Until early Wednesday morning, Greg Smith was a largely anonymous 33-year-old midlevel executive at Goldman Sachs in London.
Now everyone at the firm — and on Wall Street — knows his name.
Mr. Smith resigned in an e-mail message to his bosses at 6:40 a.m. London time, laying out concerns that Goldman’s culture had gone haywire, putting its own interests ahead of its clients.
What the e-mail didn’t say was that about 15 minutes later, an Op-Ed article he had written detailing his criticisms was to be published in The New York Times. “It makes me ill how callously people still talk about ripping off clients,” he wrote in the Op-Ed article.
The Op-Ed landed “like a bomb,” inside Goldman, said one executive who spoke on the condition of anonymity.
The article reignited a debate on the Internet and on cable television over whether Wall Street was corrupted by greed and excess. By noon, television crews crowded outside Goldman’s headquarters in Lower Manhattan. More than three years after the financial crisis, the perception that little has changed on Wall Street — and that no one has been held accountable for the risk-taking that led to the crisis — looms large in the public consciousness.
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Although he isn’t highly paid by Wall Street standards — earning about $500,000 last year, according to people briefed on the matter — Mr. Smith is part of what some Goldman staff members and alumni refer to as a sizable, yet silent contingent within the investment bank. These people are increasingly frustrated with what they see as a shift in recent years to a profit-above-all mentality.
Evidence of this shift, they say, can be seen in the accusations brought by the Securities and Exchange Commission in 2010 that the firm intentionally duped certain clients by selling a mortgage-security product that was designed by another Goldman client betting that the housing market would crash. More recently, a Delaware judge criticized Goldman over the multiple, and potentially conflicting, roles it played in brokering an energy deal. (In both cases, Goldman has denied any wrongdoing.)
Even the greed-loving, Wall Street-worshipping, union-bashing shills at the Daily News felt the need to criticize Goldman:
Goldman Sachs’ clients will be the ultimate judge of whether the venerable Wall Street investment bank is a topflight firm or closer to the tank of scheming sharks portrayed on Wednesday’s New York Times Op-Ed page.
Goodness knows, over the years, while the firm has profited handsomely, Goldman has managed to make its customers plenty of money.
That said, the essay by Greg Smith, “Why I Am Leaving Goldman Sachs,” will stand as a landmark cri de coeur , one that will have long-term reverberations for the company and the industry it so powerfully represents.
Smith ended a 12-year career at Goldman with a resignation letter for the ages. He wrote of a growing culture of voracious greed and described an ethic that put profit above all else — especially clients’ interests.
Those clients were left, in Smith’s words, like muppets with their eyes torn out.
Not surprisingly, the firm views the column as overamplified griping by one disgruntled employee. Perhaps. There are two or more sides to every story. But Smith’s descriptions are harrowing.
He described his pleasure, from his first day on the job as a recent college grad, at being a company man. He advised major clients around the world, worth more than a trillion dollars in assets. He sought out and mentored potential hires, even appearing in a Goldman recruitment video.
Then, a drastic shift in corporate culture changed everything.
“I knew it was time to leave,” he wrote, “when I realized I could no longer look students in the eye and tell them what a great place this was to work.”
Wrote Smith: “Over the last 12 months I have seen five different managing directors refer to their own clients as ‘muppets.’ ”
“These days, the most common question I get from junior analysts about derivatives is, ‘How much money did we make off the client?’ . . . You don’t have to be a rocket scientist to figure out that the junior analyst sitting quietly in the corner hearing about ‘muppets,’ ‘ripping eyeballs out’ and ‘getting paid’ doesn’t exactly turn into a model citizen.”
Indeed they don't.
Better hold some teachers accountable, eh Daily Newsers?
That'll make things all better.
Because so far, nobody - I mean nobody - from Wall Street has been held accountable for the financial collapse and the ethical and moral lapses that lead to it.
It took courage for Greg Smith to do what he did, and he deserves credit - no pun intended, since he did work for an investment bank - for acting on his convictions.
ReplyDeleteThat said, his op-ed piece does fall into the typical "a few bad apples..." pattern.
The problem is not that a few dishonest people took over a once-noble firm. That fantasy can be disposed of by reading John Kenneth Galbreath's "The Great Crash," in a which a major chapter on the origins of the 1929 stock market crash is titled, "In Goldman Sachs We Trust."
No, the problem in not that the traders took over from the investment bankers; it's that the political economy of neoliberalism has so tipped the scales of power within society that predation and parasitism became systemically inevitable.
And the predation and parasitism is steadily moving up the economic food chain. The economic security of the working class in the US was wiped out thirty years ago, with deindustrialization. Unpayable debt due to inflation of housing costs, health care and higher education are currently wiping out the middle class. But the snake is eating its own tail now: witness how the banks treat investors and pension funds like rubes to be fleeced, and Jon Corzine apparently is going to be allowed to steal over a billion dollars from commodities customers.
One other thought: Smith wrote of the contempt with which Goldman people speak of their customers. Can you imagine what Gates, Broad, Kopp and the education venture/vulture philanthropists say when they talk about Weingarten and the NEA?