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Ex-Goldman Exec Comes Clean On How A "Toxic And Destructive" Goldman "Rips Its Clients Off"

Tyler Durden's picture




 

Stop us when this confession from Greg Smith, a now former executive director and head of the Goldman's United States equity derivatives business in Europe, the Middle East and Africa, sounds exactly like everything we have said about the firm over the past 3+ years (and why we just can't wait for the next trading "recommendation" from Tom Stolper).

Excerpts from the NYT. Highlights ours.

Why I Am Leaving Goldman Sachs

Today is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.

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 knew it was time to leave when I realized I could no longer look students in the eye and tell them what a great place this was to work.

When the history books are written about Goldman Sachs, they may reflect that the current chief executive officer, Lloyd C. Blankfein, and the president, Gary D. Cohn, lost hold of the firm’s culture on their watch. I truly believe that this decline in the firm’s moral fiber represents the single most serious threat to its long-run survival.

...

How did we get here? The firm changed the way it thought about leadership. Leadership used to be about ideas, setting an example and doing the right thing. 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.

Today, many of these leaders display a Goldman Sachs culture quotient of exactly zero percent. 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. 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.

 

....

And so on - the picture is more or less clear to anyone who has read our endless rants against the tentacular financial monopolist of scale. Also, maybe it is time for all those media "critics" to offer an apology to Matt Taibbi?

While this comes nowehere close to redeeming the massive ills the firms and its peers have inflicted upon society, this kind of self-reflection is critical, not only at Goldman, but everywhere else, if the world has some chance of stopping before it slides right over the edge.

We leave readers with some appropriate sketches on this now closed matter courtesy of the inhouse artistic genius, William Banzai.

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Wed, 03/14/2012 - 07:59 | 2253389 JPM Hater001
JPM Hater001's picture

It's as likely if not more likey he learned the old adage- A fish rots from the head down...and the closer he got to the head the more he smelt the decay.

Any they are crooks.  That too.

Wed, 03/14/2012 - 08:30 | 2253473 TheFourthStooge-ing
TheFourthStooge-ing's picture

I see what you did there.

+1

 

Wed, 03/14/2012 - 08:32 | 2253474 Cursive
Cursive's picture

@JPM Hater001

Yes, it appears he finally woke up. This is why youth should be discounted because of it's inherent gullability or lack of adequate skepticism. As Matt Tiabbi found, GS has been doing this for decades.

Wed, 03/14/2012 - 09:39 | 2253699 Benjamin Glutton
Benjamin Glutton's picture

I disagree...while surely Goldman has been playing their clients throughout its existence to varying degrees this gentleman indicates that Goldman is now totally lacking in value as an investment adviser unless you are an Enron type company or Greek like banker/politician.

Public policy has morphed reasonable regulation to such extremes that what were once sensible limitations on the profitability/lawfulness of dubious transactions that they have created investment houses which are little more than giant spider webs.

Goldman is not unique in this regard.

Wed, 03/14/2012 - 12:15 | 2254217 DaveyJones
DaveyJones's picture

The same is true for "our" government. Given the two entities are utterly intertwined and interdependent as we slide into financial hell, it makes sense that the stress and corruption accellerates. See history

Wed, 03/14/2012 - 08:43 | 2253508 battle axe
battle axe's picture

DavidC wake up and take off the blind fold. GS has been pulling this shit for more then a 20yr+. All those CDO's that were put together in 06-08 where was Mr. Smith's disgust back then? He got paid and kept his mouth shut. Also he was shocked that the firm would recommend paper that would take care of their "AXES", come on, that has been going on since I started at BS 25+ yrs ago. This guy is simply someone who got blown out of the saddle at GS (probably got screwed on his bonus) and now he is telling everyone he found "god" and is shocked that this was happening. What  a load of bullshit this guy is trying to sell. Again, this Mr. Smith is either an Idiot or a liar. And yes I did read the story.

Wed, 03/14/2012 - 10:51 | 2254141 Greater Fool
Greater Fool's picture

Yeah, I'm inclined to agree. The "axe list" thing is no shock: This is the way you do business, especially in fixed income. Hell, it's the way you do business in a Japanese restaurant with "half-price sushi" on Mondays.

If you don't understand that "trading recommendations" from a global bank are really "exposures we'd like you to buy from us because we don't want them," then you have no business running money--your own or anyone else's.

Wed, 03/14/2012 - 08:54 | 2253531 resurger
resurger's picture

fuck this is scary shit.. something is burning somewhere...

you smell that ...

Wed, 03/14/2012 - 11:10 | 2254253 DaveyJones
DaveyJones's picture

is that the fat mans' cigar, our children being sacrificed or the basement of this highrise?

Wed, 03/14/2012 - 07:49 | 2253371 Chief KnocAHoma
Chief KnocAHoma's picture

This just in..... Former gs employee jumps in front of a moving train after shooting himself in the head four times.

In sports Obama filled out his brackets!

Wed, 03/14/2012 - 08:00 | 2253394 JPM Hater001
JPM Hater001's picture

Well there is no use taking chances on a suicide.  Best be sure you are good and dead before you stop trying.

Wed, 03/14/2012 - 08:39 | 2253494 LongSoupLine
LongSoupLine's picture

 

 

Hard to really say what Greg's backdoor intentions are with this "confession", or what events (other than his coming to Jesus moment) really lead him to go public, but one thing's for sure...it's the truth.  With that, we'll take it..thanks Greg, and good luck working for Jamie Dimon where things are soooo much better. (ok, maybe he's not going to JPM...just playing the odds with my statement).

Wed, 03/14/2012 - 09:00 | 2253550 sessinpo
sessinpo's picture

markmotive

Testify.

 

I recommend witness protection program. On the other hand, golman probably has people in that department. I think Greg just committed suicide. I surely hope we don't find him sleeping with the fish.

Wed, 03/14/2012 - 14:45 | 2255255 MeelionDollerBogus
MeelionDollerBogus's picture

Suicide? Whatever happened to "natural causes" ? http://youtu.be/v1_yL9dZ8uk

I hear Matt Simmons is also a big fan of hot tubs & surprise heart attacks.

Wed, 03/14/2012 - 09:39 | 2253698 Translational Lift
Translational Lift's picture

Greg OBVIOUSLY was not doing GOD's work....................

Wed, 03/14/2012 - 07:38 | 2253341 jcaz
jcaz's picture

Didn't make partner, eh Greg?

Wed, 03/14/2012 - 07:52 | 2253375 kridkrid
kridkrid's picture

Clearly. Doesn't make what he said wrong... except for the part where anything has changed in the past ten years. That part was bullshit. He may not have noticed, though he likely did.

Wed, 03/14/2012 - 08:35 | 2253488 azzhatter
azzhatter's picture

I'm sure it was much better under Paulson,Thain, and Corzine.

Wed, 03/14/2012 - 08:02 | 2253383 francis_sawyer
francis_sawyer's picture

.

Wed, 03/14/2012 - 07:38 | 2253342 Stackers
Stackers's picture

Hate to break it to Mr. Smith but we went sliding over the edge years ago, and just have not bothered to look down yet.

Wed, 03/14/2012 - 07:39 | 2253343 icanhasbailout
icanhasbailout's picture

I refuse to believe anyone could be at GS for 12 years and be this naive.

 

Wed, 03/14/2012 - 07:46 | 2253364 Zero_Sum
Zero_Sum's picture

I agree. Rather, I think this is a case of "I hit my number, now I'm ducking out before the walls collapse and throwing a grenade over my shoulder on the way out the door".

Wed, 03/14/2012 - 08:35 | 2253425 GetZeeGold
GetZeeGold's picture

 

 

Sounds like a nasty divorce gone really bad.

 

It's either pay the bitch off....or risk her going public. Apparently someone dropped the ball.

 

Wed, 03/14/2012 - 09:03 | 2253566 sessinpo
sessinpo's picture

You'd be surprised how much even the most ethical person will turn a blind eye when the paycheck is good enough. It is common psychology for those entering a certain culture to want to fit in. They may not commit devious acts, but they ignore what others do and find ways to justify it.

Wed, 03/14/2012 - 07:43 | 2253345 asteroids
asteroids's picture

Bravo Mr. Smith. Now, who's next? Don't be shy, confession is good for the soul. Anybody from BLS want to stand up?

Wed, 03/14/2012 - 08:01 | 2253398 JPM Hater001
JPM Hater001's picture

I have wantenly destroyed the fabric of understanding for our country and debased all that is good.  I also beat a little puppy to death last week with a tire iron...

Wed, 03/14/2012 - 08:21 | 2253449 williambanzai7
williambanzai7's picture

BRING HIM IN

Wed, 03/14/2012 - 08:24 | 2253459 GetZeeGold
GetZeeGold's picture

 

 

Yes officer......I'm sure that was the guy.

 

Wed, 03/14/2012 - 08:26 | 2253463 williambanzai7
williambanzai7's picture


This Klepto is still on the lam
All others would be in a jam
With justice now bought
He'll never be caught
He may have perfected "The Scam"!!!

The Limerick King

Wed, 03/14/2012 - 08:28 | 2253469 GetZeeGold
GetZeeGold's picture

 

 

He may have perfected "The Scam"!!!

 

.....and it may be hard to catch him......now that he's moved to Siam.

 

Wed, 03/14/2012 - 11:01 | 2254199 Boxed Merlot
Boxed Merlot's picture

Perhaps mixing in a little more Teneo in verse will keep the hounds on the trail as well. 

Their choice of Louis Freeh to "investigate" begs scrutiny.

Wed, 03/14/2012 - 12:17 | 2254588 DaveyJones
DaveyJones's picture

cause he never fogets his condom

Wed, 03/14/2012 - 08:37 | 2253492 azzhatter
azzhatter's picture

Ah Yes, Comrade Corzine looks good in Teal

Wed, 03/14/2012 - 09:41 | 2253708 Vlad Tepid
Vlad Tepid's picture

He'd look better in a bright orange jumpsuit..

Wed, 03/14/2012 - 09:31 | 2253669 resurger
resurger's picture

hahahah

Wed, 03/14/2012 - 10:39 | 2254048 ptoemmes
ptoemmes's picture

Yes, a Kony 2012 takeoff for him and the rest of the band of financial marauders.

Maybe Brad Pitt (aka Tyler) could explain the evil of Corzine to one of his adoptees.

Joseph Kony is truly evil, but he does not have a monopoly on evil.

Pete

Wed, 03/14/2012 - 10:57 | 2254176 Boxed Merlot
Boxed Merlot's picture

 “The father we know ran for public office because of a lifelong desire to give back to society as well as a love of the political process and a passion to be a progressive Democrat.”
JOSH CORZINE
JEFFREY CORZINE
JENNIFER CORZINE
Brooklyn, New York

Wed, 03/14/2012 - 15:47 | 2255508 Island_Dweller
Island_Dweller's picture

Asteroids asks: Anybody from BLS want to stand up?

 

Why would anyone want to come clean if the majority of people on this planet take the attitude of the posters here?  Instead of assuming that Mr. Smith was a young and naive kid who got higher and higher at Goldman and then was exposed to more and more crap until he couldn't deny it any longer and did a pretty noble thing by writing this.  Cognitive Disonance can be powerful (just ask the Nazis). Instead of applauding him, most of the people on this board call him a POS and say he's a liar who didn't get partner or the bonus he wanted.  Shame on you all!

 

You all say you want whistleblowers and then you shit on them.  Good luck with that strategy.......

Wed, 03/14/2012 - 07:41 | 2253346 Ancona
Ancona's picture

That made me throw up in my mouth a little bit. :-(

Wed, 03/14/2012 - 07:42 | 2253348 Bagger
Bagger's picture

Is this a good time to invest in horse's heads?

Wed, 03/14/2012 - 08:01 | 2253362 Wakanda
Wakanda's picture

 "...offer you can't refuse".

Wed, 03/14/2012 - 07:42 | 2253349 itchy166
itchy166's picture

We've already slid "right over the edge" I am afraid...

Wed, 03/14/2012 - 07:42 | 2253350 Dollar Bill Hiccup
Dollar Bill Hiccup's picture

Testicles.

Wed, 03/14/2012 - 08:05 | 2253408 JPM Hater001
JPM Hater001's picture

I applaud the guy too.  I mean, I have left jobs completely disgusted in the culture and you have to express it or it will never be questioned or change.

Oh, and in this case it will also never be investigated because last time I checked there is a fiducuary responsibility before all others and selling things to clients you dont think are good income producers clearely misses the point.

I'm trying to remember why advisors are forced to do 8 hours of ethics?  Fortunately I'm in insurance and we are only required 4.

Wed, 03/14/2012 - 08:15 | 2253433 GeneMarchbanks
GeneMarchbanks's picture

Question: does it take 12 years to figure out the things this man 'exposed'?

Answer: No, from the outside it takes a common sense person and a lucid 20 minutes of research.

 

Wed, 03/14/2012 - 09:13 | 2253606 kridkrid
kridkrid's picture

Which does raise an interesting point.  How pervasive is mind control?  I'm sure there is all sorts of rah-rah GS BS when someone get hired in.  People convince themselves of all sorts of things every day.  I'm guessing the hurdle isn't so great to think that Goldman Sacs is... on the inside.

Wed, 03/14/2012 - 10:39 | 2254069 Bastiat
Bastiat's picture

Making a shitload of money (a subset of having power) is the best mind control.  Over time and as one rises near the fish's rotting head (as someone said above) the cognitive dissonance between your interior and shared narrative of what you are doing vs the increasingly obvious facts can't be suppressed.  It really helps if that doesn't happen until you've accumulated enough money to live your life out in a comfortable exile from the industry.

Wed, 03/14/2012 - 11:05 | 2254221 kridkrid
kridkrid's picture

It doesn't even need to be a "sh-tload"... any amount greater than you could otherwise earn will do the trick.  Which is why a police state isn't so hard to create.  What other job is the cop going to take, especially in an economy that is grinding to a halt?  But yes... income is the best mind control (well... and maybe religion).

Wed, 03/14/2012 - 07:43 | 2253351 Mr. Lucky
Mr. Lucky's picture

A tardy mea culpa.

Wed, 03/14/2012 - 07:43 | 2253352 TrillionDollarBoner
TrillionDollarBoner's picture

I love the smell of truth in the morning.

Hats off to Greg Smith.

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