The Buzz

Moral Bankruptcy on Wall Street

The journalistic categories for The Buzz are smart, notable, mixed bag, flawed and howler. Nothing for “courage.” But that’s a pretty good designation for the New York Times op-ed penned Wednesday by Greg Smith, Goldman Sachs executive director and head of the firm’s United Stated equity-derivative business in Europe, the Middle East and Africa. At least that was his title until he resigned on the day his Times piece ran.

It was a hell of a parting shot leveled at an organization that—says Smith—has lost its way. The old culture, focused first and foremost on helping clients, is dead, he says. In its place is a voracious appetite for profit, even when—perhaps especially when—the profit is at the expense of the clients, often referred to around the office as “muppets.”

Smith directs his parting blows at the top of the organization. “When the history books are written about Goldman Sachs,” he writes, “they may reflect that the current chief executive officer, Lloyd C. Blankfein, and the president, Gary D. Cohn, lost hold of the firm’s culture on their watch.” He refers to the firm’s “decline in . . . moral fiber” and suggests this “represents the single most serious threat to its long-run survival.”

The departing executive reveals that there are three quick ways to become a Goldman leader. First, get clients to buy stocks or other products the firm wants to dump because they lack sufficient profit potential; second, “hunt elephants,” meaning get clients to trade whatever will bring the biggest profit to Goldman, not themselves; and, third, get to a position “where your job is to trade any illiquid, opaque product with a three-letter acronym.”

Smith says he has attended sales meetings where not a single minute is spent in discussion about how the organization can help clients. “It’s purely about how we can make the most possible money off of them.”

We can’t say how smart it is for a disgruntled Goldman executive to lob such verbal grenades on his way out the door. But this is a highly notable blast, in addition to being courageous.