When a small brokerage firm contacted Goldman Sachs Asset Management last week offering to sell $2.8 billion of deeply discounted Venezuelan bonds, the response was a quick "yes."
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Buying the bonds for pennies on the dollar was a no-brainer for fund managers in the unit of Goldman Sachs Group Inc., according to people familiar with the matter.
Internally, the purchase didn't receive heightened scrutiny. The two co-heads of the unit, GSAM, were informed only after the trade had been completed, the people said. The trade didn't reach Goldman's firmwide standards committee, which often vets deals that carry potential blowback, they added.
An ensuing uproar over that trade, which critics say extends a financial lifeline to Venezuela's embattled government, caught top executives at Goldman off guard, the people familiar with the matter said. In part, this was because asset management is viewed as a straightforward business not prone to controversy.
In the past, Goldman's image troubles have typically involved complex financial transactions involving its trading or banking businesses.
The incident shows how, a decade after the financial crisis, Goldman lives in a spotlight unique even on Wall Street. That is thanks to the public drubbing it took over financial-crisis-era actions, perceptions of political influence that have only increased with former executives in top spots of the Trump administration, and a knack for making money when others are losing it.
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The Venezuelan imbroglio also highlights how the priority of the firm's asset-management business -- to make money for its fund investors -- can clash with Goldman's postcrisis push to view potential business with an eye toward protecting its reputation.
"How could you criticize a money manager for buying something so cheaply? That is what they do," said Diego Arria, a former governor of Caracas and former Venezuelan ambassador to the United Nations who disapproves of the bond deal. "But the perception is terrible."
In a statement earlier this week, Goldman said: "We recognize that the situation is complex and evolving and that Venezuela is in crisis. We agree that life there has to get better, and we made the investment in part because we believe it will."
Goldman has been more sensitive to its public perception in recent years.
In 2010, after a government lawsuit accused the firm of defrauding mortgage-bond investors -- a suit it later settled for $550 million, agreeing it had made mistakes -- the bank formed a firmwide standards committee to reshape its business practices and mend its reputation.
Training sessions for employees, many of them run by Chief Executive Lloyd Blankfein, stressed the importance of protecting Goldman's standing in the eyes of clients and the public.
"Everyone has to have big eyes, big ears, know what's going on around them, and be policemen for the organization," Mr. Blankfein said at a 2012 training session. "At the end of the day, we only have one reputation. We rise and fall together."
Goldman has become choosier about taking on new business, executives say. It backed away last year from underwriting a Russian government bond under pressure from the U.S. State Department. It has shied away from some deals involving coal companies, concerned about backlash from environmental groups, and hasn't taken on investment-banking work for Venezuela in years.
Underwriting a stock offering for a company with murky financials or structuring a complex bet on mortgages carry obvious red flags. Those matters are often presented to senior management for final approval, according to people familiar with the firm's practices.
But those lines are less clear in Goldman's asset-management arm, which manages $1.3 trillion on behalf of pension funds, mutual funds and other big investors. As a so-called fiduciary, it is obligated to act in the best interests of its investors; portfolio managers are given wide latitude to buy and sell securities.
In the case of Venezuela, Goldman's portfolio managers who focus on emerging-market debt had been actively looking to buy the country's beaten-down bonds. They believed President Nicolás Maduro would eventually be swept out of power and that the securities would rally, according to people familiar with the matter.
Yet the transaction drew a swift, public rebuke from opposition groups in Venezuela because the bonds had been held by the central bank, which reported an infusion of cash the day the deal was completed.
Meanwhile, the country's economy is in free fall, and street protests and food shortages are a daily occurrence.
Ironically, GSAM's value to Goldman is its steady-state nature: predictable fees, which have churned higher as assets under management have swelled.
Its share of the firm's total revenue has doubled since 2009 to 19%.
Now, the Venezuelan deal threatens to roil other businesses within the firm. Goldman bankers worry that aiding a widely disliked government will anger clients in the region, according to people familiar with their concerns.