Is Greg Smith disingenuous? Willfully blind? Machiavellian? Deluded? Peeved by the size of his bonus and feeling vindictive? Or simply stupid?
Whatever the case, the now-former Goldman Sachs banker set both Wall Street and Main Street agog when he quit his job yesterday and, not contenting himself with sending his resignation letter to his bosses, decided he would publish it as an op-ed column in The New York Times. The reason he’s walking away from a job that pays a healthy seven-figure salary and bonus every year aroused even more comment. “The interests of the client continue to be sidelined in the way the firm operates and thinks about making money,” Smith opined.
To anyone who followed the Congressional hearings in April 2010, focusing on Goldman’s now-infamous “Abacus” structured transaction, that’s hardly news. Since then, we’ve had years to digest the reality that when a Montana senator demanded of the Goldman Sachs honchos lined up in front of his subcommittee whether they believed they were working for themselves or their clients, Dan Sparks, former head of Goldman’s mortgage business, had to pause before he replied. Even then, the best answer he could come up with was, “that’s a complicated question.”
Smith’s tirade, which easily matches that of Matt Taibbi in Rolling Stone that labeled Goldman a “vampire squid,” the answer is simple: yes. His motives for commenting publicly, however, were being analyzed with a growing level of skepticism and even downright cynicism yesterday afternoon. Why, pundits wondered, had Smith ever believed anything different about Wall Street? Why had he been content to swallow his dissatisfaction and disillusion until (so rumor would have it) he received a bonus he believed didn’t reflect his talents or contributions? Weren’t his complaints sheer hypocrisy? Well, possibly.
But the bottom line is that Smith represents a large number of bankers on Wall Street. I talked to a lot of them when researching my book, Chasing Goldman Sachs, first published in the summer of 2010 (and in an updated paperback edition last October.) Many of them would only agree to discuss their concerns about the way the industry and their firms had changed over the last two or three decades if I agreed not to use their real names.
Once I made that promise, scores of current and former bankers just like Smith told me they wanted to do the best for their clients. They loved the big fat paychecks, but they also relished the challenges of finding a clever solution to a client’s corporate finance problem, helping an investment manager unload a big block of stock, or structuring financing for a complex buyout deal. The folks who created credit derivatives were exhilarated not by the fat bonuses, the promotions or the chance to make money off clients, but by the rare opportunity to create a genuinely new financial instrument that would enable users to keep lending to long-term clients while diversifying their credit exposure.