In a New York Times op-ed piece that has gone viral, departing Goldman Sachs partner Greg Smith issued an ethical broadside against his now former employer, reinforcing some of the worst public impressions of the high-flying financial sector:
TODAY is my last day at Goldman Sachs. After almost 12 years at the firm . . . I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.
To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. . . . The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.
According to Smith, many clients are referred to derisively, and their financial well-being can take a low priority:
It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail.
Smith calls upon Goldman to jettison the “morally bankrupt people, no matter how much money they make for the firm,” and to reset the firm’s organizational culture.
Predictable response I
The Times reports that “Goldman Sachs took issue with the opinion piece, defending the investment bank’s practices and its treatment of clients”:
“We disagree with the views expressed, which we don’t think reflect the way we run our business,” said a spokesperson for Goldman Sachs. “In our view, we will only be successful if our clients are successful. This fundamental truth lies at the heart of how we conduct ourselves.”
Predictable response II
Christine Harper reports for Bloomberg that the stock market reacted immediately to the op-ed piece:
Goldman Sachs Group Inc. (GS) saw $2.15 billion of its market value wiped out after an employee assailed Chief Executive Officer Lloyd C. Blankfein’s management and the firm’s treatment of clients, sparking debate across Wall Street.
The shares dropped 3.4 percent in New York trading yesterday, the third-biggest decline in the 81-company Standard & Poor’s 500 Financials Index, after London-based Greg Smith made the accusations in a New York Times op-ed piece.
(Now, before we stick a fork in Goldman, let’s remember that a 3.4 percent stock decline isn’t exactly the end of the world. Let’s see how things are going at the end of the month.)
Not so predictable response
It appears that Smith was one of the good guys within the firm. For example, Business Insider reports that a former Goldman intern and analyst, Aveneesh Singh Saluja, vouches for Smith:
“I worked for GS both as an intern in 06 and as a full time analyst from July 07 to March 09. …I hold him in very high regard – he took care of us junior guys, gave us great pieces of advice, and in general came across as one of the more personable, friendly, and genuine guys on the floor.”
Saluja isn’t the only former colleague publicly vouching for Smith’s character. It’s good to see that Smith isn’t being tossed under the bus by everyone who worked with him.
When will we ever learn?
Wow, shades of 2008. Smith’s op-ed suggests that one of the world’s biggest investment houses has learned very little from the meltdown of the financial services industry. In the meantime, powerful business interests continue to lobby Congress and federal enforcement agencies, claiming the financial sector doesn’t need to be strongly regulated. (I beg to differ…)
Marshall Auerback puts this in a broader context for AlterNet:
Greg Smith’s mea culpa about Goldman should not come as a surprise to anybody who has a remote connection with the financial services industry. But to suggest that the allegations made by Mr. Smith are unique to Goldman’s culture is ludicrous. They are symptomatic of a much broader problem embedded in Wall Street culture as a whole. Goldman’s major sin was being more astute at exploiting this system than most of its competitors.