Had a “gotcha” moment while reading the papers this morning. It was also a sad confirmation. It was a piece in the Guardian via the New York Times, a letter from Greg Smith, Executive Director and the head of Goldman Sachs U.S. equity derivatives business in Europe, Africa and the Middle East. Former Executive Director, I should say, as Smith is resigning from Goldman Sachs, citing a change in culture at the company, moving away from doing what is best for its clients to what is best for the company according to Smith, who writes-
“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 email. Even after the SEC, 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.”
Smith, goes on to make the following statement about sales meetings at Goldman, “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.”
And so, Smith, a Rhodes Scholar finalist, is leaving Goldman. As I said, for me it was a gotcha moment and a sad confirmation. It’s not all that often that those at the top of the financial industry jump ship and talk about it. It becomes increasingly obvious that the system remains totally out of control, that we learned next to nothing from 2008. Ronald Reagan’s budget director David Stockman, and others of similar experience and credibility, have warned that we’re headed for another crash. Perhaps someone should listen? But then the system isn’t designed for anyone to take the kind of forceful action this would require, particularly as we near the end of an election cycle. Particularly when the Hill and White House have been purchased by monied interests like the firms dealing in derivatives on Wall Street.
The following Bill Moyers interview with Reagan Administration Budget Director, David Stockman, is on topic and enlightening.