In the 1980s and 1990s, I worked for the commodity trading division of Salomon Brothers. Goldman Sachs and their commodities division, J. Aron, were our chief competitors.
In the March 14 issue of the New York Times, an article appeared on the Op-Ed page by a Mr Greg Smith. This article is getting a lot of attention in the media. The Times knew that it would. Mr. Smith, an "almost" 12-year veteran of the sometimes-venerated - and most-times hated - Wall Street powerhouse publicly said goodbye to the firm in his treatise "Why I am leaving Goldman Sachs."
He said: "The interest of the clients continue to be sidelined in the way the firm operates and thinks about making money."
I have known Goldman Sachs for more than 30 years. Goldman Sachs and its employees have always known why it is in business. Making money has always been the number-one reason for the firm's existence.
But Mr. Smith disagrees. He wrote: "It might sound surprising to a skeptical public, but culture was always a vital part of Goldman's success… It wasn't just about making money."
"It makes me ill how callously people talk about ripping their clients off."
Successful Goldman employees never had a problem taking a hunk of flesh from a client. The culture of the Goldmans and Salomons of this world encouraged making money, long before Mr. Smith showed up on the scene. The more money you brought to the firm the more money and prestige was accrued to you.
And, conversely, if you did not bring the cash in you found yourself an ex-employee. It has always been a simple and effective formula, and one that has made many people very rich.
Mr. Smith continued: "It astounds me how little senior management gets a basic truth: If clients don't trust you they will eventually stop doing business with you."
Well, it astounds me that a 12-year veteran of Goldman Sachs could make such a statement. It reveals an astounding lack of knowledge and understanding of the firm at which he spent more than a decade!
Mr. Smith said: "When I was a first year student, I didn't know where the bathroom was, or how to tie my shoelaces… I was taught to be concerned with learning the ropes, finding out what a derivative was, understanding finance, getting to know our clients… learning how they defined success and what we could do to help them get there."
As a trainee, did he not see the managing directors on the trading floor, sales desks, and investment banking suites who were being paid tens of millions of dollars? Did he not understand that the cream of the crop at Goldman were not those who were "helping" their clients, but those who were adding hundreds of millions of dollars to the bottom line of the firm itself?
Mr. Smith's comments are as weird as CEO Lloyd Blankfein's statement that Goldman Sach's does "God's work."
As the New York Times put it, Mr. Smith resigned "as a Goldman Sachs' Executive Director and head of the firm's United States Equity Derivatives business in Europe, the Middle East and Africa." While a very impressive title to a layman, in Goldman-speak the only title that really carries any weight at the firm is managing director or partner.
Greg Smith in his piece pines for the "good old days" at Goldman. The days of Robert Rubin, the manipulative trader and boss who made fortunes for the company, himself and weaseled his way into a job as Treasury Secretary of the US under President Clinton.
Or perhaps back to the days of Hank Paulson, who took the firm public, made billions for the firm and became Treasury Secretary under President Bush II.
Or perhaps back to the days of John Corzine, who ran Goldman until he left to become the Democratic Senator and then Governor of the state of New Jersey. This is the same John Corzine who recently allowed a 200-year-old commodity firm, MF Global, to go belly-up on his watch. Corzine was purported to be trying to turn MF Global into a "Goldman Sachs" by making huge leveraged bets on European debt markets.
A huge score on this trade by Corzine would have given him the money necessary to build MF into the next Goldman but it was not to be. At the end of the day, it was the clients of MF Global who lost money.
The current CEO of Goldman, Mr. Blankfein, was a gold trader for the firm in the early '80s when I knew him and he ran the commodities division later on. President Gary Cohn was a very aggressive base metals trader in London in 1989 when I knew him.
I can attest to the fact that both of these men have done absolutely nothing to change the culture of Goldman Sachs. In fact, it is still the very same machine focused on making money that it was 12 years ago when Mr. Smith joined. And, in fact the same firm that it was 30 years ago when I started competing with them.
I guess Mr. Smith is nothing more than a cockeyed optimist. However, I am surprised that with all of his education and credentials it took him 12 years to realize what GS really is.
Obviously, Greg Smith is educated and polished. Otherwise, Goldman would never have hired him in the first place. It is clear that Mr. Smith is not as observant or street smart as others who work at Goldman or on Wall Street for that matter. I am sure that Lloyd Blankfein and Gary Cohn are not losing any sleep with this genius leaving the firm.
Goldman's culture has always been built on "ripping the eyeballs out of muppets" and "getting paid" and taking risk. The master manipulators of the US treasury came out of this money making machine-Robert Rubin, Hank Paulson, and John Corzine.
My problem is not with Mr. Smith or his treatise. I feel bad for Greg Smith. He is a 30-something-year-old naïve kid, who is not too quick on the uptake, considering it took him 12 years to see through the BS of a corporate-culture lecture at one of the most carnivorous firms that has ever existed in the financial world.
In the '80s and '90s and even recently the company's best customers always referred to Goldman as the firm they "love to hate."
Goldman was, and is, so powerful in the markets that you have to do business with them or you miss out on the flow of information - just ask any significant hedge fund manager, sovereign wealth fund manager or mutual fund manager. They will all tell you the same thing. As Warren Buffet once said: "If you want to make money, hold your nose and go to Wall Street."
Buffet owns a big chunk of Goldman today with a juicy dividend. Do you think that Buffet wants Goldman to be the firm that Mr. Smith hoped they would be?
My problem with this piece is that the NY Times actually decided to print it.
The NY Times showed itself once again to be nothing more than a manipulative and biased liberal rag. This article caters to the Occupy Wall Street movement. The article is misleading to those who don't understand how and why Wall Street operates.
The article is not an op-ed piece; it is a work of fiction, written by a well-meaning kid who thinks he is writing non-fiction!
The bottom line is that the kid got it wrong. Now he should go work for the peace corps - or maybe George Soros!
The NY Times has once again attempted to mislead the masses with a piece that is not only false but will one day embarrass the poor naïve kid who wrote it.Shame on you NY Times!