Book offers rare glimpse into Goldman Sachs
By Christina Rexrode, AP
October 23, 2012, 12:01 am TWN
NEW YORK--Greg Smith wrote the essay that echoed across Wall Street like a thunderclap.
Smith was a vice president at Goldman Sachs until March. He announced his departure from the investment bank with a blistering editorial in The New York Times, accusing Goldman of routinely deceiving clients and relentlessly pursuing profit at the expense of morality.
And he struck a nerve. The essay went viral in the financial world and beyond. Smith was praised for uncloaking corruption that was crying out to be addressed, and also derided as a disgruntled employee.
Goldman Sachs denies Smith's allegations about deceiving clients. The bank says it took his concerns seriously, thoroughly investigated them, and found no evidence to support them.
Smith's book, "Why I Left Goldman Sachs," is being released Monday. It's a window into a company that is notoriously tight-lipped, with stories about a swaggering place where interns arise for 5 a.m. meetings and business trips mean slapping down US$150 for one person's dinner.
What Smith hopes to do, he says, is educate people about how Wall Street works, and fuel a public conversation about what went wrong ethically, and how to fix it. The practices that caused the financial crisis, he says, were never really resolved; they're just lying dormant.
Smith, 33, gave his first print interview to The Associated Press. Excerpts have been edited for clarity and length.
Q: Tell us about March 14, the day you left Goldman. You were working in the London office, and you say you had already cleaned out your desk and had been told the editorial would go online at 7 a.m. your time.
A: I get up at 6 a.m., and I type a very heartfelt email to nine people in Europe, including the CEO of Goldman Europe, and express in very personal terms why I'm leaving. I talk about exactly what I thought was wrong with the place, this obvious deceit of clients.
Within five minutes I get an email back from someone on the management committee in Europe who says, "I'm really surprised to hear this. I'm in London today. I'd love to meet with you." I get two voice mails from two other people. And then at 6:57 or 6:58, the piece comes online.
Q: What did the bank do?
A: My work BlackBerry stayed on for about three more hours, and I started getting emails from clients who were saying, "We completely agree with you, we don't trust Goldman Sachs, we do business with you guys with a 'buyer beware' attitude." I started getting text messages from Goldman managing directors who were supportive as well. And Goldman reached out to me in formal fashion and said, "We're sorry to hear you resigned; we'd like to air these concerns out."
Q: The bank denies everything you've charged about them ripping off clients.
A: The thing that disappoints me most is that management is denying there's a problem. Why not try to repair the trust instead? Clients are telling you they don't trust you. There's been an SEC fraud suit that was settled for half a billion dollars.
(The Securities and Exchange Commission accused the bank of selling investments to clients when the bank believed the investments were going to fail. Goldman paid US$550 million. It remains the largest SEC penalty paid by a Wall Street firm.)
I'm not some lone voice who thought there was a problem, a change from a client fiduciary model (doing what's best for the client) to use-the-client-to-extract-wealth model. It's a problem that many, many of my colleagues felt and that the public feels as well, borne out in SEC suits and congressional testimonies and clients saying publicly that they don't trust us.