Everyone is all abuzz this morning about the acerbic resignation letter of Greg Smith, head of the firm's United States equity derivatives business in Europe out of their London office.
Did I say letter? It was an OpEd published in the NYT, Why I Am Leaving Goldman Sachs .
“To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. Goldman Sachs is one of the world's largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.
It might sound surprising to a skeptical public, but culture was always a vital part of Goldman Sachs's success. It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients. The culture was the secret sauce that made this place great and allowed us to earn our clients' trust for 143 years. It wasn't just about making money; this alone will not sustain a firm for so long. It had something to do with pride and belief in the organization. I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years. I no longer have the pride, or the belief.”
I disagree with my colleague, Josh Brown, who writes: “The “culture” of Goldman Sachs was, is and always will be about making money, often at the expense of a client” (How to Quit a Job Without Publishing an Op-Ed).
Sure, profits matter, but Wall Street used to be about so much more than that. There was a culture of mentoring, developing, teamwork, a belief that doing the right thing for your clients was in your own best interest.
Firms that used to be Partnerships — as opposed to the publicly traded corporations of today — meant that you had to be more involved in what your partners were doing, as they had the ability to bankrupt the firm AND the individual partners. This was a huge factor in the dynamic – and it made recruitment, training and mentorship all that much more important.
It was more than just Goldie — Think about Mother Merrill, and the generations of traders and investors who learned their craft in her embrace (Gone).
I hope I am not overly romanticizing the Wall Street of old. When you speak to some of the folks who have a long tenure in this business, you hear great stories of the old days. People I have been fortunate enough to meet and know in this business have painted quite a clear picture of what it once was like, and you cannot blame it all on the rosy glow of nostalgia. I have sat at the knee of people like Art Cashin and Doug Kass and Justin Mamis and Felix Zulauf and David Kotok and Walter Deemer and David Rosenberg and Barry Hyman. I have heard the stories — some bad, most of them good, quite a few of them hilarious.
Much of that is lost to the change to public companies — making quarterly numbers is a cruel taskmaster, one that makes such genteel ideas as culture and leadership passé.
Why do you think Bloomberg has never gone public . . . ?
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Source: Why I Am Leaving Goldman Sachs GREG SMITH NYT, March 14, 2012 http://www.nytimes.com/2012/03/14/opinion/why-i-am-leaving-goldman-sachs.html
See also: Why I am leaving the Empire, by Darth Vader (Daily Mash)
A Response from Goldman Sachs From Chairman Lloyd Blankfein (The Borowitz Report)
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
Don’t burn you bridges…Guess he doesn’t need any references LOL
Many corporations exist for their management, not their shareholders. Our government has come to the same place. The politicians are more interested in their enrichment than the people they represent.
“…Firms that used to be Partnerships "” as opposed to the publicly traded corporations of today "” meant that you had to be more involved in what your partners were doing, as they had the ability to bankrupt the firm AND the individual partners. This was a huge factor in the dynamic "“ and it made recruitment, training and mentorship all that much more important…”
the Partners knew they had to keep ‘the Psychopaths’ at bay (and, usually, away..)
NowadaZe? We, really, don’t have to Wonder, do We?
Sounds like the mission creep that’s killing the postal service.
Now on Broadway: Ritholtz in Romancing the Street!
Surely the partnership structure nurtured a certain culture. Going public changed that but what he have seen over the last few years is the moral hazard feed back loop.
I assume that he saved his exorbitant pay instead of blowing it on coke and gold leaves in cocktails, so that he won’t need to rely on his Goldman contacts in the future. I don’t believe he will be doing power lunches with Lloyd anytime soon. I believe this is the ultimate definition of “F-U” money.
My wife and I actually had a little conversation about salespeople related to this last night without knowing this op-ed existed. She commented on how some she had dealt with recently were really focused on her needs and would follow-up rather than just try to sell what their company was pushing. My comment was that very good salespeople don’t get that way by making every sale to a new person. They have to keep old clients coming back for more, which means they have to look after them. Screwing them for a single sale helps that month’s income but hurts their overall career. It looks to me like GS is forgetting that a customer for life is worth a lot of money than a short-term muppet.
I appreciate the work of Mr. Brown but sometimes he seems to channel a little too much Cody Willard. Josh – don’t start making rock videos of yourself.
When arbitrage companies go public the mantra becomes "It's only money and it ain't mine."
Hmmmmm……this guy has given up on a career in finance, so, considering the timing of this piece (right after bonus time, campaign heating up), wouldn’t it be interesting if he turns up in the Obama fold somehow?
Hey who remembers 1929?!? Barry you are indeed romancing the street.
Senator Couzens. Did Goldman, Sachs and Company organize the Goldman Sachs Trading Corporation? Mr. Sachs. Yes, sir. Senator Couzens. And it sold its stock to the public? Mr. Sachs. A portion of it. The firm invested originally in 10 per cent of the entire issue for the sum of $10,000,000. Senator Couzens. And the other 90 per cent was sold to the public? Mr. Sachs. Yes, sir. Senator Couzens. At what price? Mr. Sachs. At 104. That is the old stock … the stock was split two for one. Senator Couzens. And what is the price of the stock now? Mr. Sachs. Approximately 1 3/4.
Folks, when dealing with any investment bank, and Goldman in particular, caveat emptor is the only rule to follow. And it always has been.
Fiduciary obligations owed to clients do not change when a private partnership elects to go public.
I am not persuaded the problem is going public per se, it seems more likely that moral hazard was primarily introduced by tying executive compensation to quarterly numbers (stock price, profits, etc); most of those numbers are susceptible to juicing via market manipulation or alteration via accounting fraud.
As Bill Black would say, this is an intrinsically “criminogenic” environment: Executives with a penchant for bullshit, criminality or outright sociopathy get ahead, honest executives struggle to succeed …until they leave or join the party.
@ Mark E Hoffer: “the Partners knew they had to keep "?the Psychopaths' at bay (and, usually, away..)”
From Smith’s NYT OpEd: “How did we get here? … 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.”
GS Recruitment Standards – Psychopaths OK. Ax murderers not OK.
RE: “Firms that used to be Partnerships "” as opposed to the publicly traded corporations of today "” meant that you had to be more involved in what your partners were doing, as they had the ability to bankrupt the firm AND the individual partners.”
Yes, I think the migration away from private partnerships, as well as many other dynamics, has played an important role.
Also, it seems as if “fiduciary responsibility” is a term that is very rarely heard anymore…
Since the removal of Glass-Steagall, the big banks have been trudging the inevitable evolution to becoming massive market manipulating daytraders that offer absolutely nothing to anyone but themselves at the expense of everyone else, while paying off politicians & regulators for continued deregulation, using their buying power to brainwash the public via Fox, CNBC and high priced PR firms.
Meanwhile, Goldman’s executives pay an effective tax rate that a single mother or disabled veteran should pay.
Bottom line, it’s illegal to steal, con and cheat, unless you’ve paid the right people in high places beforehand….the rest of us can go F- ourselves if we don’t like it.
It was only recently that Goldman took bids from clients for Maiden Lain bonds and then informed them that Goldman itself had the winning bids. Talk about front running. And this is not three years ago.
873450 Says: Fiduciary obligations owed to clients do not change when a private partnership elects to go public.
*****
That’s the problem, these folks (psychopaths) have deluded themselves into believing they have no fiduciary obligation to anyone but themselves.
At least when they were private they retained the risk of their failure, not passed to the stockholder (many times removed from the accountability loop via mutual funds, 401K, pensions) or worse to the gov’t (socialized losses) maximizing the moral hazard.
Simple question: Why would anyone HAVE TO deal in any way, shape or from with Goldman Sachs, or JPM or…any TBTF bank for that matter?
Like, there are NO alternatives? WTF?
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