By ThinkProgress War Room on Mar 14, 2012 at 4:44 pm
Epic Resignation Letter Underscores Need for Tougher Rules on Wall Street
This morning, a now-former Goldman Sachs executive, Greg Smith, published a truly epic resignation letter in the New York Times. Smith wrote that he resigned from Goldman due to its “toxic and destructive” environment which included managing directors referring to their own clients as “muppets.”
The entire letter is worth a read, but here’s the key part:
Today is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.
To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money…It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail….These days, the most common question I get from junior analysts about derivatives is, “How much money did we make off the client?”
Smith also described how Goldman’s thirst for profits at all costs developed:
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…you will be promoted into a position of influence.
What are three quick ways to become a leader? a) 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. b) “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. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.
Perhaps unintentionally, Smith’s editorial made a compelling case for the Volcker Rule, an element of the Dodd-Frank Wall Street Reform Act that would prohibit proprietary trading at federally-backstopped institutions. Banks like Goldman, which made billions of dollars by making “shitty deals” that sold mortgage-backed securities and other complex derivative products to unwitting customers then turned to taxpayers for a bailout when too many of those deals went sour, would no longer be able to make those trades without giving up access to the Federal Reserve’s emergency lending and the FDIC’s backing. (Remember, Goldman converted into a bank holding company at the height of the financial crisis, in order to access the Fed’s emergency lending programs.)
While Goldman offered an official response, it also appears to be launching a behind-the-scenes smear campaign against Smith as well.
Evening Brief: Important Stories That You May Have Missed
Nearly 70 percent of Americans support “continuing to pursue negotiations with Iran” while only a quarter support an Israeli military attack on Iran’s nuclear facilities, say a new poll released today by the Program on International Policy Attitudes (PIPA) and the University of Maryland.
Rep. Peter King’s (R-NY) “Manhunters” video sparks U.S. Marshals probe.
Foreign Policy writes that the viral video Kony 2012 oversimplifies the atrocities committed by Joseph Kony and “is infantile, lowest-common-denominator activism” that, while making a celebrity of Joseph Kony, engages in “tried and true paternalism” over Africans.
All of that talk about about a brokered GOP convention may not just be talk after all.
Land owners kept in dark about fracking violations on their property
Arizona Republicans move forward with “tell your boss why you’re on the pill” bill.
Rush Limbaugh today: “How can I be anti-woman? I even judged the Miss America Pageant!”
Other recent Progress Reports
Mar 13, 2012: Rush On The Rocks
Advertiser Exodus Grows Exponentially It’s becoming increasingly clear that Rush Limbaugh’s vile, sexist attacks on Sandra Fluke and other women have taken a severe toll on his show. Here’s the latest. At least 140 Companies Have Dumped Limbaugh ThinkProgress has obtained an internal memo from Premiere Radio Networks listing 96 national companies that have “specifically [...]
GOP Obstructionism, By the Numbers It’s no secret that Republicans have done everything in their power to throw up road blocks for President Obama at every turn. And nowhere is their power to block the president greater than it is in the Senate, where Republicans have effectively imposed a blockade on the president’s nominees for [...]
Mar 9, 2012: Jobs Day, By the Numbers
Jobs, Jobs, Jobs Today is Jobs Friday. Here’s the rundown on the monthly employment report from the Department of Labor. -647,000…the number of jobs created lost in state and local governments since August 2008. -22,000…the average number of public sector jobs created lost each month in 2011, thanks to ongoing spending cuts at all levels of government [...]
Mar 8, 2012: Is the 1% Pledge Falling Apart?
Mr. 1 Percent’s Iron Grip Fades Mr. 1 Percent, Grover Norquist, is best known for convincing nearly every single Republican in the House and Senate (and a handful of Democrats) to sign his pledge swearing that they will never, ever vote for a tax increase, nor to close any tax loopholes. What’s the practical impact [...]