Like a lot of top Wall Street banks this year, Goldman Sachs has seen an exodus of top talent. International asset manager Suzanne Donohoe's departure for Kohlberg Kravis Roberts & Co. in February led off a month-long spree of announced exits, including the retirement of top media industry banker Joseph Ravitch (at just 47) and William Wicker, the energy segment partner and managing director, who left for a vice-chairmanship at Morgan Stanley.
One goodbye that really caught attention was that of Byron Trott, vice chairman and managing director of the bank's Chicago office. News broke in March that the 50-year-old Trott, best known as a trusted advisor to billionaire Warren Buffett's, was leaving Goldman to form BDT Capital Partners, a merchant bank in Chicago that will launch with $2 billion in capital and aims to buy into family-owned enterprises for its well-heeled clients. (Buffett will be among them, but Goldman sources confirm he will also retain his relationship with the firm in which Berkshire Hathaway has a $5 billion preferred stock investment).
With his ties to Buffett, many are dying to know: what led this renowned rainmaker to leave Goldman after 27 years, where he's tapped the grapevine for some signature Buffett deals, like buying a $4.5 billion stake in Marmon Holdings from Chicago's Pritzker family? Some wonder if the one-time rumored successor to former Goldman CEO Hank Paulson wanted to escape the taint of Wall Street. Others have speculated that this was a first step toward taking the helm at Berkshire Hathaway when Buffett, who is 78, retires.
Then there was also the overhang of the Treasury's Troubled Asset Relief Program. Trott's name has been prominent in press narratives describing the brain drain at top banks, which many contribute to executives wanting out from under compensation caps tied to TARP. (Goldman itself received $10 billion from the Treasury.)
Trott and his people at BDT weren't talking about the new venture — not surprising for a member of the famously tight-lipped Club Goldman. But a Goldman insider told U.S. Banker that TARP had no impact on Trott's departure. Trott had long-standing plans to do something "entrepreneurial," and to "do something [while] young enough so he could do it for a number of years.
"The timing is a coincidence with what's happening in the market," says the source. "He was thinking about this before TARP was in existence. You might be able to make this argument with other people, but not with Byron."
A financial services consultant and close observer of Goldman, while not in the loop of Trott's plans, told U.S. Banker that there could be "50 to 100" executives who eventually walk out of banks due to perceived TARP-related interference. Another consultant says prominent boutiques, hedge funds and foreign banks are attracting TARP refugees by the bushel. These execs "are running out because they run very exotic and very rewarding products, and they want to get outside of any TARP supervision whatsoever," notes risk management consultant Leo Tillman, a former chief institutional strategist for Bear Stearns.
The Goldman source says Trott's decision to start BDT predates TARP. And logistics also seem to debunk any TARP-related presumption. The first leak of BDT's plans come just over a month following the stimulus bill passage that retroactively chained down TARP recipients. That also would have left a very small window of time to track down investors or recruit his co-founder, New York attorney Bill Bush, whose retirement — and named replacement — as a partner-in-charge at Fulbright & Jaworski was just consummated in April.