Another Ex-Goldman Banker Confesses: The Firm Became 'Toxic'

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Goldman Sachs soundoffThe fallout continued on Thursday from a Goldman Sachs (GS) employee's scathing public resignation in the pages of the country's most famous newspaper. On Wednesday, The New York Times published an op-ed by Greg Smith, previously "a largely anonymous 33-year-old midlevel executive at Goldman Sachs in London," in the words of a Times follow-up piece. Titled "Why I Am Leaving Goldman Sachs," Smith's diatribe declared Goldman's environment to be "as toxic and destructive as I have ever seen it," and denounced management for allowing "the interests of the client... to be sidelined in the way the firm operates and thinks about making money."

The Times -- touting its own impact, to be sure -- quoted an unnamed Goldman executive as saying the op-ed landed "like a bomb" inside the bank.

Goldman, which by now has lots of experience in responding to bad publicity, quickly released a memo from CEO Lloyd Blankfein and President Gary D. Cohn to the firm's employees, characterizing Mr. Smith as "disgruntled" and merely one "of nearly 12,000 vice presidents" (in other words, not such a big fish among the 30,000 swimmers in Goldman's pond).

But, tellingly, the firm did not dismiss the allegations outright. The Wall Street Journal reports that Goldman "said it will examine" Mr. Smith's "claims... that executives 'callously' talk about 'ripping their clients off' in order to make more money." The company also attempted to contact Mr. Smith "for more information about his accusations, including that he saw five managing directors call their clients 'muppets' in the past year."


PHOTO: The reception area of Goldman Sachs London Office. Photo by sperkyajachtu, Flickr


(Lest you assume that Goldman thinks of its clients as creatures of felt, the Journal explained, "'Muppet' is a British slang term for 'idiot' and is sometimes used on Wall Street trading floors to denigrate an opposing trader." Remember, Smith worked in London.)


Goldman Exec Quits And Writes Searing Op-Ed on Company



Mixed Reviews of Smith's Opinions, Accuracy

Many were critical of Smith, questioning in particular his timing and honesty. Dealbreaker editor Matt Levine, for instance -- like Smith, a former vice president in Goldman's equity derivatives business -- argued against the contention that the firm's culture had changed dramatically over the last decade. "Yes," Levine explained, "there was once a time when big investment banks made most of their money by advising clients on mergers and capital raising, rather than by trading with clients. And yes, those times are long gone. But they were long gone when Smith started."

The derivatives sales business, moreover, "has always and necessarily been a business in which Goldman is on one side of a trade and its clients... are on the other. Each dollar that Goldman makes comes directly out of its client's pockets." And, of course, the bank's clients know this. They just think the benefits of working with Goldman outweigh the costs. To Levine, Smith seems to have been motivated to leave by a company-wide decline in compensation, and is cloaking his mercenary impulse with high-minded sounding justifications.

But several other former Goldman employees have gone on the record supporting Smith's claims, leading the Times to suggest that he "is part of "what some Goldman staff members and alumni refer to as a sizable, yet silent contingent within the investment bank," a group of people who "are increasingly frustrated with what they see as a shift in recent years to a profit-above-all mentality."

A DailyFinance Exclusive: A Former Goldman Trader's Response

DailyFinance spoke with one former Goldman Sachs employee, who worked at the firm for the better part of a decade (and left of her own accord -- no disgruntlement here). She provided the following statement in response to the Smith controversy. She largely agrees with Smith's analysis, although she offers the novel excuse that post-financial crisis disdain for investment banking perhaps contributed to bad attitudes and cynical behavior on Wall Street. Finally, she ends on a note of pessimism, doubting that anything good will have come of Smith's "whistle-blowing".

Here are her thoughts:
I had (what I still consider to be) the privilege of working at Goldman Sachs for eight years and on three continents. My analyst class of 2003 was much the same as Smith's recollection: We needed to be taught everything, almost down to how to tie our shoes (or, in the case of us ladies, how to convincingly wear those killer heels in an imposing but still feminine way). In the majority of cases, our mentors embodied the values the firm still claims to espouse: integrity, teamwork, hard work and success; but success should never at the expense of our reputation or our clients' trust. Clients paid our salaries and kept the lights on. There might have been a "muppet" or two on the desk, but clients were respected almost to the point of adulation. This philosophy held true across the globe, particularly in Asian offices, where someone always had to be at the office just in case a client decided to call at 10 p.m.

Unfortunately, the firm that I joined in 2003 is not the same firm that I left in 2011. Toxic is exactly how I've described the environment to friends and family, in explaining why I abandoned a job that most people (still) would give their left arm for. I'm incredibly proud of the work that I did over those eight formative years -- I'm a smarter person with a suitcase full of life experience I'd never trade -- but they got their proverbial pound of flesh, and the rewards -- not just financial -- had become nonexistent.

In an environment where earning money the traditional way (innovate, work bloody hard, be smarter than everyone else and do right by your clients) was no longer enough, and faced with increasing scrutiny from the media and, by extension, absolutely everyone, the firm had become paralysed and its employees cynical and desperate. Feeling constantly under attack -- your every action, your reason for going to work each day, your choice of career -- rarely brings out the best in people. It's no surprise that things have devolved to the point of Smith publicly announcing the reason for his departure. Unfortunately I doubt it will have much affect on the inside (my sources tell me the internal response is to "not air the dirty laundry"), but I do hope the firm is able to recover the values it once stood for. I'm incredibly grateful for the opportunities I had and I still believe the firm occupies a critical role in the capital markets -- a position I'm dismayed to see has been eroded.



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Wayne Bradshaw

The City Council is examining a request to open a Gucci Outlet Store and retail shop at 11502 Middlebelt in the Livonia Crossroads shopping center on the southeast corner of Plymouth and Middlebelt roads.The council heard at a study session on Monday from Taylor Bond, president of Children's Orchard, who wants to open a 7,500-square-foot Gucci Outlets store at the site of the former Family Buggy restaurant, which was closed several years ago.

May 06 2012 at 12:03 AM Report abuse rate up rate down Reply
Jerry D.

And GS is the source of our "bright ones" in Treasury????? Any company with more than 1/3 of it's people as vice presidents has to be fouled up.

March 19 2012 at 10:33 AM Report abuse rate up rate down Reply
gatorhans

Why is our country so scared to strike and revolt? Everyone has done it but us? Are we stupid? Just facebook each other and pick a week to not go to work. If your neighbor cant afford the time off then help them with food and money. The clowns are stealing everything from us in washington,its time to throw them our if they have been there more than 8 years VOTE them out

March 19 2012 at 9:43 AM Report abuse rate up rate down Reply
aadpolew

The entire banking,saving and loan,investment firms,should be cleaned out, top to bottom by the federal government;with stiff jail not country club jails but hard time prison terms for any and all corrupt bankers. Their are laws on the books now for the type of bussiness practice that led to the melt down. And we are heading for another melt down of the economy with the unregulated, wink and a blind eye to to whats going on in the banking industry.Will the government allow more financial institutions become "TO BIG TO FAIL" . Put everyone involved with the last melt down in hard time prison. It MAY?????? send a message to future robber baron bankers. The French Revolution started with the 99% demanding fair treatment by rich and powerful . Maybe a gullitone set set up on Wall Street MIGHT???? make a difference.

March 19 2012 at 5:28 AM Report abuse rate up rate down Reply
1 reply to aadpolew's comment
tj1108

99.9% is more like it. There is less than 1/10th of 1% that are so rich they controll the Govt.

March 19 2012 at 6:25 AM Report abuse rate up rate down Reply
drbuckles

When you buy into this fraud you are going to be down 6% and maybe even more if you are a country, like Greece. These people are vampires building large mounds of worthless paper that add to the debt of this country, and the world's. The austerity program is coming and it will be nasty for all but the banksters, unless you get rid of all the politicians who are licking their boots to stay in office. It's your future and the 40 and under crowd will have to do something about it unless they are to week to stand up for their future. Listening to the politicians you'd think it was the poor and the elderly who created this problem.

March 18 2012 at 11:44 PM Report abuse +1 rate up rate down Reply
drbuckles

When you buy into this fraud you are going to be down 6% and maybe even more if you are a country, like Greece. These people are vampires building large mounds of worthless paper that add to the debt of this country, and the world's. The austerity program is coming and it will be nasty for all but the banksters, unless you get rid of all the politicians who are icking their boots to stay in office. It's your future and the 40 and under crowd will have to do something about it unless they are to week to stand up for their future. Listening to the politicians you'd think it was the poor and the elderly who created this problem.

March 18 2012 at 11:43 PM Report abuse rate up rate down Reply
Dave

Yes, let's trust our Social Security money with these guys as some politicians want.

March 18 2012 at 11:04 PM Report abuse +2 rate up rate down Reply
markin2500

The entire banking system is corrupt

politicians are bought and paid for

no one wants to talk about it.

Disgusting.

March 18 2012 at 10:20 PM Report abuse rate up rate down Reply
markin2500

The entire banking system is corrupt

politicians are bought and paid for

no one wants to talk about it.
Disgusting.

March 18 2012 at 10:20 PM Report abuse rate up rate down Reply
markin2500

The entire banking system is corrupt ............ politicians are bought and paid for............... no one wants to talk about it.
Disgusting.

March 18 2012 at 10:19 PM Report abuse rate up rate down Reply