wasn’t about spreadsheets or quarterly reports — it was about reading the room, and sensing danger before anyone else did.
That ability to tune into the right signals — amidst the chaos — was why Goldman had moved first before the crash while others hesitated. It was also why Blankfein was meticulous in choosing the right people to lead the firm forward.
“We look for wise people who are very successful and who have lived through stressful moments and come out the other side. We try to make sure that we get diversity so that it reflects the diversity of our businesses and our people. And, frankly, we try to reflect the areas in the world in which our business is growing.”
That philosophy — anticipation, experience, and adaptability — was why Goldman Sachs didn’t just survive the financial crisis. It emerged stronger.
The lesson was whenever the world of finance had to reckon with a new crisis, the government would look for a scapegoat. And Goldman Sachs would never again be it.
The Survivor’s Spirit
In a thoughtful and reflective moment, Blankfein confided in us his take on the entire experience:
I believe my role is to make sure we’re doing the right things, make sure we’re helping the country grow businesses that help generate jobs. Is that enough? I don’t know. I get a lot of opinions. Some people come in and say, “You’re doing too much. Don’t say another word.” And other people say, “We should go on talk shows.” One thing I know for sure: Three years from now, I’ll know exactly what I should have done.
Throughout his career, Blankfein proved to have an uncanny ability to adapt to changing environments. That skill wasn’t just useful in finance — it was also personal.
In 2015, Blankfein was diagnosed with lymphoma. True to form, he approached the illness as a problem to be solved, a battle to be fought. He publicly announced his diagnosis, reassuring shareholders and employees that he would continue leading Goldman Sachs while undergoing treatment.
He never let cancer define him, just as he never let his modest beginnings define him. And by 2016, he was in remission.
The Brooklyn Closer
Blankfein walked out of that congressional hearing with the same sharp-eyed confidence he had as a kid hawking sodas at Yankee Stadium. The senators had their soundbites. The headlines were set. And yet, Goldman Sachs still stood.
Because that was the thing about Brooklyn — you don’t waste time complaining about the rules. You play the game in front of you. You see the angles before they appear. You take the hits and keep moving. That was the trader’s mentality, and it’s why Goldman Sachs, and Blankfein, endured.
By the time he stepped down in 2018, he had transformed Goldman Sachs into a more diversified, future-focused institution. The firm expanded into consumer banking, wealth management, and global markets, securing its dominance in a post-crisis world.
Unlike CEOs who overstay their welcome, Blankfein understood timing. He made sure the next generation — David Solomon and John Waldron — was ready to carry the firm forward.
The Legacy of a Fighter
For Blankfein, it was just another battle.
He had already survived the financial crisis, Washington’s scrutiny, and a cancer diagnosis. A government fine? That was just another trade.
His legacy isn’t just in Goldman’s survival or its adaptation — it’s in the mindset he embodied: Success isn’t given. It’s taken. Resilience isn’t optional. It’s everything.
Because when the world is burning, leaders don’t run away.
They run to the problem.
