Departing Goldman banker slams 'rip-off' culture
Goldman Sachs' office building at 222 South Main Street in Salt Lake City, Utah Jan. 11, 2012. REUTERS/Jim Urquhart
LONDON/NEW YORK - A Goldman Sachs executive director published a withering resignation letter in the New York Times, saying the investment bank is a “toxic and destructive” place where managing directors referred to their own clients as “muppets.”
It was the latest blow for the storied Wall Street company, which has long supplied senators and cabinet secretaries to Washington but now draws comparisons to a “great vampire squid wrapped around the face of humanity.”
In an opinion column in Wednesday’s Times, Greg Smith, who worked in equity derivatives, said Goldman had become “as toxic and destructive as I have ever seen it.
“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,’“ Smith said.
In the United States “muppet” brings to mind lovable puppets like Kermit the Frog, but in Britain, “muppet” is slang for a stupid person.
Goldman Sachs issued a short statement in response:
“We disagree with the views expressed, which we don’t think reflect the way we run our business. In our view, we will only be successful if our clients are successful. This fundamental truth lies at the heart of how we conduct ourselves.“
In a subsequent memo to staff, Goldman Chief Executive Lloyd Blankfein and Chief Operating Officer Gary Cohn said Smith’s views were in the minority among his 12,000 fellow vice presidents around the world.
“And, what do our people think about how we interact with our clients? Across the firm at all levels, 89% of you said that the firm provides exceptional service to them,“ they said in the memo, a copy of which was obtained by Reuters.
Calls to Smith, who was a vice president in derivatives sales at the company, were referred to the bank’s press office.
FRIENDLY AND GENUINE?
According to the British Financial Services Authority’s register, he joined Goldman’s UK unit a year ago.
Johannesburg-born Smith attended universities in his home country and in the United States, where he received a degree from Stanford University.
While at student at Stanford he had a summer internship at Paine Webber in 1999 and a summer internship at Goldman in 2000. Upon graduating from Stanford in 2001, he landed a job at Goldman as a financial stock analyst. He most recently worked a vice president for Goldman Sachs Services Ltd.
Though relatively little is known about Smith otherwise, Business Insider reported that a fellow Stanford graduate who interned under the banker spoke well of him.
“I hold him in very high regard. He took care of us junior guys, gave us great pieces of advice, and in general came across as one of the more personable, friendly, and genuine guys on the floor,“ the website quoted Aveneesh Singh Saluja as saying.
In contrast, questions began to arise about accomplishments that Smith trumpeted in his op-ed piece.
Smith spoke with pride about his success in competitive table tennis, but it is not clear how much success he actually achieved. The website Table Tennis Nation reported that Smith was a regular at a club in New York’s Chinatown neighbourhood, though other players said he lacked serious competitive talent.
On Twitter, some poked fun at Smith’s description of how he won a bronze medal for table tennis at the Maccabiah Games in Israel, which he said was one of the proudest moments.
Internally, Smith’s op-ed piece was not necessarily well received by former colleagues.
A trader, who knew Smith but not well, said the company is telling staff that Smith is a disgruntled employee who is leaving because he didn’t make managing director.
This trader, who did not want to be named, says former Goldman colleagues are saying that Smith “wasn’t very commercial,“ which means he wasn’t producing the kind of sales the company wanted.
PAST MEDIA STORMS
Goldman Sachs — fourth among investment banks last year based on fee-income rankings compiled by Thomson Reuters and Freeman Consulting — was once described as “a great vampire squid“ in Rolling Stone magazine. The reference was to Goldman’s the extensive influence in politics and business.
A lawyer representing an Australian fund in a suit against Goldman over mortgage-backed securities said he may seek Smith’s deposition to help bolster his case.
“Part of Goldman’s defence is everybody is sophisticated and everybody knew as much as we knew did,“ the lawyer, Eric Lewis, said. “But if you’re calling your clients muppets — most muppets don’t have the cranial capacity of Goldman.“
In recent years the firm has faced other high-profile incidents damaging to its image after the near-collapse of the global banking system in 2008.
Earlier this month it was accused of a major conflict of interest for advising El Paso Corp on its sale to Kinder Morgan, while being a significant shareholder in Kinder Morgan.
One of its bankers, Fabrice Tourre — who referred to himself as “fabulous Fab“ in emails — is still embroiled in legal claims in the United States after allegations that he duped buyers of a complex credit instrument.
And two years ago, Chief Executive Lloyd Blankfein caused a media storm when he said that as a banker he was just “doing God’s work,“ defending high banker pay and the role their institutions play in the economy.
As might be expected in the social media era, Smith’s resignation letter captured the imagination of Twitter. “Greg Smith“ was a worldwide trending topic, meaning it had suddenly spiked in interest, while both that and “Goldman Sachs“ were trending in the United States.
Many of the commentators expressed surprise about the allegations in the piece, while others called for Smith to shed light on why he left the bank, or pointed out that he seemed to have been employed in a comparatively junior role.
The letter also garnered mention on Facebook, which features pages like “Goldman Sachs Are Financial Terrorists.“
As happens on the Internet in cases like this, near-instant parodies of Smith’s letter also cropped up. The most popular by far had Darth Vader of “Star Wars“ fame resigning from the Empire via a letter similar to Smith’s.
“To put the problem in the simplest terms, throttling people with your mind continues to be sidelined in the way the firm operates and thinks about making people dead,“ the film franchise’s dark lord wrote.