David Solomon of Goldman Sachs David Solomon, president of Goldman Sachs. (Photo: Bloomberg)

Lloyd Blankfein was about to bet the future of Goldman Sachs.

It was Feb. 21, and Blankfein had gathered with the Goldman Sachs Group Inc. board to reveal his long-awaited recommendation for the bank’s next chief executive officer — the one who would steer the Wall Street giant through the next phase of its 149-year history.

His pick: David Solomon.

That decision, embraced by the board that Wednesday, has now officially set in motion one of the most closely watched successions in global finance. With the formal announcement of the move on Monday, Solomon’s chief rival for the job, Harvey Schwartz, abruptly announced his resignation. The job is, in effect, now Solomon’s to lose.

His rise to heir apparent prompts a host of questions for Goldman, including the big ones: when exactly will Blankfein make his handoff, and what will Solomon do then?

Blankfein and the board were impressed, insiders say, by Solomon’s proven ability to build businesses at a time when the bank is looking to grow, the strength of the investment-banking team he put together, and his efforts to recruit and retain talent.

Blankfein traveled the week after the board meeting and didn’t have a chance to discuss the decision with the two executives. It was only last week that Blankfein told them about the board’s call, one of the people said.

Schwartz will leave the bank on April 20, and Solomon will serve as the sole president and chief operating officer, the New York-based company said in a statement Monday.

The question of Blankfein’s successor has been a topic of debate across the financial industry since Friday, when the Wall Street Journal reported that the CEO would step down as early as the end of this year.

Blankfein later tweeted that the announcement wasn’t his. Monday’s statement didn’t mention a timetable for his retirement.

Solomon and Schwartz have been directly competing for Blankfein’s endorsement — and by extension, a shot at the top job — since being promoted to co-presidents in late 2016, after Gary Cohn left to join Donald Trump’s administration.

The competition has been a favorite topic of conversation within the halls of its Manhattan headquarters, with one executive saying it distracted from day-to-day business.

“The increased transparency also likely puts insiders more at ease so that they can focus on running Goldman Sachs,” UBS Group AG analyst Brennan Hawken wrote in a report Monday. The “move to expand beyond trading could get a subtle boost under Mr. Solomon given his diverse background (i.e. not another trader).”

‘Banking Future’

Solomon, 56, a former investment banker, has been boosted by the strength in that business, where Goldman Sachs posted record revenue in 2017. The firm’s fixed-income trading business, which produced Schwartz, is coming off its worst year in more than a decade.

Solomon rose through the financing business after joining as a partner from Bear Stearns Cos. and ran the firm’s top-ranked investment-banking business for a decade.

During that time, Goldman Sachs decided to build out the debt capital markets business, largely territory dominated by the large commercial banks like JPMorgan Chase & Co. and Bank of America Corp. The business now ranks among the largest lenders to M&A buyers, and it reported record revenue last year.

“We saw the future as more of an investment-banking future than a securities or trading future and that favored Solomon,” Charles Peabody, a Compass Point Research & Trading analyst, said in an interview with Bloomberg Television.

Solomon has also taken on a leading role in the firm’s diversity push, including presenting ideas to the board last June. He’s also led a push on retaining junior bankers, such as scaling back the hours they work, making them rest on Saturdays and encouraging them to have interests outside of work. Solomon moonlights as an electronic music disc jockey, which he puts in terms of giving an example to younger bankers.

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