Remember Greg Smith, the former Goldman Sachs executive who quit his job as Goldman Sachs executive director and head of the firm’s United States equity derivatives business (in Europe, the Middle East and Africa) via an editorial in the New York Times? Well, he’s written a tell-all book – and make no mistake, he’s telling all. The book is described as a “Wall Street tell-all” and the accusations are plenty. He writes in a clear, concise manner that wastes no time with his belief on everything from the current state of affairs in the financial sector to his lost love for the employer he dedicated more than a decade of his life to.
Even before the book was completed, Smith’s editorial was explosive; and his former employer wasted no time striking back in the days that followed. In the editorial, there were assertions that clients are being ripped off, Goldman Sachs is a toxic wasteland and that employees refer to their clients as muppets:
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… I mean, come on. Integrity? It is eroding. It astounds me how little senior management gets a basic truth: If clients don’t trust you they will eventually stop doing business with you. It doesn’t matter how smart you are.
The book reads like a who’s who in the massive banking giant and the reader doesn’t get too far before Smith reveals his belief about the economy and the financial crisis, “It’s absolutely gotten worse since the financial crisis”. And what Smith didn’t include in the Times piece, he more than makes up for in “Why I Left Goldman Sachs”. Clients were charged “huge fees” when they indicated they wanted to back out of an investment, especially if they’d been pulled in by using assurances that the investment was incredibly safe. He also details how brokers steered clients in the direction the company wanted them to go, even making moves during the European financial crisis. He outlines methods of selling pension funds with high fees, but with little sincere guidance. And there’s even mention of the elite 1% who he says “get Goldman’s best advice”.
For its part, Goldman is on the defense. In the days following the New York Times piece, the bank opened its own investigation into many of his allegations – and it began investigating Smith, as well. It said Smith was angry because he was denied a one million dollar bonus and a promotion. Smith has denied both of those accusations several times. He says he always received bonuses that were in the “hundreds of thousands” dollar range and in fact, his bonuses were often higher than what anyone else received. In an email to CNN, Goldman Sachs spokesperson Andrew Williams said,
We take any issues raised by our employees seriously. In this case, we conducted a detailed review of Mr. Smith’s claims [and]found no evidence to support them.
If the bank doesn’t know yet, it will soon know that Smith didn’t accuse his former employer of anything illegal. Unethical? Absolutely; but nothing that would cause serious legal repercussions. The book comes out later today.
The book also details why Smith believes things have worsened since 2008, when the recession began. And while he says new laws, such as Dodd Frank, are helping, savvy investment bankers are simply shifting their efforts to areas that aren’t yet as tightly regulated. He says as a result, even more clients, lulled into a sense of safety, are being taken advantage of in other areas.
In the editorial, Smith also details his priorities and what he feels defines success,
My proudest moments in life…getting a full scholarship to go from South Africa to Stanford University, being selected as a Rhodes Scholar national finalist, winning a bronze medal for table tennis at the Maccabiah Games in Israel… have all come through hard work, with no shortcuts. Goldman Sachs today has become too much about shortcuts and not enough about achievement. It just doesn’t feel right to me anymore.
A lot of people are caught up in a system that asks for morally dubious decision making,
I wrote the book about Goldman, but it’s really about the industry as a whole.
So what do you think? Is this book going to land on your Kindle? Do you agree with Smith’s certainty that the industry as a whole is worse now than before the recession? Also – what do you think clients feel about accusations that they were referred to as “muppets”? Share your thoughts and join the debate. Visit our Facebook page and follow us on Twitter, too.