Ripping a 'toxic' Goldman Sachs on the way out the door

Man standing atop steps formed from dollar bill

If we needed another reason to doubt the advice and investments Goldman Sachs sells its customers, we certainly got it today.

It comes from Greg Smith, an executive director at the investment bank, whose clients have more than $1 trillion in assets.

Or perhaps I should say whose former clients have more than $1 trillion in assets.

Because Smith quit his job through an explosive op-ed piece in the New York Times that reveals and reviles the firm's me-first culture.

"It makes me ill how callously people talk about ripping their clients off," Smith writes in the Times. "Over the last 12 months I have seen five different managing directors refer to their own clients as 'muppets,' sometimes over internal e-mail."

In the "toxic" culture that's developed at Goldman, Smith says there's a total lack of respect or concern for the bank's clients.

Smith writes that he attends sales meetings where "not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them. If you were an alien from Mars and sat in on one of these meetings, you would believe that a client’s success or progress was not part of the thought process at all."

I don't find this to be all that surprising.

Remember when Goldman was caught pushing mortgage-backed securities on its customers that it knew were going to suffer huge losses?

It actually shorted those securities, or took positions betting that they would lose money, so that the bank turned a profit when the defaults began to pile up and its unsuspecting clients lost their shirts.

That alone should have been enough to send every account holder screaming for the exits.

Smith's op-ed broadside indicates nothing has changed.

Felix Salmon, who blogs about Wall Street for Reuters, cynically says Smith decided to leave now because he just cashed his big bonus check.

He suggests that Smith's next job will go a long way toward revealing his true motive for deciding to "quit in as public and destructive manner as possible."

Will he just look self-serving by landing at a rival firm or starting his own investment company? Or will he join a regulatory agency that backs up the "serious moral purpose" he declared today?

Those are all good questions.

But what happens next to Smith is irrelevant for savers who need to be able to trust the money managers they work with to have their best interests at heart.

Beyond the standard denial from Goldman's PR office, I don’t expect anyone will spend much time refuting Smith's allegations about how the bank works.

Each time we get a peek behind the curtain at Goldman, we always see the same ugly scene.

Even if you've turned a tidy profit on investments Goldman has sold you in the past, how can you continue to buy with confidence?

This seems to be an investment bank that consistently puts its interests before that of its clients and has no qualms about playing its customers for suckers.

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