Moral Bankruptcy

Where do you call your customers muppets, talk about ‘ripping their eyeballs out’ to maximise the profit you make from them and sell them inappropriate products?

Answer: Goldman Sachs, according to one of their executive directors, Greg Smith,  writing in yesterday’s New York Times.

Just a year or two after GS boss Lloyd Blankfein said the company was engaged in ‘God’s Work’, Smith writes: “Lloyd C. Blankfein, and the president, Gary D. Cohn, lost hold of the firm’s culture on their watch.”

“My clients have a total asset base of more than a trillion dollars,” writes Smith,  ”I have always taken a lot of pride in advising my clients to do what I believe is right for them, even if it means less money for the firm. This view is becoming increasingly unpopular at Goldman Sachs.”

The three ways to achieve promotion at the company are, says Smith:

“Execute on the firm’s ‘axes,’ which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit;

Secondly,

“Hunt Elephants. In English: get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them;”

Thirdly:

“Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.”

Smith says: “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.”

Tags: asset base, derivatives, greg smith, pride, stocks

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6 Comments

  1. Anonymous
    March 20, 2012 11:49

    Should we be surprised? What does a Banker have to lose by selling you a”duff” product? Nothing? Their bonuses should be tied to clear results, no profit for the client should mean no bonus for them. Don’t trust any of them!!!!

  2. David Manners
    March 15, 2012 15:04

    Well Yes Fred I think Ed would feel he was among his own kind at Goldman Sachs but, from what we’ve just heard, I expect his GS colleagues would have that 25 mill off him before he’s found the way to the bogs. As for Trilogy, I remember an American reporter telling me when it launched that this was ‘Gene’s retirement fund’.

  3. March 15, 2012 14:41

    Sounds like a great position for Ed once he lands his 25 mil from his current post and needs to once again move on to greater things !
    Trilogy David ?

  4. David Manners
    March 15, 2012 11:30

    Yes, Mike, it seems to take the perp walk and time inside for these business villains to get the message that they’ve done something wrong e.g. Enron, Worldcom etc, and now it will be necessary to apply the same to the bankers before they start to get an inkling of the truth that they’ve been delinquent. In my personal observation they still think what they did was OK and intend to go on doing it.

  5. Mike Bryant
    March 15, 2012 09:52

    The second one is actually illegal at least in the UK. Hopefully this guy will testify and someone will at last go to prison over this debacle. Not enough will but even one is a good start. (and this is from a confirmed capitalist ! :-)

  6. Anonymous
    March 15, 2012 08:58

    Ah.
    The masters of the universe who were also involved in the 1929 disaster.

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