Masters of the Universe

The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. Rolling Stone, April 5, 2010

Over twelve years, Greg Smith worked his way up the Goldman Sachs hierarchy from lowly analyst to executive director of the London-based derivatives trading group for the firm. On Wednesday, March 14^th, he went out with a bang. He penned an Op-Ed piece, his letter of resignation from Goldman, in the New York Times. What his letter said (and the salient parts are excerpted below) is an indictment not only of Goldman, but of the “anything-for-money” culture that defines Wall Street today, an industry where the big boyz and girlz don’t get paid unless they move product – sell, sell, sell, without apparent concern for either the social consequences of their actions or even the fact that their efforts place their interests above those of their clients.

After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it… 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… The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.

It might sound surprising to a skeptical public, but 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. The culture was the secret sauce that made this place great and allowed us to earn our clients’ trust for 143 years. It wasn’t just about making money; this alone will not sustain a firm for so long. It had something to do with pride and belief in the organization. I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years. I no longer have the pride, or the belief…

Today, many of [Goldman’s] leaders display a Goldman Sachs culture quotient of exactly zero percent. I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them. If you were an alien from Mars and sat in on one of these meetings, you would believe that a client’s success or progress was not part of the thought process at all…

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.”

It isn’t just Goldman; the system is about rewarding those at top with little or no concern for anyone else. Take for example this March 9^th write-up in the Wall Street Journal: “Citigroup Inc. CEO Vikram Pandit received $14.9 million in compensation for 2011, a year in which the New York company posted its second straight annual profit but saw its shares tumble 44% amid a broad-based selloff in large financial companies… The company said in a regulatory filing [March 8^th] that Mr. Pandit got a $5.3 million cash bonus -- his first since the financial crisis -- and stock options valued at $7.8 million. The bank said last year that Mr. Pandit would get $1.7 million in salary for 2011.” But shortly thereafter the Federal Reserve applied its annual “stress test” to 19 of America’s largest banks: Of that group, “[f]our of the biggest U.S. banks failed… the Fed said [March 13^th], meaning [the failed banks] have to give up hopes of giving more money to shareholders, and may even have to go hat in hand to those shareholders for more cash.” One of them was Citigroup.

In the end, it seems painfully obvious that notwithstanding the collapse of the global financial markets in 2008, an event very clearly linked to the “money-at-all-costs” mentality of the self-declared “masters of the universe” mega-financial players, nothing has changed. There hasn’t been the slightest evidence of any self-regulation, and the millions and millions of dollars paid to Wall Street lobbyists and contributed to political campaigns has paid off for the financial sector in ineffective and watered-down federal laws and regulations (like the Dodd-Frank legislation) that have literally changed nothing, failed rather dramatically to protect the general public from the same evils that collapsed the system and threaten to allow another “perfect storm” of financial failure sometime in the foreseeable future. When will this country start representing the majority of Americans again? Or will it ever again?

I’m Peter Dekom, and tomorrow you can bet that the impact of Greg Smith’s stunning indictment of his former firm will have the following effect on Goldman Sachs: none.