Goldman Sachs executive Greg Smith has denounced the firm as "morally bankrupt," in a blistering letter of resignation published as an op-ed in today's New York Times.
Under the headline "Why I Am Leaving Goldman Sachs," Smith – until today, an executive director and head of the firm's US equity derivatives business in Europe, the Middle East and Africa – accuses the bank of putting profits above its clients.
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"I can honestly say that the environment now is as toxic and destructive as I have ever seen it," wrote Smith, who worked at Goldman Sachs for just under 12 years and says the firm has changed markedly since he started there.
"I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients," he said. "It's purely about how we can make the most possible money off of them."
His colleagues' attitude made Smith ill, he wrote, claiming that a number of managing directors referred to their customers as "muppets."
"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."
In a statement cited by the Associated Press, Goldman Sachs said Smith's account did not "reflect the way we run our business."
"In our view, we will only be successful if our clients are successful," the statement said. "This fundamental truth lies at the heart of how we conduct ourselves."
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Similar charges have been levelled at the firm before, The Atlantic pointed out, especially following the financial crisis, which saw Goldman and others bailed out by US taxpayers. However, its columnist wrote, "to hear them now, from a former true believer — Smith started at the firm as intern 12 years ago, and has been there ever since graduating from Stanford — makes them particularly damning."
Meanwhile anthropologist Joris Luyendijk, who has conducted dozens of interviews with people in London's banking industry for The Guardian over recent months, said Smith's complaints were echoed by many others.
Bankers' testimonies suggest many firms treat both their customers and their employees like "muppets," according to Luyendijk, who cites accounts of advisers pledging "We're gonna suck this client dry," and staff being fired at a moment's notice.
In an analysis piece, the New York Times suggested that Smith's criticism would be "especially painful to Wall Street now," as it seeks to win back investors' confidence following accusations of underhand dealings in the run-up to the financial crisis.
However, Forbes columnist Nathan Vardi argued that it shouldn't take Smith's letter to put investors on guard – the recent scrutiny should have done that already. "Until those clients start to take responsibility for themselves," Vardi argued, "Goldman will remain incentivized to sell stuff to them."
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In a lengthy internal memo obtained by CNNMoney, CEO Lloyd Blankfein and President Gary Cohn addressed company employees about Smith's charges.
"Needless to say, we were disappointed to read the assertions made by this individual that do not reflect our values, our culture and how the vast majority of people at Goldman Sachs think about the firm and the work it does on behalf of our clients," the memo said.
"In a company of our size, it is not shocking that some people could feel disgruntled. But that does not and should not represent our firm of more than 30,000 people. Everyone is entitled to his or her opinion. But, it is unfortunate that an individual opinion about Goldman Sachs is amplified in a newspaper and speaks louder than the regular, detailed and intensive feedback you have provided the firm and independent, public surveys of workplace environments."