Back in March, a Goldman Sachs employe, Greg Smith, publicly resigned via a New York Times op-ed, decrying the firm’s “toxic” culture. “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,” Smith wrote. “It makes me ill how callously people talk about ripping their clients off.”
Smith has penned a book about his experience that is due to be released this month. Politico received an advance copy of the book, in which Smith expands on the activities in which Goldman traders engaged, particularly when it came to betting against the very clients they were supposed to be serving:
“The client increasingly came to be regarded as a counterparty, merely the other side of a transaction, rather than an advisee,” he writes. “Where this practice of proprietary trading … turned morally ambiguous was when the firm changed its mind (or masked its intentions) and made a bet in the other direction from the client’s.” [...]
The idea was to advise clients to bet on the opposite outcome of what the firm believed would happen so it could profit by taking the other stance, he wrote.
“We must have changed our view on each of these institutions from positive to negative back to positive 10 times,” Smith writes. “I remember thinking, ‘How can we be doing this with a straight face? No thinking client would believe that conditions on the ground could change that frequently.’”
Another Goldman trader also alleged that the “commercial animals/jerks” who “pushed for the firm to profit over other considerations” have been promoted over more customer-minded employees in recent years. “So much junk was created that should never have been with disastrous consequences and that will be a black mark on the whole industry for a long time, as it should be,” she said. “I know many people who were in ‘that business’ who quit because they could not in good faith sell the crap they were being asked to create and market.”
The behavior that these traders allege is the same that Sen. Carl Levin (D-MI) criticized when he excoriated Goldman’s “shitty deal” — Goldman and other banks peddled toxic investment instruments and then bet against their own customers, profiting when those customers lost out.
Goldman has denied the allegations that Smith made in the original op-ed, and is not yet commenting on his book. Instead, the firm, as well as the conservative business press, has painted Smith as nothing more than a disgruntled employee who was upset at not being paid enough. Smith acknowledges in his book that he was upset with his compensation: “By the logic of the outside world, I was being absurdly well-compensated for work whose chief benefit was to maintain the robustness of the world’s capital markets . . . By any measure, I should have felt exceptionally lucky and grateful…But by the warped logic of Goldman Sachs and Wall Street, I was being screwed.”
But Smith being angry about his pay does not change the fact that several former traders and a Senate investigation have all drawn back the curtain on Goldman’s attempts to profit at its own customers expense.