Goldman Sachs Taps Former Calif. Treasurer

Goldman Sachs Group Inc., hoping to cash in on the rising wave of California municipal borrowing, Monday named former state Treasurer Kathleen Brown to head a new Los Angeles-based public finance office.

A widely known Democrat in a state with Democrats in most of the top government jobs, Brown is expected to function as a “rainmaker” who will use her contacts to help win bond underwriting business for Goldman.

“She can schmooze with the best of them, and that’s what the job takes,” said Zane B. Mann, publisher of the California Municipal Bond Advisor, a Palm Springs-based newsletter.

Goldman routinely ranks near the top among corporate-bond underwriters, but the firm in recent years has been an also-ran in the municipal bond business, trailing such rivals as Citigroup Inc. and J.P. Morgan Chase & Co.

As state and local budget surpluses have turned into deficits with the flagging economy of the last few years, governments increasingly are turning to bonds to finance their shortfalls.

California, for example, is expected to borrow about $5 billion via bonds this year, Mann said. The state also plans a record $9 billion to $11 billion in short-term borrowing this spring.

What’s bad news for taxpayers -- rising deficits and debt payments -- can be good news for investment banks. Fees from muni bond advising and underwriting can help make up for shrinking revenue from the withered corporate merger business.

Brown, 57, is the daughter of former Gov. Pat Brown and younger sister of former governor and current Oakland Mayor Jerry Brown. She lost her own race for governor in 1994. She joined Goldman in 2001 as a managing director in investment management, handling money for wealthy clients.

That experience, combined with her four years as state treasurer and two years as a bond lawyer with O’Melveny & Myers, has given Brown muni market experience from several perspectives, she said Monday.

“I hope I’ll be able to win the confidence of finance officials in working with Goldman Sachs,” she said. “I wouldn’t be doing this otherwise.”

Goldman, which has a small public finance office in San Francisco, is expanding its California operations by reassigning people from other divisions, such as Brown, as well as by hiring bankers from outside.