Cohn pushed to build bigger trading businesses and take more risks, including in the mortgage-bond market, according to two former partners.
Goldman Sachs's mortgage business lagged behind those of rivals such as Lehman Brothers Holdings Inc. because the firm's managers questioned whether the returns were worth the risks, according to one of the partners. Cohn, who gained oversight of the unit by 2000, supported its requests for more capital, more people and the ability to take bigger risks, the partner said.
The mortgage team continued to take on risk until December 2006, when 10 days of losses alerted senior executives to a problem, according to documents released by the firm and the U.S. Senate. The executives met with Daniel Sparks, the head of the unit, and told him to curb the size of the team's subprime bets, according to documents.
While strict in enforcing risk-discipline and making mortgage traders adhere to the firm's value-at-risk model, Cohn also understood their concerns that the model was flawed, according to the former partner. He wasn't afraid to lose money if a trade had been thought out and described, the partner said.
Risk's Rewards
"If there is one thing out of this on how to stand out, it's take risks," Cohn said in his 2009 commencement address. "Everything I've done in my career, and everything that most of you have done to this point, is to take risks."
The risks have paid off. Cohn has taken home more than $61.5 million in salary and cash bonuses in the past five years, plus restricted stock valued at $61.3 million when granted, even with no bonus in 2008. His investments in funds managed by Goldman Sachs have paid $53 million over the period, according to company filings. Cohn was the firm's largest employee- shareholder after Blankfein as of March 7. At last week's closing price, his 1,956,249 shares were worth $265 million.
Cohn and his family have an apartment on New York City's Park Avenue, another co-op on the Upper East Side and a house near the ocean in Sagaponack, New York.
He travels on business about 40 percent of the year, and when he's home puts in 11- or 12-hour days, often followed by bank-related dinners, according to a person who works with him. He checks his e-mail and makes calls until midnight. At the office, he is a sounding board for Blankfein, walks the floors and spends most of his time meeting with clients, investors and the firm's business heads, the person said.
'Based in Jealousy'
At Nymex, where he became a director in 1997, Cohn's success at Goldman Sachs was a liability and he "wasn't very well-liked," said Rappaport, the former chairman. Traders wondered about the firm's relationships with gold-mining companies and OPEC ministers, he said.
"Some of it, I'm sure, is based in jealousy," he said. "Goldman always seemed to be on the right side of the market."