Greg Smith, executive director and head of Goldman Sachs’s United States equity derivatives business in Europe, the Middle East and Africa, resigned explosively by means of a letter of denounce (NYT, pay per view) of the bad practices of the super-bank, which systematically rips off clients and pays bonuses to managers for doing it.
Naturally this is a bomb and GS stocks have fallen four points since the letter was published today. And it's probably just the beginning.
According to Matt Taibbi at Rolling Stone:
The essence of Smith’s piece is devastating. He points to one simple, specific problem in the company: the fact that Goldman routinely screws its own clients.
Smith confesses his ultimate disgust about the company's practices:
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. Even after the S.E.C., Fabulous Fab, Abacus, God’s work, Carl Levin, Vampire Squids? No humility? I mean, come on.
Muppets? That's professional!
In a higher tier and more uptight magazine, Forbes, Peter Cohan writes:
What is so bad about Blankfein’s Goldman? In Smith’s view, it gives power to the people who make the most money — and it encourages people to do that by shifting complicated financial instruments that Goldman wants off its own balance sheet onto those of its clients.
In other words: they sell junk to clients so GS can have more profits.
He also posts three possible reasons why GS still have customers in spite of its many wrongdoings and increasingly bad reputation:
- That they still make some benefits in spite of all
- That they are naive enough to be blinded by GS' name the same that they or others were by Maddoff
- That they have no alternative: GS is a monopoly in its market segment
Maybe a combination of the three, although I doubt that you can make any benefits trusting someone who calls you muppet on your back.
Still, one wonders if all this is little more than a maneuver, to prepare the return of Henry Paulson (yes the Paulson who bailed out Goldman Sachs while he was Secretary of Treasury under Bush Jr.) to the most powerful corporation on Earth (or otherwise replace current CEO Lloyd Blankfein by someone else, like his second on board Gary Cohn).
One also wonders what implications this may have on the widespread domination of GS over today's European Union or even if the inter-penetration of GS and the European crisis have something to do with it.
I can even imagine secret ethic wars between the WASP, the Jewish and the Italian mafias within this corporation. But I do not know.
Not yet at least but it is a matter to watch carefully, not in vain this is probably the most powerful bank and economists' mafia on Earth.