Goldman Sucks

The Sun  –  March 2012

Greg’s Smith’s resignation letter criticizing the working practices at Goldman Sachs is absolutely the last thing that the huge US bank needed. Credible revelations that staff referred to their clients as ‘Muppets’ have spread across the world and the reputation of this hyper-successful bank has taken yet another battering. 

Remember, this is the same bank that was fined $550m by the US regulator for selling their clients products that were designed to fail. This is the bank that was urging clients to buy sub-prime assets whilst secretly betting against them with their own money and this is the bank that used financial shenanigans to help Greece underplay its indebtedness so that it could enter the Euro (something that’s hurting us all now).

Oh yes, Goldman Sucks has got a lot to answer for! But the most shocking thing about Smith’s letter is not that it ‘revealed’ that his firm put making a fast buck above the needs of its clients (hardly scandalous news) … it’s that one of the ‘cult’ has dared speak up against it.

When I was a banker I met loads of Goldmans bankers and the one thing that they all had in common was an almost fanatical loyalty to their company. They all acted like brain-washed Moonies willing to die for the cause. Indeed, I even heard a rumour that their HR department looked for applicants who ‘were probably bullied at school’ because that would give them the malleability that their bosses were after!

This unity helped profitability, but there are two main theories that explain why the bank really makes so much money: one, that it is full of geniuses (funnily enough, Goldman’s belief!) and two, that it is ruthless and sails close to the wind (everyone else’s view!). This letter clearly supports that second theory.

It was a Goldman Sachs broker who first told me the City phrase that ‘a long term investment is just a short-term bet that’s gone wrong’ and nothing they’ve been caught doing over the last decade detracts from Smith’s belief that short-termism rules the roost and that clients are simply seen as Muppets to be rinsed for the next bonus. Indeed, some of my ex-clients still don’t talk to Goldmans because it pushed them into buying dodgy short-lived tech firms in the late 90’s.

The Goldmans spin doctors are already rubbishing Smith by claiming that he’s just a bitter man after revenge but the fact is that he’s revealed how bankers’ attitudes are as vicious and reckless as they’ve ever been. In fact, this financial crisis has made some bankers even more ruthless and short-term because their job insecurity makes them even more willing to make a fast buck.

The tragedy is that if bankers’ attitudes don’t change we could have another crisis within the next decade and I don’t think our fragile economy could take such a hit. In fact, if that happens I reckon they’ll be riots here that make Greece’s unrest look like a Christian Union meeting … and it will be banks like Goldmans that have blood on their hands.

Thoughts ?

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