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A Wall Street Insider's Response To Greg Smith
Submitted by ZH reader Sleestak, who sports a 15 year career in the bulge bracket, including GS and the less fortunate Lehman Brothers, as a fixed income trader.
Greg Smith, the Jerry Maguire of Goldman Sachs, has struck a nerve with his New York Times OpEd admonition of the culture at his former firm, the symbol of all that is successful – and wrong – on Wall Street. What he did was gutsy, if ill-advised. But his disillusionment at a once-admired business culture gone bad is also almost adorably naïve and, worse, diverts from the real cancer that has metastasized in our banking “culture” during his years in it.
I’ll say it again: Greg Smith has nerve. He took great risk putting his name to that letter. He will be getting calls, emails and all else, straight to his person. He might well face litigation, this from a foe few dare challenge. And the men at the at the top, CEO Lloyd Blankfein and COO Gary Cohn, are powerful indeed, and Greg Smith has just publicly done them far more damage as individuals than any testimony in front of Congress did.
Still, what did Greg Smith really think he was getting into when he signed up to work on Wall Street? Perhaps when contemplating his career he saw the ads we all see on television for Morgan or Merrill: “We’ll help you build your future with sound financial knowhow…” And that does sound nice. Finance is complicated and “lay” people surely can use a hand from a thoughtful ally in the trenches. It is charming to think Greg Smith was taken in by such a mission.
But away from the advertising sets, Wall Street always has been a kill-or-be-killed pit of near-violent wills set against each other. Perhaps a bit less so in the retail businesses that sell to Moms and Pops (though “broker production” is a hotly competitive racket, to be sure), but certainly in the institutional businesses where Greg Smith operated. In these businesses, in which the banks trade with professional, accredited investors, the customers are often as bloodthirsty as the banks. Yes, many could use a good salesman’s hand in furthering their interests, but as many – so many – seek the desk that’s sleeping that day and exact a predatory price. Many I’ve traded against gleefully relished it.
And frankly, that is how it should be. Or at least, always has been. One is expected to understand that when before sitting down to trade on Wall Street. You leave money hanging in the air and somebody will come take it. Such is the honor among thieves. This is not something that happened on Blankfein’s and Cohn’s watch. Read Liar’s Poker. Look up Jim Vranos. Gordon Gekko. Wall Street is an arena where people go to find who’s sleeping and relieve them of their money.
The thing is, left to its own, this isn’t so bad. If a bunch of companies want to enter a figurative casino and see which one leaves with the most chips, who’s really hurt? JP Morgan makes a killing, Citibank gets slaughtered, and at the end of the day there’s still a cold one at Killean’s Corner for $2 for Joe Sixpack.
But what Greg Smith’s letter does for pundits and politicians is help them dumb down the case against the banks and what they’ve become. The great buzzword “muppet” - a term his Goldman colleagues use for “customer” - is easy to rally around as evidence of hardwired condescension. (“Muppet” is a rather mild insult compared to ones I’ve heard and used, but it is far from a cultural crime to be arch when taking the other side of a professional’s well-considered trade.) Unfortunately, focusing his suddenly large audience on sound bites and the “meanies” at his firm distracts from the far more destructive shift that has happened on or about Blankfein’s and Cohn’s watch.
It’s hard to pin down where began the banks’ road to their dangerous present position, though you could argue that it was at the downfall of Long Term Capital Management in the late 1990s. No muppet he, former Salomon Brothers trader John Meriwether and a team of touted geniuses succeeded in getting the banks to lend that firm extreme amounts of money against positions thought to be low risk. When discovered otherwise, these banks, particularly Lehman Brothers and Bankers Trust (where I then worked), found themselves muppetized.
Then-Federal Reserve Chairman Alan Greenspan, historically an outspoken prophet of free-market practices, found footing in a contrarian impulse in this case. Here, capitalism’s consequences for poor business decisions would not be rendered. Instead, he engineered a multi-billion deal in which all the solvent players at the table would ante up for the weak, and the team could resume the regular Friday night game.
Since that time, which importantly coincided with the repeal of Glass-Steagal, an historic policy error that enabled banks to gamble with depositors’ federally insured money, we have spiraled from crisis to escalating crisis, each time prescribing still more of the same medicine and ensuring the banks’ prospects (though obviously not their managerial expertise). The Internet Bubble pops? The Fed slams short end interest rates into the dirt to cheapen banks’ financing. Massive fraud at Enron, Worldcom, Tyco and others? Same meds.
Then came the mother of all crises (so far), culminating with the failures of Bear Stearns, Fannie Mae, Freddie Mac, Merrill Lynch, Lehman Brothers and AIG. And still, Fed and Government policy was unchanged. Except for Lehman, the banks were held unaccountable, pumped full of cash and urged to get on with business as it was.
What did the banks do to deserve this incredible largesse? Their rise to this position of official favoritedom is a feat of influence peddling that will be the subject of a history far more compelling than the one examining Goldman’s cultural waywardness under Blankfein and Cohn. The methods are myriad: campaign contributions, lobbying, populating public office with former employees whose loyalties, are at the very least, questionable. When this isn’t enough, the entire too-big-to-fail meme comes in handy, a form of extortion held over policy makers that promises extinguishment of life as we know it lest they get their way.
They have held themselves above capitalism’s consequences in a society which once prided itself on the concept of creative destruction. Remember when Japan refused to liquidate its bad debts after its real estate debacle in the 1980s? We mocked them and touted our own efficiency in punishing bad investments, liquidating debt and inventory, finding the clearing prices and pressing forward with new opportunity. To boot, we tried thousands of bankers for fraud.
Well, as time and consequences progressed, we have come to take a large page out of Japan’s book. In the years since 2008, the US Government – like Japan’s since the 1880s -- has allowed the banks accounting flexibility to mask bad loans. The Fed has lent them money at rates they could not attract in the free market. It has bought their bad assets onto its own (our central bank's!) balance sheet. It has bought hundreds of billions in government bonds to make interest rates appear low enough to encourage people into the stock market and revive the banks’ prospects.
To do this the Fed has printed trillions of the same money you store your savings in so it is worth less every day in terms of the things you need to survive. That bank account you have is paying, what, one-tenth of one percent? That’s the Fed’s super, bank-regenerating interest rate policy at work. Think of that deposit as a loan to your bank (which it is) that they get at “great low rate!” with which they can, what, reinvest in our economy? More likely your money will be speculating on Greek debt or oil futures. Meantime, you’re embarrassed to give something so small as your annual interest to the paper boy for a tip.
Not one banking official of note has been tried for fraud.
This cannot be the right course for us to take in the wake of such a widely recognized crisis. The lack of purposeful outrage is deafening. We cannot restore lasting stability to our economy and society unless we are willing to face up to what we did wrong, right it, and throw out the bums who put us there. Without that, the pattern of ever escalating crisis and interventionist, market-distorting solutions will surely lead to a bigger crisis still ahead.
Perhaps the most important symbol of our failure to address reform are the pictures accompanying much of the coverage of Greg Smith’s letter, those of a power-posing Blankfein and Cohn, who without the Government’s accommodation might be striking a very different pose, indeed. You want to sign on to Mr. Smith’s army in joint distaste for Goldman’s lost culture? Please, be my guest. But more deserving of your enmity is the insidious co-option of the core premise of capitalism by a handful of people to ensure the banks’ undeserved survival, and their managers’ really nice lifestyle.
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Two choices, stay and do what needs to be done or MOVE somewhere else where perception of safety is still just that!
Great unwind, reset, etc you name it will happen but is still years away, there still is much to be looted and TOO MANY GUNS around, they have still to ban the right to bear arms before they try anything else! And that amigos will be THE FINAL ACT....and it ain't coming yet!!!
Greg Smith...? Hhmm, Greg Smith... Oh! I remember him, that's the guy from the mail room right?
MSM is trying to down play him like he is just a PO'ed employee with an Axe to grind, his letter was actually very enlightening for a guy who used to run for lunch every day.
One possibility that I haven't heard yet. This Greg Smith thing was just a trade.
GS shorted their own stock, sent out the Greg Smith "op ed" and then cleaned up handsomely.
Max Kieser is my favorite "insider" that has integrity, and speaks forcefully and offensively about the machinations of Wall Street and, worse still, the City of London. Speaking as a market novice, I have to give him props for articulating the perpetual financial crime wave that is transpiring, complete with regulatory and political capture.
My only complaint regarding him is that he shills for GW propaganda.
No one has been tried because no crimes were committed. The society and culture are corrupt, rotting to the core. The legal frame work has been adjusted such that even outright assassination of U.S. citizens is perfectly legal. The banks are fully within their legal rights to do all of the things they have done.
So quit whining and get with the program. In a corrupt society the honest man is an idiot.
Not a new concept: https://en.wikipedia.org/wiki/The_Idiot
Eat shit mfer..........
Plan on swing from a lamp post soon?
Plan on taking a remedial reading course soon?
And...
You made a sophisticated point which clearly goes over the head of the debt slave, the angry young man, the Don Quixote, tilting at windmills and feeling brave in his words, whilst failing to confront the real enemy.
The pressure in the caldera of the largest volcano in this country is building...with every injustice that goes unpunished and every wrong that is rationalized by our government, people from all walks of life who believe in the American dream of equality and opportunity become more angry. As the quaity of life recedes for the masses so that the few may benefit, as our leaders favor those with money over the guiding principles of our constitution, the anger will build. It will erupt, make no mistake... the only question is when. When it does, it will be ugly, with lots of vigilante justice doled out...but in the end, the cleansing will be good for America. Laws and regulations can't make people moral or ethical, but harsh enforcement of justice can encourage a change in that direction.
Enemies may come into our country and times will have changed, but then the boys will come down from the old high hills and belt on their guns again.
~Louis L'Amour
nothing, but the truth.
And so it will be if necessary, but it won't be the ungrateful spoilt brats who stupidly threaten the writer of this article with death to him and his children. It will be the true patriots who know the Constitution, and Declaration of Independence.
if there is imposition, as in austerity imposition,
how is the public to pay off the debts they incurred
BAILING OUT THE FUCKING BANKS AND BONDHOLDERS who wish
to impose said austerity so they can be made whole on
their HEADS UP THEIR ASSES speculations. the money can come
from only one place and that is loans from the ponzi money
banks. and they think human beings will adhere to this
impossible and incoherent system? no they don't so they
introduce more incoherent legislation to steal everything
at will to save the world from the terror fairy.
and these are grown people, educated people with
degrees and shit. i fear for my race.
end the fed.
BRAVO - this article articulates the truth so well... no one cares about Muppets or even the easy-to-hate Blankfien. There are much darker forces at work here, and much higher up the chain of command. As they say, a fish sinks from the head
Just wonder what would happen if a few big time fat cats started disappearing? Never know how many nut cases there are out there.
I’m not dedicated to Greg Smith, his future success, or making him a martyr. After all, the guy worked for Goldman, right?. But there is a lot that his case can demonstrate that’s important. For one thing, if Goldman and the financial community can so easily marginalize, dismiss, punish, and not give a shit about what happens to him, then what kind of shit do you think they really give about you?
You start wearing the blue and brown,
and you're working for the clampdown.
Clashfan,
Nice slogan. Care to give jobs and respect to the ordinary person who wears the blue and brown, and has no fancy college to attend, nor Mommy and Daddy to put food on the table? The 'clampdown' is made by the precious pets who sit securely in their complacency, and let others do the dirty work. There are more of you than the 'blue and brown', yet you blame others for your servility.
I have no idea what you're talking about, but I wish you blessings. :)
Clashfan,
You know exactly what I'm talking about, but demure for vanity's sake. You are too 'clever' for your own good or anyone else's, pet :)
A genuine lover takes off his clothes,
and he can make that lover in a thousand goes.
Backyard Baby,
Should you stay or should you go? ;-) Ta ra, pet. Have fun.
Don't worry no one else does either.
It's some lonely, jingo old geezer who's been sucking up oxygen and bandwidth, posting here non-stop for the past 4 hours at least; posting some 20+ times just on this page.
I don't think it knows wtf its talking about, all over the place, full of contradictions; syphilis or alzheimer's riddled brain..
Thanks, upshot. :)
I almost made my screen name Upgrayedd. Of course, I almost made it Mitch Cumstein, too.
I'm in Illinois where I'm getting Romney robocalls left and right and nothing from Santorum, Gingrich or Paul who seem to have written off this part of the state before the primary. Romney will get a win out of this David vs. Goliath battle, at least that is how Santorum is trying to spin it now.
Romney doesn't give a flying f*k about Illinois except how it can damage his chances for the nomination. He knows he will not beat Obama here in the general, but he has a lot more to lose here than to gain in the short term. Let's assume he gets nominated after all of this is over.
Between Obama and Romney, does anyone really see much difference at all between these two as it relates to Wall Street? Bain Capital against Obama, sorry Wall Street is winning again and will continue to win, no matter who gets elected. Any threat to this dominance is marginalized, as we see in abundance with Ron Paul's withering support.
The financial interests rule in the United States, and that starts with the Rothschilds, who own controlling interest in the secretive Federal Reserve. All of this political stuff is byplay meant to distract the American people from the real issue, the utter domination and decadence of the financial power brokers, who will stop at nothing including war to maintain their domination. Elections are meant only to distract, not offer true or meaningful change. JFK was the last president to threaten to upset the financial status quo with his issuance of United States Notes outside of the Fed. We see where that led him, didn't we. No president since, I don't care how fired up people were, has changed the basic equation that the Rothschild cartel rule the United States, and will continue to rule the United States in actuality. You are supposed to believe the US government rules, but in times of major decision and change, finance will trump. Look at the threats of martial law when the Great Recession first broke out, if Paulson did not get his way with TARP. This is the type of force we are dealing with here, the whistleblowers don't really offer much of anything new except a different perspective on the same overall situation.
bk...
Give them enough rope, and they will hang themselves. That's why they use Obama to issue the NDAA, and this latest Executive Order issued this weekend that allows the Government to commandeer all resources if it chooses under the guise of 'national security'.
Be patient. Stay close to your neighbours. There is no government that can impose these latest orders without the willing help of ordinary people in our states. I do look forward to the banksters trying that in New England, and trying to hide out here when their plots explode.
'Keep your friends close, and your enemies closer,' said Machiavelli, a master of cynical politics and control.
Give Them enough Rope--great lp, too
BK, the Fed is also intricately married to and dependent on the war machine, and JFK went after that, too. He also went after oil depletion tax breaks.
Wonder what could cause a man to rebel like that once in office? Could have been a number of things--the sickness of his father who may have been one of his handlers? The drugs he did with one woman in particular who wound up dead in a DC park?
One thing's for sure: He was more of a rebel against the MIC and Fed than we're likely to see again.
I have to agree with the bulk of your post. I'm just not sure that I'd call the controlling entity "finance" exactly.
well, sometimes we get confused.
on mouse action.
Kermit and the Beanstalk
Written by: Stan Kay
Art by: Marie Severin
Initially, Skeeter attempts to climb the beanstalk, but is called down because she doesn't meet Jack's profile of being clever and quick. Miss Piggy volunteers Kermit, who climbs up to the clouds. The giant is Gonzo, and he is married to Mrs. Giant (Miss Piggy). To quote Kermit "I kinda feel sorry for the giant." The giant thinks Jack has returned, and pulls up the beanstalk so he can't get back down. Mrs. Giant hides Kermit in the dungeon, where he is later discovered, leading to a confrontation. Kermit proves he's not Jack, he's a frog, and says he'd never steal anything. The Giant is flattered to learn he's in a book, but gets angry discovering he's the villain, and ends up breaking a hole in the floor beneath him. He discovers a stockpile of golden eggs in the cellar, and lets Kermit go.
Scooter is a tax collector, and Animal is their servant, Weirdo.
What's worse than being a muppet baby?
The prisoner meets the muppet hi-fi
north of watford junction.
We get in, but we don't have fun,
and we leave before the truncheons,
so it's back to watch the day to day
saga of working people
hanging out the washing and clipping coupons
and generally being decent.
"You want to sign on to Mr. Smith’s army in joint distaste for Goldman’s lost culture?" bravo, well said..
You lie, steal, cheat, and deceive.
It's such a small, small game.
Don't you know it is wrong?
Well, that hits the nail on the head now does it not.
Complements to sleestak for a well written, succinct, and accomplished piece of writing.
Funny I thought the problem came from going public and losing the partnership. Then the Traders took the top positions as they started to generate shareholder returns and displacing the Investment Bankers. Wall Street like The City turned into a traders' bear pit with Salomon values everywhere. Fine so long as they are limited in liability by Shareholder Capital - but just how did Limited Liability Corporations come to have exposures exceeding Shareholder Capital; and why was Shareholder Capital full of strange instruments that did not actually belong to the Company ?
After all didn't Enron turn into a Trading Desk under Jeff Skilling running SIVs to hide the exposures ?
banker's alibi, inflation will eat us all/
http://www.cnhedge.com/
http://www.jinrongbaike.com/
The republican party wants the concentration of wealth and power, and for that to occur, it must happen at the expense of the middle and lower classes.
They want to help the petroleum industrial complex - but they couldn't care less of what it means to ordinary Americans.
The Republican party drove the nation's economy into a ditch in the eight years of George Bush's presidency - now they blame Obooma the mooslim forenah for not ending the Recession they started, while at the same time doing everything they possibly can to keep the nation's economy from getting any better while he is President.
The Republican party is unpatriotic and despises anyone or anything that gets in their way of concentrating power and wealth.
And dont even get me started on the dems, buncha corporate sellouts preaching social harmony and playing race cards.
The two party political system is a dog and pony show that serves to keep the lower classes distracted with the illusion that they are voting for something, and that the great nation founded by the founding fathers is still vibrant.
It is all a media manipulation. The real U.S. is more like a terminal cancer patient that has been infested by a horde of malignant parasites. People who think corrupt politicians are the problem are simply not focusing their sights on the real source of the problem at the top of the Parasite pyramid.
Sleestak wrote:
My money's on the 1910-1913 time period.
Sleestak also wrote:
I'm of the opinion that all four of the main 'isms(communism, capitalism, fascism, and socialism) sprang from the same roots...
Don't ask me to nail that down though.
In the U.S. it formally began around 1913.
In Europe, it had been initiated at a much earlier date.
1795 was another banner year ... it was the year that Mayer Amschel Rothschild began skyrocketing in wealth and just 3 years later was able to send his 21-year-old son Nathan to London with a small fortune to begin a takeover of the British banking system.
.
What should be glaringly obvious from Mr Fleastacks puff-piece on those near-violent wills set against each other (Oohhh! How scarey does that sound?),is that these self-proclaimed Big Swinging D!cks are, in fact, a bunch of malicious, robbing, venal pussies - who couldnt survive without fraud, malfeasance, embezzlement, lying and - WHEN EVEN ALL OF THAT SKULLDUGGERY FAILS - a TAXPAYER, BAILOUT to keep their criminal scams in operation!
Wall St has as much to do with the productive economy as a particulary nasty dose of the clap has to do with romance - if it happens at all it's fleeting and there's a heavy price to pay down the road.
The economy was productive for years IN SPITE of Wall St - now its been sucked dry by those maggot leeches - and you'll be paying the tab 'til eternity
But don't despair - I'm sure Mr Sleazstack would be more than happy to treat you to some Wall St largesse in the form a $2 cold one at Killean’s Corner.... should he somehow mistakenly be in the vicinity.
Banking is the most bloated puffball of puss on humanity
As you say rightly the entire shitshow is worthless and totally unproductive
at the core of our economic malaise is putting the parasites in Govt at the top of society.. every other parasite (bankers, crony corporates etc) hangs off Govts largesse
And this entire Parasite Club then mis-directs and mal-invests our productive wealth (and destroys it)
Hence the Great Depression we're in
Stop Paying Your Taxes ...don't feed the suckers
Isn't this how Joseph Schumpeter described the fall of Capitalism?
I believe Premier Kruschev's famous speech should more accurately have been interpreted as "You (U.S. capitalism) will rot from the inside"
With hindsight, looks like Nikita knew what he was talking about.
Smith is a rat leaving a sinking ship but respect for leaving with a little bit of moral flag waving
It's a crying/expensive shame Sucks didn't sink in '08 when it should have but ex Goldmanite, Wank Paulson, oiled into position at the US Treasury saved this/his rotten ship by robbing taxpayers
It should have been all over in '08, it would have been massively better if it was from every angle
Instead we have to suffer yet more years of rot and stink from these criminal financial gangsters and grow even more angry at Paulsons corrupt ignorant decisions
Paulson should be banged-up in jail with Blankfein as cell-mate trying to fleece, con and rob each other of hypothacated prison food and trading sugar coated AAA rated inmate turds ..there's still plenty of time
Greg Smith, the Jerry Maguire of Goldman Sachs
He matches the idealism, but not the liver, of who Maguire's character was based upon.
In the latest HBO Real Sports, NFL uber-agent Leigh Steinberg basically pissed a multimillion dollar fortune away through a vodka bottle.
Wall Street tries to divert attention.
apparently links/references to max keiser and william k. black
get scrubbed from this author's posts. the most cynical
assumption would be so that he can continue to claim
there is no purposeful outrage without being directly
contradicted by the facts of history and contemporary
commentary. if the lead in to the link was offensive it
is/was only due to another lack of comprehension.
(note to self ....)
you won't have purposeful outrage if you
SCRUB IT FROM THE COMMENTARY ! SEE?
otherwise, a very insightful statement from our author,
mr. sleestak. imho. perhaps i'm delusional? let's try again.
Friday March 16 9:00am
Guns and Butter
http://archive.wbai.org/
w.k.black explaining/exposing the systemic control fraud
which is the financial and monetary system as it intersects
with the psychopaths and their sycophants.
"..If you are a member of a fraternity of self-confessed cheaters and liars, your public statements may not be credible and compelling as you think. Unless you are talking to muppets of course. 'Trust me, this time I am NOT lying. But if it goes wrong, I was and you should have known better.'" jca
http://jessescrossroadscafe.blogspot.com/
18 March 2012
Damning the Demimonde: Thomas Frank Versus the Oligarchs' Enablers
Good stuff.
Glass-Steagall