A little over a week ago, Greg Smith, an executive director at Goldman Sachs, one of the world’s largest investment banking and securities firm, resigned from his position after publishing a letter in the New York Times Opinions section.
The letter, entitled “Why I am Leaving Goldman Sachs,” details Smith’s observations of the current state of the company.
Smith, who joined Goldman fresh out of college and has worked at the firm for twelve years since, describes the main problem as the culture of the company, that is, “the interests of the client continue to be sidelined in the way the firm operates and thinks about making money.”
He outlines three quick ways to rise to the top in the company, two of which involve tricking the client into making moves that will benefit Goldman the most, with no concern for how they will—if at all—profit the client. Using Goldman jargon, these are executing on the firm’s “axes,” which consists of having someone invest in stocks that Goldman is trying to get rid of. “Hunt Elephants” is another code, for getting clients to make a trade that will bring in the biggest profit for Goldman.
The third secret is to get lucky and find yourself dealing with and trading gas. Keeping in line with this blatant disregard for clients, many employees refer to their own clients as “muppets.” Although Smith said he did not know of any illegal activities happening at the company, he lamented the eroding moral fiber of the company, stating, “I knew it was time to leave when I realized I could no longer look students in the eye and tell them what a great place this was to work.”
Although Smith is not the only Wall Street banker to recently resign, he is the most high profile one, and the only one to leave in such a spectacular and outspoken manner. Goldman’s stock has not gone up or down much since his resignation, making many believe the situation would blow over and be forgotten.
Others, however, believe that these insiders fail to think about the long term effects. Matt Taibbi, the journalist who christened Goldman a “Vampire Squid,” thinks this marks the beginning of something bigger than any of the movements currently in the United States—and that includes Occupy Wall Street. Taibbi optimistically writes, “this incident may turn Goldman into such a pariah that the best young bankers won’t want to work there anymore.”
At this point Goldman’s future is unclear, but there is no denying need for reform within Wall Street. And with Smith’s explosive words, it may well start there.