Friday, March 9, 2012

Goldman Bear Hugs the Mormons

Reuters has the details:

Some 2,000 miles away from the hustle and bustle of Wall Street, Goldman Sachs Group Inc has found an unlikely second home: Mormon country.

Low taxes and a cheap but well-educated workforce persuaded Goldman to go on a hiring binge in Salt Lake City. The bank now employs 1,300 people here -- putting Utah's capital city on a path to become Goldman's fourth-largest global operation, behind only New York, New Jersey and London.

At a time when the Wall Street firm has cut thousands of jobs elsewhere , Goldman plans to grow in Salt Lake City. Already, Salt Lake City accounts for just under 4 percent of the global investment bank's total headcount, double the staff it had in Salt Lake City only two years ago, and that figure continues to climb .

During a Feb. 28 visit to Goldman's office on Main Street, just a few blocks from the headquarters of the Mormon Church, Chief Executive Lloyd Blankfein told employees of plans to hire an additional 300 workers by year's end.

Goldman's image as a Wall Street powerhouse dominated by hard-charging traders and swaggering bankers might seem at odds with Salt Lake City's reputation as a family-oriented town where the bars close early and the Church of Jesus Christ of Latter-day Saints is the most powerful local institution.

But by bulking up in Utah, which boasts one of the lowest corporate tax rates in the United States, the bank is taking advantage of a series of lucrative tax breaks offered by the state to woo its business.

Several former and current employees say that dozens of technicians, developers, accountants and research analysts on the East Coast have been replaced by less expensive staff in Utah... .

"The cost savings have become less interesting than the quality of people we can retain," says David Lang, a managing director who heads Goldman's Salt Lake City operation. "We would expect that one day we can export the talent from here. We have groups and teams here who interact with our global operations abroad every day."

Goldman's move out West underscores how for major investment banks , proximity to Wall Street means less and less when it comes to support staff, trade processing and even research.

Many of those functions "can be performed just about anywhere with a computer connection," says Charles Geisst, a Wall Street historian and professor at Manhattan College. "They just simply go where the costs are cheapest."

The tax advantage is nonetheless important. State taxes have become a big concern for corporate America, as some cash-strapped states have leaned heavily on higher corporate taxes to plug widening budget gaps...

Goldman Sachs ranks as the second-biggest beneficiary behind Procter & Gamble Co of Utah's tax-break program, having inked a deal in 2009 to receive an estimated $47.3 million worth of rebates over 20 years. In exchange, the bank committed to investing $51 million in Utah, maintaining at least 1,065 employees and paying them at least 50 percent above the average Salt Lake County wage....

Utah officials continue to give Goldman the star treatment. When Goldman Chief Financial Officer David Viniar, a former college basketball player, visited the Salt Lake office in October, he was invited to shoot hoops with players from the local NBA team, the Utah Jazz.

"Goldman Sachs being here is a big deal," said Gov. Herbert, a Republican and former real-estate agent who makes no secret of his contempt for high taxes and what he calls "nonsensical" regulation....

Utah's tax breaks are rebates spread out over a number of years and are only granted as long as companies meet agreed-upon targets for investing, hiring and wages, says Jerold Oldroyd, a partner at law firm Ballard Spahr who structures the tax incentive deals for the state.

Even without the rebate, Utah's corporate tax rate of 5 percent is among the lowest in the nation, according to data from the Tax Foundation, a nonpartisan policy group. State tax rates range from zero to 12 percent, with a median rate of 7 percent.

And just as wages and office space are less expensive in Salt Lake than in metropolises like New York, payroll and property taxes tend to be lower as well.

"Utah is sort of like a U.S. tax haven," says Robert Willens, a tax expert who teaches at Columbia University. " Utah may be offering incentives, but the corporate tax rate is incredibly low and an even bigger element of the tax savings is that Goldman can attribute more of its taxable income to the state. I'm sure that $47.3 million is just the tip of the iceberg." Goldman wouldn't comment on that...

Beyond the tax benefits, Utah offers Goldman talent for less than a fifth of what it is accustomed to paying.

The average Salt Lake County worker made $43,398 a year in 2011, meaning Goldman only needed to pay its workers an annual salary of about $65,000 apiece, on average, to meet its tax-break criteria. State officials say the bank exceeds that goal by paying local workers $80,000 a year, on average.

While that may be good news for Salt Lake residents, it's a far cry from the $400,000 paycheck all Goldman Sachs employees have taken home each year, on average, since 2008.

In addition to recruiting new employees from local universities such as Brigham Young, Goldman has transferred from the East Coast some junior-level workers who agreed to take pay cuts to keep their jobs, says a former Goldman vice president who worked in Utah. The bank also convinced some managers that a move to Salt Lake would help their careers, offering promotions and stable pay if they agreed to transfer for a year or two, the former vice president says.

For believers in Utah, the appeal is broader than costs. Due in large part to the influence of the Mormon church, whose members serve as missionaries in foreign countries, many Utahans are multilingual and well-traveled. State officials boast that an overwhelming majority of Utah residents are fluent in at least one language other than English...

Its recent hiring spree includes quantitative whizzes who engineer Goldman's trading technology, accountants for its corporate finance division and analysts to crunch numbers in asset management and global investment research....

Goldman may soon have company. Morgan Stanley and the Royal Bank of Scotland Group PLC recently received tax breaks to hire more workers in Utah, and state officials say they received inquiries from Morgan Stanley and JPMorgan Chase & Co after they noticed their rival's Salt Lake City buildup. JPMorgan and Morgan Stanley representatives declined to comment on the matter.

"No one has yet matched what Goldman is doing here," said Kim Smith, former global co-head of training for Goldman's fixed income, currency and commodities division and a finance professor at Brigham Young University. "But one thing about Wall Street is, as soon as one firm finds something that's interesting, they all follow."

A few years ago, at the height of the financial crisis, Goldman came to symbolize for some Americans an every-man-for-himself ethos. Blankfein didn't help matters when he quipped that Goldman was doing "God's work." But in Salt Lake City, the locals appear to be cutting Goldman a lot more slack.

"Whether it's our distance from New York or our distance from Washington, D.C., where the antagonism has grown around Goldman Sachs, it's not happening here," says Becker, Salt Lake's mayor . "There isn't the kind of friction with Goldman Sachs that there is in different cities."


  1. The Gadianton robbers have arrived in Zarahemla.

    1. LOL. I needed a good laugh today...

  2. "There isn't the kind of friction with Goldman Sachs that there is in different cities."

    I don't believe this. I work a few blocks away from the Goldman Sachs building in Salt Lake City. When the OWS movement was in full force, plenty of protestors were around, specifically targeting the GS office building. Additionally, most Utah residents I know are not happy with the wall street bailouts, and GS.

  3. A minor side note on how long this 'competition' has been going on, but the John Birch Society heavily relied on dues paying Mormons during their hey-day, and the word is the security services relied on them back then, and presumably still now, to fill ranks.

    conflicted group.