Goldman Sachs Exec Director quits, indicts former employer in stinging NYT editorial

Greg Smith, a 12 year veteran of Goldman Sachs who held the rank of executive director until today, has tendered his resignation and penned a NYT op-ed explaining his disillusionment with the firm. Smith describes a "toxic," "destructive" company that puts its own bottom line ahead of its customers' best interests, the result of a "decline in the firm's moral fiber" under CEO Lloyd C. Blankfein and president Gary D. Cohn. In modern Goldman Sachs, customers are described internally as "muppets," and are pushed to trade in complex products that make big commissions for Goldman, even when they earn less for the clients compared to simpler products.

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.

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. Now project 10 years into the future: You don’t have to be a rocket scientist to figure out that the junior analyst sitting quietly in the corner of the room hearing about “muppets,” “ripping eyeballs out” and “getting paid” doesn’t exactly turn into a model citizen.

Why I Am Leaving Goldman Sachs (via MeFi)


  1. The brown-nosing apologists for rapacious corporations will only see the bit about nothing illegal going on, mouth a platitude about corporations only being mandated to make money, and go back to fuming about food stamps, public schools, and health warnings on cigarette packages.

    1. That’s my fear as well.  While this man now condemns his former job, you can rest assured that he will use his front page “I’m a good guy” fame to secure another six or seven figure salary. 

      It’s a long way from opining about screwing over rich people to acknowledging how hard the poor in this country are getting screwed, and doing something about it.

  2. Sorry, I’m very cynical about it all. This guy worked 12 years at the top; if there’s a culture at the firm, it’s one he helped creating, one he was an integral part of. Only now that the easy money is gone, he’s grown a conscience…?

    1. and you’ve every right to be skeptical! why one only has to look at the response this article is getting on almost every news source, like the wall-street-journal, fox, bloomberg, the washington post, business week…   they are all telling nearly the exact same simple story, that this guy’s very late attitude change is nothing to pay any attention to… just one disenchanted employee… nothing to see here… move along

      1.  A more interesting story would be – how did this guys rant land on the front page of the Times? 

    2. The Times describes him as a “mid-level executive.” I don’t know where you got the idea that he worked at the very top.

  3. I wish someone would find a way to restructure the financial industry in such a way that it didn’t tend to just attract people who think of money as an end unto itself. (Not that I’ve got any brilliant ideas about how to do so; I was an art major.)

    1. A good start would be enforcement of existing laws. But that really just kicks the can from Wall Street to government.

        1.  I know I missed it, or at least the OWSers in my area did.  Every semi-coherent demand I heard was some variation of “Give the government more power”.

          Keep in mind that they’d fully agree that corporations control the governments.  The same governments they want more powers for.

          I’ve mostly given up trying to find consistent logic in the activist community.

          1. Not that I can speak for that movement, but I understood their message to be “give government more power **over corporations**”. I don’t think they were as delusional as you paint them, thinking that you can give government more power without removing or at least changing that corporate control.

          2. Many OWS didn’t seek any more power for the government, and instead equal application of already existing laws. Oh, and Glass Steagall, please. 

          3.  Cocomaan:

            I guess your local OWSers are of a higher quality.  Mine would just stare at you blankly when you say “Glass Steagall”.

            But then OWS seems to have been adopted as a brand of convenience for a great many to bang the drum of their particular pet cause.  For instance, homelessness; very noble, but what the hell does that have to do with reforming banking and investing law to stop Wall Street fiscal shenanigans?  At best it’s treating a symptom.

          4. But then OWS seems to have been adopted as a brand of convenience for a great many to bang the drum of their particular pet cause.

            Just like you’re doing right now.

            Since you’re big on the criticism I don’t suppose you want to propose any solutions?

          5. Honestly, I think you’re making stuff up, but after reading rants from Ann Coulter, Michele Malkin, Free Republic, and the Tea Party movement,  I’m willing to concede that it’s time to give up on finding consistent logic from activists.

    2.  Unfortunately, your much more culturally important profession (and I mean that in the most serious sense) has also been corrupted by speculators and manipulators in search of a commoditized “market”.

  4. Speculating (as opposed to investing) in the stock market is a gambling game run by the pros for the pros.  If you don’t see the sucker at the table, he’s sitting in your seat.

    Long-term investing is a different game. And even there, your best bet is to pick a vehicle like a broad index fund which has no incentive to churn your holdings, or to buy and hold specific stocks for the long term. (Wish I’d held onto more of my IBM.)

    My bog-simple set of index funds have delivered a nice 10% APR when averaged over the past two decades, at acceptably low risk. A more reasonable long-term goal would be 8%. That requires having the horizon and patience to wait out (and ideally take advantage and buy during) downturns.

    I will bet. I won’t gamble. If I don’t feel I can count on a positive expectation value, I don’t play.

    1. they don’t all do this.  perhaps you should find an investment advisor who doesn’t commit insider trading at your expense. 

      perhaps, *gasp* this type of insider trading should be illegal and enforced…

  5. I know what to do.  Buy out two of these companies with fake money, then sell them to each other back and forth and back and forth, for ever higher amounts until they are selling for quintillions of dollars.  Then sell them both and buy everything else with the profit and retire on Mars.

  6. Are “Executive Director” titles really a dime a dozen at GS? Came across a comment today by someone claiming to be a former Vice President at GS and saying as much.

    Does this make any difference to the legitimacy of Greg Smith’s piece? Probably not.

    It does say something about fact-checking in journalism though…

    Nonetheless, we all want to see the big cheese get what they deserve.

    1. This is common in brokerages.  I worked for a branch of a big national firm in a town of 50,000, and two of the seven brokers were vice presidents.

    2. In the memo Goldman sent to employees today they mention there are 12,000 vice presidents at the firm and that Smith was one.   At most banks the hierarchy goes something like analyst, associate, VP, senior VP, managing director.  At Goldman I know they also have partners above MDs.  I assume the 12,000 number in the memo must include VPs and SVPs if they have 30,000 total employees, but I’m not sure.

      It’s also unclear to me whether Executive Director is a subset of VP or Goldman-speak for SVP or something else.

  7. When I worked at a bank, one of the top people at the headquarters told me they were basically a giant money laundering operation.  I thought that description was too kind really.

  8.  I think the point about him taking twelve years, is that he finally reached a breaking point.  Giving him the benefit of the doubt, it’s refreshing to find the occasional story where somebody has finally found their soul again.

  9. “I don’t know of any illegal behavior…”


    How stupid must he (still) think we muppets are?

  10. This morning when I was listening to this on NPR on my way to work Smith was being compared to other people who’d quit their jobs in outrageous ways, achieving, in some cases a kind of “folk hero” status.

    Somehow he doesn’t seem to me to be quite so comparable to, say, the flight attendant who grabbed a beer and slid down a plane’s emergency exit ramp. Both seem to be giving their boss the finger on the way out and burning a lot of bridges, but I’m pretty sure Smith made enough money over his career that he can take some time off and enough connections that he can (and probably will) parlay his op-ed into a big book deal.

    Given that his whole claim that he’s got a problem with a “decline in moral fiber” at the firm he’s leaving rings pretty hollow to me.

  11. Anyone who feels otherwise has available to him or her a mechanism for anonymously expressing their concerns.  We are not aware that the writer of the opinion piece expressed misgivings through this avenue, however, if an individual expresses issues, we examine them carefully and we will be doing so in this case. (WSJ’s copy of GS-response)

    Well, that certainly sounds anonymous.

  12. The world needs more whistleblowers to jump out of these unassailable towers of corporate crime, not just in the financial arena but in GM Foods, Nuclear Power, Arms Manufacture, Natural Resource Extraction. Stratfor was important to disclose just how far these private institutions go to protect their bottom line. Ideally, the weakest link in these instances is the bravest soul in search of redemption and spiritual awakening. Of course there will always be doubts about motivations and degree of disclosure, timing but in the end Smith can say he abandoned the Big Lie while the others towed the line. Corporate personhood should be illegal but it is not. People working for inhuman corporations need to start acting up. Smith did the right thing.  

  13. “decline in the firm’s moral fiber”

    Suggests that there is room to go lower. I am not sure that is the case anymore.

  14. i get it, everyone hates the big banks and their very highly compensated employees.

    but still, HOW IS THIS NEWS?  he’s one of 12,000 people.  I would assume someone in his position hates their job and quits pretty much every day.

    1. > i get it, everyone hates the big banks and their very highly compensated employees.

      You’re trying to re-frame borderline illegal behavior as success, and re-frame having a problem with that as hating success.  So no, I don’t think you get it.

  15. >> borderline illegal behavior

    lol.  is it illegal to call your clients “muppets”?  is it illegal to focus on how you can make the most money off your clients?

    it isn’t hating success, it is hating big banks and their highly compensated employees who capture far more value than they create.  and i think this is a reasonable view to have.  HOWEVER, feeling this way should not make any negative-but-stupid news report on the topic important.

    the only way i can understand why this is news is this:

    the public likes this story because it is one that is easy to understand about an opaque industry and opaque firm.

    the new york times likes this story because it requires zero effort to research and report lots of follow up stories.  “News flash: some university students now want to work for facebook more than goldman.”

    the us government likes this story because it distracts from the afghanistan massacre that happened two days prior.

    goldman likes this story because their clients already know they are trading against them, and it distracts from other unsavory things they might be doing that carry more serious consequences.  (like lawsuits or actual loss of clients.)   In addition, seeing the public get up in arms about something stupid like this shows people “in the know” how capricious public opinion can be.

    So this story makes everybody happy.

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