Goldman exec resigns with harsh farewell

NEW YORK -- Goldman Sachs, arguably the most storied investment bank on Wall Street, has been compared to a money-sucking vampire squid and called the evil empire of finance. On Wednesday it got a different kind of black eye -- delivered by one of its own.

Greg Smith, an executive director at the bank, resigned with an editorial that accused the bank of losing its "moral fiber," putting profits ahead of customers' interests and dismissing customers as "muppets."

The decline of the bank's culture, he wrote, threatened the bank's survival after 143 years.

The editorial, "Why I Am Leaving Goldman Sachs," appeared in The New York Times, was the talk of Wall Street and was widely circulated online.

Goldman issued a three-sentence statement disagreeing with Smith. "In our view," the bank said, "we will only be successful if our clients are successful. This fundamental truth lies at the heart of how we conduct ourselves."

Smith worked for Goldman in London, but the bank did not provide further details.

Smith, identified by The Times as head of the company's U.S. equity derivatives business in Europe, the Middle East and Africa, wrote that he attended sales meetings in which helping clients make money was not part of the discussion.

"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," he wrote.

Smith wrote that Goldman had devolved from a company he was proud to work for when he joined. He said the bank needs to "weed out the morally bankrupt people" and suggested that the erosion of Goldman's culture threatened its future.

Smith wrote that there are easy paths to becoming a leader at Goldman, including persuading clients to invest in products the company wants to get rid of or will bring the most profit to Goldman.

Another way, he said, is to "find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym."

On Wall Street, the editorial may have been shocking in tone, but it was not surprising in content. Goldman's peers, even some of its customers, take its pursuit of profit as ordinary business.

"I would be very surprised if it did anything more than anger the people who are already hostile to Goldman," said Lawrence Baxter, a former executive at Wachovia who teaches at Duke University's law school.

He added that it was difficult to tell whether the editorial was "a genuine indication that things are badly out of line or just somebody who's really disgruntled."

Goldman's success has made it one of the most powerful engines on Wall Street. Goldman survived the financial crisis in 2008, which crushed two of its rivals, Bear Stearns and Lehman Brothers, and hobbled another, Merrill Lynch.

Goldman is also known for churning out leaders who run the world. The bank has been called the New York Yankees of finance.

Henry Paulson, who was Treasury secretary when the government devised its $700 billion rescue of the banks in 2008, is a former CEO. So is Jon Corzine, the former New Jersey governor who was at the helm of the brokerage MF Global when it collapsed.

The Smith editorial comes as outrage against Wall Street excess has bubbled up in popular culture, most notably through the Occupy Wall Street protest movement, and in the presidential campaign.

Matt Taibbi of Rolling Stone, a vocal critic of Goldman who wrote the "vampire squid" line, said in a blog post that Smith's editorial might do what financial regulation and the Occupy movement could not.

"Real change was always going to have to come from within Wall Street itself," he wrote, and the best way is for investors to see that "the Goldmans of the world aren't just arrogant sleazebags, they're also not terribly good at managing your money."