In the discussion thread: Weekend Economists Ask: "What Were They Thinking?" March 16-18, 2012 [View all]
Response to Demeter (Original post)
Fri Mar 16, 2012, 10:02 PM
Demeter (77,388 posts)
26. This Is Your Defense of Goldman Sachs and Wall Street?
I found the Bloomberg editorial response to Greg Smith’s resignation letter from Goldman Sachs to be so terrible that ironically I think it is a more damning criticism of the current destructive culture on Wall Street than Smith’s original piece. The editors at Bloomberg basically try to paint Smith as naive and stupid...
Yes, Mr. Smith, Goldman Sachs Is All About Making Money
Apparently, when Greg Smith arrived at Goldman Sachs Group Inc. (GS) almost 12 years ago, the legendary investment firm was something like the Make-A-Wish Foundation -- existing only to bring light and peace and happiness to the world.
Smith, who was executive director and head of the firm’s U.S. equity derivatives business in Europe, the Middle East and Africa, does not go into details in his already notorious op-ed article in Wednesday’s New York Times, “Why I Am Leaving Goldman Sachs.” But one imagines Goldman bankers spending their days delivering fresh flowers to elderly shut-ins and providing shelters for abandoned cats. Serving clients was paramount. “It wasn’t just about making money,” Smith writes. “It had something to do with pride and belief in the organization.”
It must have been a terrible shock when Smith concluded that Goldman actually was primarily about making money. He spares us the sordid details, but apparently it took more than a decade for the scales to finally fall from his eyes.
He says that Goldman has changed. “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.” And he warns: “Without clients you will not make money. In fact, you will not exist.” It’s tragic that Goldman is losing an employee who realizes that you need customers to stay in business.
And what an employee! He worked at Goldman as an intern in college and worked there continuously until today. “I was selected as one of 10 people (out of a firm of more than 30,000) to appear on our recruiting video, which is played on every college campus we visit around the world.” Then there was being “a Rhodes Scholar national finalist” and “winning a bronze medal for table tennis at the Maccabiah Games in Israel, known as the Jewish Olympics.”
then conclude by saying:
We have some advice for Smith, as well as the thousands of college students who apply to work at Goldman Sachs each year: If you want to dedicate your life to serving humanity, do not go to work for Goldman Sachs. That’s not its function, and it never will be. Go to work for Goldman Sachs if you wish to work hard and get paid more than you deserve even so. (Or if you want to make your living selling derivatives but don’t know what a derivative is, as Smith concedes in passing that he didn’t at first.)
Goldman and other investment banks do perform an important role in our economy, and Goldman bankers -- most of them, at least -- can hold their heads up high. But it is not charity work. Goldman’s clients are mostly very well-off. Smith’s lament that the bank no longer serves their needs above and beyond its own does not tug at our heartstrings.
This is the heart of the problem with Wall Street right now. The editors at Bloomberg apparently don’t understand the basic principles by which a good service exchange is supposed to work. This client-company relationship should not be a competition, ideally it should be mutually beneficial arrangement.
How the system is supposed to work is that Goldman Sachs would do the best financially by helping their clients do their best. There should not even be a question about putting the clients’ needs above Goldman’s or Goldman’s needs above the clients. Their goals for the most part should be mutually interdependent and self re-enforcing. It should be a a symbiotic relationship not a parasitical one. There is a very real difference between making money providing an expensive service and running a con.
Smith seemed more than willing to help make a lot of money in exchange for providing clients with a good service, Smith was complaining that Goldman was basically ripping people off. Smith’s criticism is that Goldman was not providing its clients what they paid for, the best possible financial advice, and was also using their trust to trick them out of their money.
This Bloomberg editorial suggests it is incredibly stupid to ever expect a Wall Street company to actually try to provide you with the service that you pay them for. If this is truly what the elite business world thinks this is not only an acceptable but expected way to treat paying clients, then Bloomberg makes Smith’s point for him.
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This Is Your Defense of Goldman Sachs and Wall Street?
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