People usually resign from a position through a private letter to the boss. Greg Smith, a Goldman Sachs executive director based out of London who manages U.S. equity derivatives for clients in Europe, Africa and the Middle East chose a different method when he decided to leave the payroll of Goldman Sachs; he gave the reason for his resignation in a powerful opinion piece on the editorial pages of The New York Times entitled, “Why I Am Leaving Goldman Sachs.”
The reason for Greg Smith’s resignation can be summed up as follows: the corporate culture at Goldman Sachs has been transformed and deteriorated to the point where it became rotten to the core, and where clients are viewed as mere “muppets” who can be fleeced through the investment bank’s rapacious greed.
Here is an excerpt from Smith’s piece:
“These days, the most common question I get from junior analysts about derivatives is, ‘How much money did we make off the client?’ It bothers me every time I hear it, because it is a clear reflection of what they are observing from their leaders about the way they should behave. Now project 10 years into the future: You don’t have to be a rocket scientist to figure out that the junior analyst sitting quietly in the corner of the room hearing about ‘muppets,’ ‘ripping eyeballs out’ and ‘getting paid’ doesn’t exactly turn into a model citizen.”
The devious, greed-encrusted investment bank got that way because of its leadership, Greg Smith emphasizes. The same leadership that boasted that it “does God’s work.” Unfortunately, the corrupted investment bank Smith describes is probably the most powerful non-governmental actor in the world. That is what makes Greg Smith’s explanation for leaving Goldman Sachs so bone-chilling and terrifying.
So, will the resignation of Greg Smith change the corporate culture at Goldman Sachs? I doubt it. It was not so long ago when we learned about the e-mails Goldman Sachs trader Fabrice Tourre sent to his girlfriend, one of which said, “…More and more leverage in the system, the entire system is about to crumble any moment…the only potential survivor the fabulous Fab…standing in the middle of all these complex, highly levered, exotic trades he created without necessarily understanding all the implications of those monstrosities !!!”
The public explanation for resigning offered by Greg Smith, and what were intended as private musings by Fabrice Tourre, are insights into the inner sanctum of a global financial octopus. Already subsidized by a massive taxpayer bailout after the financial collapse of 2008 (Goldman Sachs got a $12 billion payment through the AIG payout made by Uncle Sam, about enough to pay one year’s bonuses to the senior executives), Goldman Sachs is a paradigm of arrogance and indifference to the public that saved the investment bank from itself. Somewhat optimistically, Greg Smith hopes that his public explanation will somehow induce the board of directors at Goldman Sachs to “correct” its corporate culture. I wish I could be as optimistic, but I’m not. If there is a solution to the systemic risk posed by this selfish behemoth, it is unlikely to come internally from within Goldman Sachs. Other remedies are called for.