By AnnaMaria Andriotis

David Solomon was fed up with his critics inside Goldman Sachs. The time had come to crack down.

It was bad enough that Goldman partners were criticizing the chief executive's leadership and bad-mouthing the storied bank's costly expansion of consumer lending. What rankled Solomon even more was the suspicion that some of the naysayers were leaking details to reporters. Goldman launched a probe to figure out who was talking, according to people familiar with the probe.

Solomon was going through a brutal stretch in 2022 and 2023. The consumer lending expansion that he had spearheaded was generating billions of dollars in losses. It was hurting Goldman's stock, moneymaking partners were leaving and Solomon had taken flak for his attention-grabbing side gig DJing.

Solomon told Goldman's board that he was going to take action, pushing out troublemakers who he said were undermining him with their leaks, people familiar with the matter said. The board told Solomon he had their support. By last year, longtime executives who had openly criticized his strategy were gone. The departures sent a message inside Goldman: No one is safe if they go up against the CEO.

These days, things are going a whole lot smoother for Solomon. The bank is exiting consumer lending and refocusing on its core businesses of advising giant companies and wealthy individuals. Solomon gave up the prominent DJ gigs. Profits have been rising steadily. In February, Goldman's stock hit a record high.

And Solomon, 63 years old, has cemented control for the foreseeable future. This year, he got a 26% raise and an $80 million bonus to stay for five more years.

This account of Solomon's comeback is based on conversations with current and former Goldman partners and executives, many of whom interacted directly with Solomon over the period.

The board and his allies inside Goldman give Solomon credit for refocusing the firm and boosting its financial results. Goldman's revenue and profit were both up since the beginning of 2024, and its stock has risen 55%.

Goldman spokesman Tony Fratto said the firm has "met or exceeded" most of the goals it had set in a 2020 strategic plan for growth and improving returns.

But not all the internal whispers about Solomon's leadership have gone away. Several senior partners told The Wall Street Journal that Solomon has benefited from a broader stock market surge and economic conditions that have been favorable for trading and dealmaking, and Goldman might have done even better were it not for the consumer-lending fiasco.

Goldman's spokesman responded that the bank's stock has outperformed its peers. Goldman's stock is up 233% over the past five years. Its archrival Morgan Stanley is up 214%, and JPMorgan Chase is up 191%.

Solomon joined Goldman as a partner in 1999. In 2018, after running its powerful investment banking unit and then serving as a chief operating officer and president, he became CEO, Goldman's third since it went public in 1999.

He moved quickly to overhaul a firm that had operated for decades as a loosely run partnership. Many Goldman partners consider their opinions about the firm's direction to be as important as the CEO's. Solomon was soon butting heads with some of them.

During his first four years in charge, he initiated several reorganizations. He separated wealth management from asset management in 2020, only to bring them back together again in 2022.

The frequent structural changes contributed to an exodus of partners. In asset management, nine of the 11 partners named as leaders in early 2022 are gone. "When you restructure an entire division, leadership changes are sometimes inevitable," the firm's spokesman said.

At times, when partners came to Solomon's office to tell him they were leaving, the CEO would yell at them.

Consumer push

Few decisions stirred as much internal controversy as his push to expand the consumer-lending business. The effort to court ordinary consumers had begun under Solomon's predecessor, Lloyd Blankfein.

The high-yield savings accounts offered by Goldman's consumer arm -- called Marcus after the firm's founder -- had been a success, and Solomon wanted to pitch more products to consumers. He cited Chime, a financial technology company that provides mobile banking services mainly to customers of modest means, as a model of what he wanted Goldman to achieve.

The consumer expansion proved costly. Solomon pushed forward with a roughly $2 billion acquisition of specialty lender GreenSky in 2021, overruling deputies who had counseled against the deal when it first came up a few years earlier. (In 2023, Goldman agreed to sell the company at a loss.)

Investment banking had a record year in 2021, overshadowing the consumer losses, and Goldman's bankers reaped big bonuses. Then investment banking slowed, and pay declined. Employees from vice presidents to senior partners began laying the blame on the consumer experiment.

Every dollar lost investing in consumers, the internal critics argued, was a dollar the bank didn't spend on its core businesses or the compensation for bankers and traders. Solomon told partners who questioned the consumer endeavor that they had no vision.

As the noise intensified, Solomon told high-ranking colleagues he was having difficulty knowing whom to trust. At one management committee meeting, he said he couldn't talk openly and honestly with the group when media reports about him or the firm were appearing shortly after their meetings.

At a dinner with roughly a dozen partners, Ed Emerson, a top trader, blasted the consumer business. Emerson said he thought Solomon should be fired and Goldman President John Waldron should be made CEO. Word got back to Solomon about what Emerson said.

Longtime partner Jim Esposito, co-head of the global banking and markets division, was another critic of the consumer strategy. Esposito said in group meetings and in one-on-ones with Solomon that the firm was making mistakes expanding the business, and that he didn't agree with Solomon's all-in approach on consumers.

Relations between Esposito and Solomon, who had worked together closely for years, turned testy at times. Esposito wrote a memo for Solomon offering strategic recommendations, including why the consumer business wasn't right for Goldman. He met with Solomon to go through it. The CEO strongly disagreed with him.

Esposito told a colleague that during another meeting, Solomon told Esposito that Disney chief Bob Iger had given him some advice: At some point the CEO has to pick the strategic direction himself, and the leadership team has to be on board.

In 2022, as the bank's profit slumped, Waldron, Goldman's president, led a review of the entire consumer operation. That same year, the firm's consumer-lending operations came under scrutiny from the Federal Reserve and the Consumer Financial Protection Bureau.

By that fall, the firm had concluded consumer lending needed to shrink, and began its exit.

Cracking down

The dismal earnings continued in 2023, extending a run of profit declines that would hit eight quarters in a row that year.

The board had launched a review about what had gone wrong with the consumer business and who should be held responsible. Solomon's role in expanding the business was part of the review.

The company also launched a widespread probe to try to determine whether any of its executives, including senior partners such as Esposito, were talking to reporters.

In late 2023, Esposito and Solomon discussed the strategic direction of the firm and whether Esposito was on track to become either president or CEO. Esposito didn't like the feedback he got. A few weeks later, Goldman announced to employees that Esposito was leaving. In the memo, Solomon praised Esposito for his integrity.

In his own farewell email, Esposito said: "Lately, I've been consumed by a feeling of merely going through the motions which isn't in my DNA nor what makes this place special."

By that time, Goldman also had announced the departure of Emerson, the partner who had criticized Solomon at a company dinner.

Other senior partners also left around this time, including some who were viewed as noisemakers.

A turning point for Solomon came in September 2023 when Adebayo Ogunlesi, then the board's lead director, told analyst Mike Mayo that the board fully supported Solomon.

Solomon began telling his deputies he intended to stay around for as many as five more years. It surprised some executives because when Solomon took the CEO job, he had said he would leave sooner. Executives close to Solomon said he wanted to rebuild his image and not go out with the consumer failure being his legacy. He also wants to make more money. Goldman's spokesman said Solomon remains at the firm because he loves the job.

He began traveling the world to meet in small groups with nearly all of the more than 400 Goldman partners. He told them the firm was his priority, and that they shouldn't pay attention to stories about him.

He has overseen several big changes to the firm's core businesses, including increasing its lending to institutions and wealthy individuals, and reworking the way the firm runs its asset-management business.

Goldman's core businesses of investment banking, trading, and asset and wealth management performed well last year. After the November election, the bank's stock, like shares of many other financial institutions, jumped on anticipation that dealmaking and capital markets activity would roar back.

Since at least 2023, Solomon and Waldron wanted to add younger blood to the bank's management committee, but the process dragged out, in part because they disagreed about some of the people who should be added. They created operating committees for investment banking and markets and assigned roughly a dozen people to each of them.

(MORE TO FOLLOW) Dow Jones Newswires

May 26, 2025 21:00 ET (01:00 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.