Goldman Board Hopes Image Overhaul Will Save Blankfein

It's being billed as the biggest salvage job on Wall Street—and it has nothing to do with preventing another meltdown at troubled mega banks Bank of America (NYSE:BAC) and Citigroup (NYSE:C).

Rather, it’s about preserving the job—at least for a while—of Goldman Sachs’ chief executive Lloyd Blankfein.

Goldman’s (NYSE:GS) board has directed new public relations chief Jake Siewert to begin to reshape Blankfein’s image—battered and bruised by three years of bad publicity and Blankfein’s uneven performances before Congressional committees investigating the firm’s role in the financial crisis.

According to people close to the firm, Siewert understands the difficulty in creating a new image for Blankfein and the necessity of the task: Goldman's board believes it has no choice but to keep Blankfein in the job to prevent a civil war between competing factions at the firm, according to people with direct knowledge of the matter.

As one senior Goldman executive told FOX Business: “There will be all-out war if Lloyd leaves now.”

Goldman had no comment; Siewert, a former official in the Treasury Department, will start slow at first, rebranding Blankfein by offering him through selective and friendly media outlets that the CEO feels most comfortable with.

To be sure, Blankfein has had a rough three years at the helm of Goldman—and under normal circumstances he would have ceded at least some control by now. He is both CEO and Chairman and the firm’s board has discussed the possibility that he give up the chairman job, according to people with knowledge of the matter.

Blankfein has been dragged before various Congressional committees to answer thorny questions about the firm’s role in the financial crisis.

Goldman, meanwhile, has faced civil charges from securities regulators for selling toxic debt to its customers without disclosing the level of risk (the firm settled those charges without admitting wrongdoing).

More recently, Blankfein’s leadership has come under pressure following a scathing New York Times opinion piece written by a former employee who criticized the firm’s corporate culture under his leadership as one in which executives do anything to make a quick buck even if it means taking advantage of its clients.

Shares of Goldman have fallen 39% over the past year.

Still hanging over Blankfein’s head is a potential perjury charge; he has not been officially cleared by the US Justice Department of allegations that he may have misled a Senate committee with statements describing some of the firm’s actions during the 2008 banking debacle. People at Goldman say the likelihood of perjury charges are low, but they also worry that Blankfein won’t receive official clearance any time soon.

As reported by the FOX Business Network, Blankfein has told people he doesn’t plan to step down from the top job at Goldman as many people –including friends of his—had suspected as he has become a lightening rod for all that is wrong with the Wall Street corporate culture.

Sources are now telling FOX Business the decision to stay is not totally his. According to senior executives at the firm, Goldman board members want Blankfein to stay at least for the year because they worry that there is no person at the firm ready to take the top job.

Bankers and traders, the two constituencies that control Goldman and have traditionally fought for power, remain bitterly divided and no single executive is seen by the board as ready to unite the firm.

Blankfein comes from the trading side of the business along with his No. 2, Gary Cohn. But Cohn is unlikely to get the top job since Goldman’s business model must become more client-oriented because of new financial regulations. Top bankers might leave the firm if Cohn gets the job, people close to the firm say.

Yet appointing top bankers to that post, namely Michael Evans and Michael Sherwood, would lead to an exodus of traders loyal to Cohn, according to these people.

“They know they need to bide time and keep Lloyd in that job,” according to one senior Wall Street executive with direct knowledge of the matter. “Gary isn’t likely to get the top job because he’s a Lloyd clone, and the bankers aren’t ready to run a firm like Goldman. That leaves Lloyd, at least for now.”