Wednesday, March 14, 2012

Burning down the house

This morning I found myself in an odd position while reading Greg Smith's fuck you resignation letter op ed in the NY Times.  I bow to no man in my desire to see banksters like Blankfein chased through the streets of lower Manhattan by angry investors and drowning homeowners carrying burning torches.  And yet...

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.
But this was not always the case. For more than a decade I recruited and mentored candidates through our grueling interview process. I was selected as one of 10 people (out of a firm of more than 30,000) to appear on our recruiting video, which is played on every college campus we visit around the world. In 2006 I managed the summer intern program in sales and trading in New York for the 80 college students who made the cut, out of the thousands who applied.
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. 
Um...bullshit.  Smith, who is in his mid-thirties and has been earning millions from G-S for years is either naive or has his own scam going.  First of all, the timing -- this is about the time when bonus checks clear.  But even more to the point, I don't recall Wall Street ever being confused with a Buddhist retreat.  I don't believe G-S was considered some sort of paragon of virtue even before they went public, and certainly not since -- which happened around the time Mr. Smith joined the company.  And they've been mentoring candidates for 100 years To Make Money and to mentor others To Make Money.   Those interns are there not for the teamwork and spirit of humility, but to make a lot of money.   I'm guessing Smith did all right because of that, up until this crisis of confidence.  Perhaps, like Mitt Romney, they only talked about ripping the eyes out of their client muppets in "quiet rooms" when Smith joined the firm.  

And clients who came to Smith to buy derivatives knew G-S was making money on the deal -- they likely prided themselves on their own sophistication because they also figured they'd make money off the deal, too.  That's kind of how it works.  It ain't pretty, but pretty's for losers.

I think Felix Salmon responded best:

Smith has been in this business for 12 years, and he’s done extremely well by it. And to a certain extent, if the people who work for him are constantly asking how good a deal is for Goldman, rather than how good the deal is for Goldman’s clients, then that’s because of the example he set. What’s missing in his op-ed is any sense of mea culpa, any sense that he was at all part of the problem.
There’s a strong smell of faux-naive coming from Smith’s op-ed. “Leadership used to be about ideas, setting an example and doing the right thing,” he writes. “Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence.” Here’s a question for him: back when he made videos for Goldman urging candidates to join the company, were the people who got promoted those who had ideas and did the right thing? Or were they the ones who made lots of money for the firm? To ask the question is to answer it.
So let’s not pretend to be shocked that the most successful bankers are the ones who make the most money off their clients. And let’s not try to imply that the solution to this problem lies at the Goldman Sachs board level. It doesn’t. The real muppets, in this story, are Goldman’s board members, who have never had any real control over how the company is run. And, frankly, never will. The most remunerative skill, at Goldman, is the ability to flatter someone into believing that they’re incredibly important and clever and sophisticated, even as you’re getting that person to do exactly what’s in your own best interest. No one rises to lead Goldman Sachs who doesn’t have that skill. And you can be sure that Lloyd Blankfein uses it on the board every time he meets with them.
 I look forward to Greg Smith joining the Occupy Wall Street movement (it's been very warm here in the Northeast, so his timing on this is pretty good, too). 

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