The Sad State of Goldman, Merrill, et. al.

Everyone is all abuzz this morning about the acerbic resignation letter of Greg Smith, head of the firm’s United States equity derivatives business in Europe out of their London office.

Did I say letter? It was an OpEd published in the NYT, Why I Am Leaving Goldman Sachs .

“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 disagree with my colleague, Josh Brown, who writes: “The “culture” of Goldman Sachs was, is and always will be about making money, often at the expense of a client” (How to Quit a Job Without Publishing an Op-Ed).

Sure, profits matter, but Wall Street used to be about so much more than that. There was a culture of mentoring, developing, teamwork, a belief that doing the right thing for your clients was in your own best interest.

Firms that used to be Partnerships — as opposed to the publicly traded corporations of today — meant that you had to be more involved in what your partners were doing, as they had the ability to bankrupt the firm AND the individual partners. This was a huge factor in the dynamic –  and it made recruitment, training and mentorship all that much more important.

It was more than just Goldie — Think about Mother Merrill, and the generations of traders and investors who learned their craft in her embrace (Gone).

I hope I am not overly romanticizing the Wall Street of old. When you speak to some of the folks who have a long tenure in this business, you hear great stories of the old days. People I have been fortunate enough to meet and know in this business have painted quite a clear picture of what it once was like, and you cannot blame it all on the rosy glow of nostalgia. I have sat at the knee of people like Art Cashin and Doug Kass and Justin Mamis and Felix Zulauf and David Kotok and Walter Deemer and David Rosenberg and Barry Hyman. I have heard the stories — some bad, most of them good, quite a few of them hilarious.

Much of that is lost to the change to public companies — making quarterly numbers is a cruel taskmaster, one that makes such genteel ideas as culture and leadership passé.

Why do you think Bloomberg has never gone public . . . ?


Why I Am Leaving Goldman Sachs
NYT, March 14, 2012

See also:
Why I am leaving the Empire, by Darth Vader (Daily Mash)

A Response from Goldman Sachs From Chairman Lloyd Blankfein (The Borowitz Report)

This post originally appeared at The Big Picture and is posted with permission.

3 Responses to "The Sad State of Goldman, Merrill, et. al."

  1. Bixch123   March 14, 2012 at 1:48 pm

    It is comforting to know that at least one former banker has a heart, but the question is, why did it take Greg Smith so long to find his? The Goldman Grinch whose heart recently grew two sizes, worked at Goldman for ten years, accumulating more money than joe the plumber could dream of (I assume), before he decided to make his official departure due to the "toxicity" of the company. Apparently Goldman's culture has changed since he first began as an intern – we will give him that much — but where was he a couple of months ago during Occupy Wall St.? Hopefully not waiting for his bonus to kick in?…

  2. sierra7   March 15, 2012 at 1:10 pm

    The writer is correct; "banking" has changed dramatically since the late 1970-80's. When banking-client relationships were more intimate there was more care for the client. When "outside" investors started to finance corporate ventures "outside normal" banking relationships the whole structure began to collapse. Read: banking client relationship" fees.
    Competition for those fees forced "banking" to step into the new world of "cut throat" competition for those corporations monies for takeovers, expansion, etc.
    Banking has never been the same.
    That coupled with the destruction of the "rules of the game" included in Glass/Steagall and the insistence of the "dismal economic advisor" world on "free market" economies to open more their markets has led to the dominance of greed, greed, and more greed.
    For this GS dissenter, try flipping burgers. You might feel better.

  3. sierra7   March 20, 2012 at 11:18 am

    A good overview of the corrupt financial system participated in by the likes of Greg Smith and Goldman Sachs:
    "Wall Street and the Financial Crisis" "Anatomy of a Financial Disaster"
    US Senate Permanent Subcommittee on Investigations.
    (Cosimo Reports)
    Chapter 6: "Investment Bank Abuses: Case Study of Goldman Sachs and Deutsche Bank."
    Almost 300 pages involving these two banks; the majority Goldman Sachs.
    I can't understand how any "investor" could going forward ever do business with this company in the future. They have to have marbles for brains!