Posted by Michael Kennedy on March 14th, 2012 (All posts by Michael Kennedy)
Ann Althouse has a good post today. I can’t get through her Captcha system so I thought I would post a few comments here. This NY Times op-ed piece is the source for her observations. It is behind the Times’ idiotic payment wall so go to her blog for the link.
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. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.
That certainly states the issue clearly. What does he complain about ?
I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years. I no longer have the pride, or the belief.
But this was not always the case. For more than a decade I recruited and mentored candidates through our grueling interview process. I was selected as one of 10 people (out of a firm of more than 30,000) to appear on our recruiting video, which is played on every college campus we visit around the world. In 2006 I managed the summer intern program in sales and trading in New York for the 80 college students who made the cut, out of the thousands who applied.
I knew it was time to leave when I realized I could no longer look students in the eye and tell them what a great place this was to work.
What specifically is the problem ?
I have always taken a lot of pride in advising my clients to do what I believe is right for them, even if it means less money for the firm. This view is becoming increasingly unpopular at Goldman Sachs. Another sign that it was time to leave.
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 (and are not currently an ax murderer) 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.
Well, that’s clear enough.
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. Integrity? It is eroding. I don’t know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact.
Wow ! Read the rest of it.
A few years ago, I read Nicole Gelinas’ book, “After the Fall: Saving Capitalism from Wall Street-and Washington” She has a great deal of information in that book and this sounds like she was right. My review of her book is here. Greed wasn’t the problem. It was a casino mentality brought on to some degree by the fact that the big investment banks, like Goldman Sachs, went public and the money they lost was investors’ money, not their own. Brown Brothers, Harriman, a private partnership, never got into trouble. They were using their own money. It is interesting that Bain and Company, the company that Mitt Romney worked for, got into trouble later, after he had left, because partners borrowed money so they could cash themselves out. Junior partners asked Romney to return and straighten out the mess. He did and convinced Bill Bain to personally borrow money to pay back a large share of the firm’s debts. Subsequently, Bain Capital has more than quadrupled its investments and is profitable. That’s why I support him and hope for his election.
Gingrich and Santorum are lobbyist-politicians. Sorry if I hurt anyone’s feelings.