Goldman Sucks

Goldman sucks, according to Greg Smith, a former banker in the investment firm’s London office. In a New York Times Op-Ed on Wednesday, March 14, Smith wrote a scathing resignation letter detailing a company culture rife with scheming and scamming its clientele, practices he witnessed firsthand over his twelve-year career there. Goldman’s practice of unloading “shitty deals” unto unwitting investors while simultaneously placing bets against them has of course been well-documented and comes as no surprise, but what does is that such public humiliation comes from within its own ranks.

Once universally revered but now widely reviled, Goldman Sachs is the investment bank everyone loves to hate. Tarred by scandal in the 2008 housing meltdown for selling garbage CDOs stuffed with sub-prime mortgages while at the same time making huge bets on the collapse in the housing market, the firm faced ethics hearings from the Senate Governmental Affairs Subcommittee on Investigations in April of 2010. In a particularly memorable exchange, Michigan Senator Carl Levin grilled GS Mortgages Department head Daniel Sparks about internal memos referring to a prioritized investment for sale as “one shitty deal.”

Goldman played both sides of the game to its own profit, which is legal, as CEO Lloyd Blankfein has pointed out, “in the context of market-making.” To be clear, market-making is creating an arena for fair transactions to occur between buyers and sellers–not what Goldman was doing, which was “taking one side of a transaction that they were themselves creating and structuring so that it would cause the other side of the transaction to fail,” according to Inside Job director Charles Ferguson. In the eyes of many, Goldman engineered a great global fraud. As a result of the greedy calculus of Goldman, and the entire banking industry, the housing market imploded, taking the economy and millions of American jobs with it. To add insult to injury, the banks subsidized their losses to the already reeling taxpayer, while privatizing all of the ill-gotten profits.

Since the meltdown, the banking industry has fought reform tooth and nail, in order to protect profitable unregulated revenue streams, i.e. derivatives. At the same time, banks are profiting wildly from charging ever-higher interest rates and fees to consumers, while the Federal Reserve has kept the federal funds interest rate–the rate banks pay for cash–near zero. That’s a damn fine spread… Banks pay practically 0% on cash that they then turn and lend to consumers at a charge of up to 30%.

Banking profits are up and bonuses are bigger than ever, but are those bonuses deserved? Can you really say that you ‘earned’ tens of millions ‘rightfully’ when it was the result of a rigged game? This cavalier attitude of corporate entitlement for bankers and stockbrokers did not always exist, and it certainly does not bode well for the American Dream… Once upon a time, in a land far, far away, the stock market existed as a resource for businesses looking to raise capital, not as a global Ponzi scheme for manufacturing investment bubbles. Smith yearned for the halcyon days of an era at Goldman when clients mattered more than profits–when they weren’t referred to as “muppets” by managing directors. Smith’s manifesto marks a call to conscience not just for Goldman Sachs but for America.


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