Inside Wall Street

Gregory Smith, a mid-level executive at Goldman Sachs has resigned and written a blistering op-ed in yesterday's New York Times exposing the culture that pervades the top investment firm.

"I can honestly say that the environment [at Goldman Sachs] now is as toxic and destructive as I have ever seen it. . . .  I can no longer in good conscience say that I identify with what it stands for.

"I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. . . .  It makes me ill how callously people talk about ripping their clients off. . . .

"These days, the most common question I get from junior analysts about derivatives is, “How much money did we make off the client?” It bothers me every time I hear it, because it is a clear reflection of what they are observing from their leaders about the way they should behave. . . .  

"Goldman Sachs today has become too much about shortcuts and not enough about achievement. It just doesn’t feel right to me anymore. I hope this can be a wake-up call to the board of directors. Make the client the focal point of your business again. . . .  Weed out the morally bankrupt people, no matter how much money they make for the firm. And get the culture right again, so people want to work here for the right reasons."

"Why I Am Leaving Goldman Sachs" landed like a bomb on Wall Street.   But to me, as a way-outside observer, it fits with everything we've seen in the investment bankers' response to the financial crisis of the past few years.

Here, however, we're not talking about how Wall Street has profited at the expense of Main Street.   We're talking about one of the very top investment firms ripping off its own clients, people they were being paid by for advice in investing their money profitably.  And what were they doing?

In one now infamous case, Goldman Sachs sold derivatives to clients and at the same time turned around and made their own investments that were predicated on those same assets losing money.  How's that for building trust in your clients?    Smith's point is that this is not only wrong but it will eventually destroy the firm.

It seems clear now that the pure market is a-moral, based on greed.   This is deception of the very people who have put their trust in you.   Where is the line between this and what Bernie Madoff did?

Ralph