Ex-Goldman Sachs executive director Greg Smith fulfilled a dream I'm sure many people have: Blasting his former employer in an extremely public forum (the New York Times) and making the whole world sit up and say, "Hmmm, maybe there's something wrong there."
In his op-ed in the Times, Smith describes a "toxic and destructive culture" that puts profit motive ahead of clients. He writes:
"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. Even after the S.E.C., Fabulous Fab, Abacus, God’s work, Carl Levin, Vampire Squids? No humility? I mean, come on. Integrity? It is eroding. I don’t know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact.
It astounds me how little senior management gets a basic truth: If clients don’t trust you they will eventually stop doing business with you. It doesn’t matter how smart you are."
Plenty of ink has been spilled on Goldman Sachs, but perhaps Smith's op-ed will make a difference. Matt Taibbi at Rolling Stone praises the op-ed, and suggests that true Wall Street reform will only occur when insiders such as Smith start rejecting the culture of the Street. He writes:
"The resignation will have an effect on Goldman’s business. The firm’s share price opened this morning at 124.52; it’s down to 120.72 as of this writing (it dropped two percent while I was writing this blog), and it will probably dive further. Why? Because you can stack all the exposés on Goldman you want by degenerates like me and the McClatchy group, and you can even have a Senate subcommittee call for your executives to be tried for perjury, but that doesn’t necessarily move the Street.
But when one of the firm’s own partners is saying out loud that his company liked to 'rip the eyeballs out' of 'muppets' like you, then you start to wonder if maybe this firm is the best choice for managing your money. Hence we see headlines this morning like this item from Forbes.com: 'Greg Smith Quits, Should Clients Fire Goldman Sachs?'
This always had to be the endgame for reforming Wall Street. It was never going to happen by having the government sweep through and impose a wave of draconian new regulations, although a more vigorous enforcement of existing laws might have helped. Nor could the Occupy protests or even a monster wave of civil lawsuits hope to really change the screw-your-clients, screw-everybody, grab-what-you-can culture of the modern financial services industry."
The Awl also offers an interesting perspective on the whole thing.
Anyway, I'm pretty cynical about the possibility of change, and I doubt that Smith's op-ed will have much of an impact upon anyone but him, and his ability to get a job in finance. But you never know. In any case, I always enjoy a bold gesture of defiance, and his was pretty good.