It’s tempting to get all savvy and snarky about Greg Smith’s op-ed in The New York Times this morning on why he’s leaving Goldman Sachs.
It’s no small thing for someone in an omerta culture like Goldman’s to take to the New York Times to eviscerate the firm. It’s much easier to assuage your Goldman guilt by quietly leaving the firm like everyone else does, preserving future prospects in the financial industry.
Smith knew he’d get attacked by Goldman and I’m sure he figured he’d get hammered on the Internets. But he did it anyway.
What are three quick ways to become a leader? a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) “Hunt Elephants.” In English: get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.
So let’s just point out that, all other considerations aside, it took considerable courage and/or nerve to write this. Rolling Stone’s Matt Taibbi, no naif he, writes this:
There are a lot of people who just want to tear Wall Street down and start over again, but what Smith did in this piece was show that people like him can be part of the solution. What he did couldn’t have been easy - kudos to him, and let’s hope the inevitable blowback sent his way won’t be too rough.
It’s also worth noting that Smith’s views are hardly unique amongst Goldmanites or ex-Goldmanites, as Reuters Breakingviews’s Peter Thal Larsen says:
Indeed, the complaint that Goldman puts its own interests first can be regularly heard from customers, counterparties and even ex-employees.
The New York Times news side shows that by talking to others who have left Goldman:
This guy might as well have had a microphone in the room with me during my exit interview…took the words right out of my mouth. To add to one thing he said, I had never heard the term “rip someone’s face off” until I started working at Goldman Sachs. Unfortunately, that phrase was all too often used in the context of client transactions.
As of now, Goldman shares are down 3.5 percent on the day, with no other apparent reason.
The anonymous Goldman disses, the speculation about his motives (the purely motivated character witness is rare indeed), and the snide remarks about his ping-pong prowess aren’t going to dent the impact of his piece.
Meantime, go hit up The Wall Street Journal, which right now is hosting a live chat about what Smith’s op-ed means about the culture of Goldman and Wall Street.
…er, wait. The Journal is actually having a live chat with a crisis communications PR person on how to flack the response to Smith’s op-ed.
Kudos to Mr. Smith for his display of courage, candor and integrity - qualities that are quite rare in the business world nowadays.
#1 Posted by Lloyd Trufelman, CJR on Wed 14 Mar 2012 at 02:56 PM
I can only hope the main stream media will finally investigate and report about the new movie that has the Goldman Sachs evidence. The documentary shows how Goldman Sachs sold FAKE stock into pension funds. The movie is www.TheWallStreetConspiracy.com let me repeat that again. " Goldman Sachs sold FAKE stock into the pension funds and stock market. All clearly explained in the new documentary called " The Wall Street Conspiracy "
Richard
SiriusNews
#2 Posted by SiriusNews, CJR on Wed 14 Mar 2012 at 03:07 PM
It seems that what Mr. Smith described at GS is the same as the culture at Saloman Brothers (see Liar's Poker). Nothing has changed. It seems we can assume all of Wall Street is like that.
#3 Posted by Ron R., CJR on Wed 14 Mar 2012 at 07:35 PM
The BBC's initial coverage of Smith's resignation op-ed was typical of the kind of snark and apologia we've come to expect from the deeply embedded business press.
The first slag comes from the BBC's own Business Editor, Robert Peston, who dismissed Smith as "an investment banker who joined the firm just under 12 years ago filled with idealistic enthusiasm", as if after much less than that, Smith wouldn't have already lost any youthful idealism that Peston attributes to him.
"I've been watching Goldman for more than 20 years, and I'm not persuaded it was ever the co-op Mr Smith seems to think he joined," Peston says, essentially denying and rationalizing the behavior that Smith attributes to Goldman in his resignation / op-ed. In other words, GS were always as avaricious and amoral as they are now, so what's Smith complaining about?
The article then goes on to further slag Smith off by saying that "Even as an executive director, Mr Smith still had an estimated 2,000 managing directors and partners above him in the pecking order", as if he couldn't possibly know what he's talking about because he's too far down on the totem pole — with the implication that somehow, those above him could actually not be preying on their own clients and putting ever-greater profits above everything else, but that Smith was too junior to know that. Yeah, right.
But then it turns to (of all sources) former investment banker Bill Cohan, who wrote a book on Goldman Sachs and echoes Peston's claim that while "Mr Smith would know how the Wall Street giant treated clients in his division ... [Cohan] questioned 'whether or not he understands the Goldman strategy overall'."
" 'He's not on the management committee or even a partner of the firm,' Mr Cohan told Bloomberg TV." Again, in other words, Goldman Sachs could well be putting its clients interests ahead of its own and not ripping them off, but doing so in a manner so secret that those at Smith's level could not detect or be aware of. (Let's call it the "hidden altruism" theory.) In which case all the evidence that Smith describes to the contrary is what — the behavior of rogue employees? Evidence that senior management have no idea what their employees are doing in the trenches? A complete disconnect between the "Goldman strategy overall" and the employees who are ostensibly implementing that strategy and interacting with the clients? Please.
And, just to confirm Cohan's insider perspective (to say nothing of the BBC's Business staff), the article can't avoid the former's assessment of Smith's future employability in the finance industry for daring to speak the truth about what he's seen: "He's toast. He is completely toast in terms of [working on] Wall Street, no question about that," [Cohan] added. As if that were at all relevant to the veracity or implications of what Smith had said in his op-ed. Had Smith accused Goldman of breaking the law, would the fact that he might find it difficult to get a job on Wall Street in the future be germane to such accusations?
#4 Posted by CounterCorp, CJR on Wed 14 Mar 2012 at 09:15 PM
You know, I got a little leery about Smith's estimate of when Goldman's decay began. I figured it was when Goldman started risking investor money when it went public, not their own. So I started doing a quick search and I found Paul Volcker:
http://www.huffingtonpost.com/mobileweb/2012/03/14/paul-volcker-greg-smith-goldman-sachs_n_1345798.html
"Volcker, who served as an economic adviser to President Obama, said at The Atlantic's Economy Summit in Washington, D.C., that when Goldman Sachs went public in 1999, it "became a trading operation," which hurt clients and the economy at large.
"That changed the mentality, I'm afraid," Volcker said about Goldman Sachs. "It's a business that leads to a lot of conflicts of interest."...
At the conference, Volcker said that Wall Street's general shift toward speculation in the early 2000s damaged the economy.
"These were brilliant years for Wall Street from one perspective," Volcker said. "Were they brilliant years for the economy? Well, there's no evidence of that."
Volcker pointed out that as banks profited, workers did not become more productive, and there was "virtually no increase" in average household income when adjusted for inflation. This led to an "imbalanced economy," he said."
And who else did I find? Jon Corzine:
http://en.m.wikipedia.org/wiki/Jon_Corzine
"He became Chairman and CEO of Goldman Sachs and the leading advocate in the firm's decision to go public. In 1999, having lost a power struggle with Henry M. Paulson, Corzine left the firm. After his departure from Goldman Sachs, he earned what has been estimated to be $400 million during the 1999 initial public offering of the company."
Why bring him up? Continued:
#5 Posted by Thimbles, CJR on Wed 14 Mar 2012 at 11:13 PM
Because they're crooks is why.
#6 Posted by Thimbles, CJR on Wed 14 Mar 2012 at 11:17 PM