If Greg Smith can be believed, Goldman Sachs has responded to the financial meltdown and election results of 2008 in the same dysfunctional manner as the Republican Party. Mr. Smith is resigning today from his position as “executive director and head of the firm’s United States equity derivatives business in Europe, the Middle East and Africa.” The reason? The culture of Goldman Sachs has deteriorated to the point that he can’t look recruits in the eye and say that it is a good place to work.
Even on a good day in a good year, Goldman Sachs has always been a mercenary place. If it is immeasurably worse today than it was four years ago, that’s really saying something.
I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them. If you were an alien from Mars and sat in on one of these meetings, you would believe that a client’s success or progress was not part of the thought process at all.
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…
…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.
He’s warning Goldman Sachs’ clients and potential clients that the firm can’t be trusted. And he explains how the culture was corrupted by poor incentives (and poor leadership):
Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence.
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.
Of course, I don’t think Goldman Sachs has been exercising good judgment for a long time. In the lead-up to the housing bust, Goldman was betting against financial products it was pushing on clients. So, I guess the warning here is that they’ve normalized that kind of behavior. It’s no longer the exception but the rule.
Add Goldman Sachs to a long list of institutions that learned the wrong lessons from the Bush years.
I hope some other firms can do the right thing by their clients and take some of Goldman Sachs’ business away.
Say what you will, but they’re the best in the business. This is what happens in a capitalist economy. I don’t understand why people are surprised.
This is also all the more reason to support privatization of Social Security! As you can see, they’ll have their clients’ best interest at heart because that means they’ll make more money! …Or…not.
This is what happens in a capitalist economy. I don’t understand why people are surprised.
No, it’s not! This fatalism just plays into their hands.
This isn’t how it worked for 60+ years under New Deal-era financial regulation. This is not the way it has to be.
Well if you’re protesting against the outcomes of a corrupt system rather than the system itself, then I suppose that’s your right. And maybe it alleviates more suffering because we’re playing within the bounds that we’ve got — as you say, “not playing into their hands” by accepting that capitalism is fine within those regulatory bounds. But I have no reason to reassert the legitimacy of the capitalist enterprise.
We always think that what we have is “the best” way of doing things…until suddenly it’s not. I just don’t get people complaining about a system that proudly calls itself capitalism operating in the service of capital.
The point is, the existence of a “capitalist” system is not, in and of itself, corrupt.
But I have no reason to reassert the legitimacy of the capitalist enterprise.
How about, everything else that has been tried has made the streets run with blood?
They are indeed successful grifters. But the trouble with greed is that it eats up all sense of a larger evolement. As Smith points out, the sales meetings are lived on a single level sort of like any predator who feeds off a pool of resources until it is exhausted.
And then they swim to the next pool of suckers.
The food chain here of what becomes of the monies that rightly belong to the middle class and the Country’s infrastructure is what is the true disaster. But then I’m sure Mitt has lots of friends at GS.
I’m Mitt Romney, and all my friends are plutocrats.
You put your finger on it. Grifters can’t grift without suckers. Hopefully if somebody like Smith says they’re grifters, there won’t be so many suckers.
Oh, and not only says they’re suckers, but says it on the op-ed page of the NY fucking Times. That might get through to the idiots out there who have an unwarrantedly high estimation of their own intelligence, a description that fits many Times readers to a T (or why else would David Brooks, Tom Friedman and Ross Douthat be featured columnists?), and also fits the definition of the classic grifter magnet. If this doesn’t get through to them I don’t know what will.
The statement may be slightly courageous but only in the way Jerry Mcquire discovering that agents exploit athletic talent is childishly courageous. There is a striking naivete in someone who should have faced systematic greed from the very beginning of his career.
Mr. Smith are you shocked, shocked to find gambling in the casino?
Maybe Mr. Smith is just a slow learner. Not everything is obvious to all of us, especially if our livelihood depends on our oblivion.
I hope his essay has a good effect on some readers, and that this rapacious flood has crested.
“I hope some other firms can do the right thing by their clients and take some of Goldman Sachs’ business away” Seriously?? This particular spotlight may be hitting Goldman right now, but it’s not like the rest of Wall Street is any less corrupt. Goldman was not alone in bringing down the economy and screwing millions of people out of money they’d actually earned, in contrast to the way Wall Street gets its $billions. They didn’t learn the wrong lessons from the Bush years, those lessons were their business plan from the very beginning.
The “financial services” sector is a parasite skimming the economic lifeblood from its victims while contributing almost nothing of value to the economy or the country. Sorry, Boo, but you ain’t gonna find salvation by pinning your hopes on the other varieties of toxic leech.
He’s just being statesmanlike.
In my small town, there are a number of financial services companies. It is so odd.
the other varieties of toxic leech
You know, like the New Deal. Just another variety of that toxic capitalism. Pretty much indistinguishable from the 1880s, or the 2000s. It’s all the same; there’s really no difference.
That 70-year period without a depression, after they had happened every 20 years like clockwork? Just luck.
Clinton repealed Glass-Steagall. Just sayin’.
I really don’t understand your point about “the Bush Years.”
It was hard for him not pass it when he was presented with a bill that passed with a veto proof majority, thereby removing his ability to stop it.