Goldman Plans Hiring Spree to Fix Lapses After Increased Fed Scrutiny

A fresh bout of US regulatory scrutiny is setting off a hiring spree at Goldman Sachs Group Inc. as the company’s leaders seek to remediate issues raised by banking supervisors.

(Bloomberg) — A fresh bout of US regulatory scrutiny is setting off a hiring spree at Goldman Sachs Group Inc. as the company’s leaders seek to remediate issues raised by banking supervisors.

The Wall Street firm is enlisting several hundred new staffers to help address concerns from authorities including the Federal Reserve, according to people with knowledge of the matter, who asked not to be named discussing confidential plans. The back-office hiring binge comes even as the firm cuts executives from money-making ranks amid a slump in business.

Though regulators routinely question large financial firms, Goldman executives privately describe growing pressure from the Fed over the past year. If left unsatisfied, supervisors can impose increasingly formal and potentially onerous measures behind the scenes to force banks to overhaul operations and procedures. 

Goldman has been dealing with a confidential measure imposed by the Fed that predates the current increase in scrutiny, one person said. That may add to the pressure on managers to resolve concerns. It’s not uncommon for big financial firms to contend with such actions out of view, but in more severe cases they can spiral into public orders and other fallout.

Discover Financial Services, bracing for a consent order from the Federal Deposit Insurance Corp., announced a leadership shakeup this week and said it’s been hiring more personnel to deal with authorities’ concerns.

“We are not permitted to comment on any supervisory matters related to our regulators,” a spokesperson for Goldman said in a statement. “Therefore we are not able to comment on these reports.”

A representative for the Fed declined to comment.

Tougher Environment

Unclear is what deficiencies the firm is seeking to address now that it has largely abandoned an effort to build out a consumer bank that was said to have set off questions from the Fed last year. The scrutiny has touched areas outside that unit, some of the people said.

While some managers blame the firm’s failed retail foray for inviting regulatory attention, Chief Executive Officer David Solomon has told colleagues it reflects a generally tougher regulatory climate for the industry at large. 

The blowup of investment firm Archegos Capital Management in 2021 also set off a prolonged look at how Wall Street banks handle counterparty credit risks. And Goldman has disclosed it’s cooperating with the Consumer Financial Protection Bureau and other governmental bodies examining how it ran its credit-card business.

Goldman’s new hiring push is the first tangible fallout to emerge from regulators’ heightened interest in the firm, which Bloomberg reported in September. It’s especially notable during a year in which the company is reacting to a market slowdown by shrinking headcount — cutting thousands of jobs in a series of culls. The bank’s earnings are down 35% through midyear after posting a 48% drop last year.

It can take awhile to overhaul compliance departments to regulators’ satisfaction. The current CEOs of Wells Fargo & Co. and Citigroup Inc. both came into their posts on a mission to appease regulators — and are still at it years later.

At credit-card lender Discover, mounting pressure to address regulators’ concerns culminated with the abrupt departure of CEO Roger Hochschild. The firm announced the move Monday and then said Thursday that it hired more than 200 workers to strengthen compliance systems and risk-management operations.

Wall Street executives often note such projects require significant portions of their attention, cutting into time that they could be using to hone strategies or compete for more business.

(Updates with changes at Discover in fifth and penultimate paragraphs.)

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