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View Full Version : Rebuke of Wall Street Culture Sparks Debate



Conley
03-15-2012, 11:57 AM
Until early Wednesday morning, Greg Smith was a largely anonymous 33-year-old midlevel executive at Goldman Sachs in London.

Now everyone at the firm — and on Wall Street — knows his name.

Mr. Smith resigned in an e-mail message to his bosses at 6:40 a.m. London time, laying out concerns that Goldman’s culture had gone haywire, putting its own interests ahead of its clients.

What the e-mail didn’t say was that about 15 minutes later, an Op-Ed article he had written detailing his criticisms was to be published in The New York Times. “It makes me ill how callously people still talk about ripping off clients,” he wrote in the Op-Ed article.

The Op-Ed landed “like a bomb,” inside Goldman, said one executive who spoke on the condition of anonymity.

http://dealbook.nytimes.com/2012/03/14/public-rebuke-of-culture-at-goldman-opens-debate/?hp

Hope you don't mind me posting in your room Chris :laugh: I figured this could go here.

The resignation letter and the debate seems to confirm that Goldman and others are trading against their clients. I don't know if that's illegal or not. I think it is unethical but I am also surprised at this point that anyone would trust Wall Street to not put profit above everything. Hasn't that been their m.o. for a while now?

MMC
03-15-2012, 05:53 PM
Evidence of this shift, they say, can be seen in the accusations brought by the Securities and Exchange Commission (http://topics.nytimes.com/top/reference/timestopics/organizations/s/securities_and_exchange_commission/index.html?inline=nyt-org) in 2010 that the firm intentionally duped certain clients by selling a mortgage-security product that was designed by another Goldman client betting that the housing market would crash. More recently, a Delaware judge criticized Goldman over the multiple, and potentially conflicting, roles it played in brokering an energy deal. (In both cases, Goldman has denied any wrongdoing.)

Still, the ripple effects were felt beyond Wall Street. Shares of Goldman fell 3.4 percent. And media coverage was worldwide. “Goldman Boss: We Call Our Clients Muppets,” screamed the front page of The London Evening Standard.....snip~

Guess that part is what really got to Goldman Sachs.....huh? These be Obama's boyz!

MMC
03-15-2012, 06:08 PM
Goldman loses $2.2 billion on op-ed piece (http://att.my.yahoo.com/_ylt=Alw.GTGZ3NHj60Pf8ADjsO.mN3wV;_ylu=X3oDMTJkNmV 2bjY4BGNjb2RlA3lyZARjcG9zAzEEaW50bAN1cwRwa2cDaWQtM jA0MTk4NgRwa2d2AzUEcG9zAzIEc2VjA2F0dHRkLWZlYXQEc2x rA3RpdGxl/RV=1/RE=1331946363/RH=YXR0Lm15LnlhaG9vLmNvbQ--/RO=2/RU=aHR0cDovL2ZpbmFuY2UueWFob28uY29tL25ld3MvZ29sZG1 hbi1yb2lsZWQtb3AtZWQtbG9zZXMtMTAyNTU3OTY0Lmh0bWw-/RS=%5EADAeTmYnd33n0QouinyGyLYaUrkpy8-)

Conley
03-15-2012, 06:10 PM
Evidence of this shift, they say, can be seen in the accusations brought by the Securities and Exchange Commission (http://topics.nytimes.com/top/reference/timestopics/organizations/s/securities_and_exchange_commission/index.html?inline=nyt-org) in 2010 that the firm intentionally duped certain clients by selling a mortgage-security product that was designed by another Goldman client betting that the housing market would crash. More recently, a Delaware judge criticized Goldman over the multiple, and potentially conflicting, roles it played in brokering an energy deal. (In both cases, Goldman has denied any wrongdoing.)

Still, the ripple effects were felt beyond Wall Street. Shares of Goldman fell 3.4 percent. And media coverage was worldwide. “Goldman Boss: We Call Our Clients Muppets,” screamed the front page of The London Evening Standard.....snip~

Guess that part is what really got to Goldman Sachs.....huh? These be Obama's boyz!

The Obama administration is stacked with GS men. It has certainly paid off for the company known as Golden Slacks.

Chris
03-15-2012, 06:17 PM
"Hope you don't mind me posting in your room Chris"

Please do, it's everyone's room!

If it has to do with economy it fits!


Here's my take on it...

As Smith reported in Why I Am Leaving Goldman Sachs (http://www.nytimes.com/2012/03/14/opinion/why-i-am-leaving-goldman-sachs.html?_r=1), "How did we get here? The firm changed the way it thought about leadership. Leadership used to be about ideas, setting an example and doing the right thing. 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."


As The misguided practice of earnings guidance (http://www.uic.edu/classes/actg/actg516rtr/Readings/Markets/Earnings-Guidance-1-McKinsey-Full.pdf) reveals, what Smith reports is an unintended consequence of government action, the Private Securities Litigation Reform Act of 1995, which protects corporations from liability and encourages short time preference.

Chris
03-15-2012, 07:42 PM
Russ Roberts, The right way to make money (http://cafehayek.com/2012/03/the-right-way-to-make-money.html):
EconTalk listener Andrew Hedge points out that Smith’s time at Goldman began when Goldman had just gone public noting that Emanuel Derman also views the post-IPO Goldman as a less attractive company than when it was a partnership. I suspect that when Goldman was a partnership risking more of the partners’ own money their bets were more prudent than today when they are able to use a lot more leverage with a lot less equity. I’m sure their culture was different and that it eroded slowly at first.
As a private partnership they were not subject to the Private Securities Litigation Reform Act of 1995, public they are.

Peter1469
03-15-2012, 08:07 PM
Goldman loses $2.2 billion on op-ed piece (http://att.my.yahoo.com/_ylt=Alw.GTGZ3NHj60Pf8ADjsO.mN3wV;_ylu=X3oDMTJkNmV 2bjY4BGNjb2RlA3lyZARjcG9zAzEEaW50bAN1cwRwa2cDaWQtM jA0MTk4NgRwa2d2AzUEcG9zAzIEc2VjA2F0dHRkLWZlYXQEc2x rA3RpdGxl/RV=1/RE=1331946363/RH=YXR0Lm15LnlhaG9vLmNvbQ--/RO=2/RU=aHR0cDovL2ZpbmFuY2UueWFob28uY29tL25ld3MvZ29sZG1 hbi1yb2lsZWQtb3AtZWQtbG9zZXMtMTAyNTU3OTY0Lmh0bWw-/RS=^ADAeTmYnd33n0QouinyGyLYaUrkpy8-)



If this guy wasn't telling the truth, he is looking at a big law suit. I suspect that he was.

Chris
03-18-2012, 01:43 PM
Marketplace Morality Is Not About Being Nice (http://www.nytimes.com/roomfordebate/2012/03/15/does-morality-have-a-place-on-wall-street/marketplace-morality-is-not-about-being-nice)
Some have suggested that investment banks, at least, went off track when they morphed from partnerships into publicly traded companies, a structural transformation that altered management incentives. Bankers now focus on the next quarter rather than the next 20 quarters, the quick trade rather than relationship building. And perhaps Washington should mandate a reversion. But the biggest benefit would be a change in size rather than structure. No longer too big to fail, the capitalist morality generated by competition and the risk of failure would again be fully operative. And Wall Street would again be firmly focused on its core competency of efficiently allocating capital to American business.